Buy and Hold Investing Can Set You Up For a Nice Retirement
It’s safe to say that stocks play a valuable role in investing for retirement, regardless of how close you are to the golden years. The equity markets can be one of the best tools for building wealth over time and growing a nest egg that will keep you comfortable late in life. While some people will be quick to mention the risks of investing, the truth is that the risk of missing out on the gains that the stock market has to offer year after year is far greater of a concern.
With that said, investors that are looking ahead to retirement need to be extremely selective with the companies that they are going to own for the long haul. Choosing to invest in reliable businesses with a history of rewarding long-term shareholders can lead to huge gains over the years, while too many volatile names can make buy and hold investing an uncomfortable endeavor.
That’s why put together a list of 3 stocks to buy and hold for retirement to help you get a sense of the types of companies to look out for. Let’s take a further look below.
One of the key pillars of investing for retirement is taking advantage of companies that pay dividends. That way, investors can generate extra income for reinvesting over the years or even live off of their dividends after they stop working. Reliable dividend-paying companies in sectors of the market that offer growth are ideal, and that’s the case with Cisco Systems. It’s a worldwide leader in communications equipment selling a broad range of products across networking, security, collaboration, applications, and the cloud.
Cisco is a nice option for buy and hold investors thanks to its rock-solid balance sheet and long-term upside given the high demand for data center solutions, the migration to cloud networks and 5G expansion. A strong balance sheet is important because it allows the company to reward shareholders with dividend boosts and share buybacks, and with $24.5 billion in cash at the end of Q1, it’s clear that Cisco has plenty of capital to continue this trend. Cisco stock currently offers a 2.6% dividend yield and recently boosted its payment by 14%, so consider adding shares for income and a more conservative way to gain exposure to the tech sector.
Consolidated Edison (NYSE: ED)
Utility stocks are a good place to look for buy and hold opportunities, as these businesses have low-demand elasticity and established businesses that investors can count on regardless of what is happening in the economy and overall market. Consolidated Edison stands out as one of the best utility stocks to consider, as it provides steam, natural gas, and electricity to customers in New York and some parts of New Jersey. Keep in mind that Consolidated Edison’s rate-regulated electric and natural gas distribution in New York helps to reduce volatility in the company’s earnings, which is certainly appealing for conservative investors.
Consolidated Edison also has a clean energy business that is attractive for long-term buyers, as its one of the largest solar energy farm owners in North America. We know that the world is going to focus on renewable energy sources in a big way over the next decade, which could lead to earnings growth for the utility company. Finally, the fact that Consolidated Edison has increased its dividend for 47 consecutive years and offers a 3.81% dividend yield makes it a fantastic option for buy and hold investors.
Costco Wholesale Corp is another great example of a company that investors can rely on over the years. With 817 membership warehouse stores in the U.S., Canada, Mexico, the United Kingdom, Japan, and more, the company has a massive customer base and sells consumer staples products in bulk that people will always need. Costco is unique in that it offers great deals to consumers that many other competitors simply cannot match, which in turn leads to loyal customers and recurring revenue in the form of membership renewals.
While many other retail companies have struggled during the pandemic, Costco has only gotten stronger, which is a testament to how successful its business model is. The company is also expanding its e-commerce sales channels, which could be a nice earnings growth driver over the next few years. Finally, investors can expect plenty of share buybacks and both regular and special dividends over the years from this retail giant, making it a very strong buy and hold option for retirement.
Costco Wholesale is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.