Three Investments That Will Ensure Financial Independence
Key Points
- A company with more than 50 years of dividend growth through consistently selling refreshment would be a terrific fundamental investment.
- It can be worthwhile to take into account a retailer who understands how to adjust to a constantly shifting consumer landscape.
- Why not diversify your holdings among 500 of the biggest American corporations?
For many of us investors, financial independence is a major goal. When your investments can pay for your expenses without you ever having to work again for the rest of your life, that is typically regarded as having been accomplished. Although achieving that goal would be fantastic, it could take many years. You can take a huge step toward accomplishing that aim by making wise investments in outstanding businesses with respectable long-term viability.
In light of this, we asked three of our writers to suggest an investment that would present a fantastic chance for people to achieve their own financial independence aspirations. They chose the Invesco S & P 500 Equal Weight ETF, Target (TGT 0.81 percent) and Coca-Cola (KO 2.34 percent) (RSP 1.22 percent). Continue reading to see why, and then you can determine whether one or more of their suggestions should be included in your effort to achieve financial independence.
Coke makes everything better.
It's wise to choose businesses in uncertain times that like sharing their wealth as well as knowing how to turn a profit during lean times. A good company I've been bullish on for years, even before the coronavirus pandemic upended all of our lives, is Coca-Cola, which is a prime illustration of this.
Let's start with the dividend, which has always been a key component of the stock's allure. Coca-Cola is a Dividend King, one of the few stocks in the S & P 500 index that has increased its payout every year for at least 50 years. That by itself demonstrates the business's capacity to produce sums of money that are sizable enough to sustain those distributions (for comparison, the corporation paid out dividends totaling over $7.5 billion in 2021).
How does Coca-Cola manage to carry off this ruse decade after decade and year after year? Since its namesake and signature beverage are primarily made of sugar and water, its goods are often made at a low cost and don't require much innovation. You probably drank the same beverage 15 years ago that you did yesterday at lunch, whether it was Coke or Minute Maid orange juice (which has long been a part of the company's line).
Coca-Cola does not rely on the development of new products or the tweaking of existing drinks to increase sales—we are not talking about smartphones here. This is a key factor in the business's profitability, which has been and undoubtedly will continue to increase. These days, its margins exceed 25%, which is high for practically any type of firm, especially one in the food industry with such a lengthy history.
Coca-Cola beverages are also sources of solace in difficult times and ostensibly unnecessary commodities that many customers still regard as important. Who among us, even the healthiest among us, hasn't occasionally had a hankering for a cold bottle of Coke or Sprite? This makes buying the company's stock during a downturn in the economy a smart defensive move. Coca-Cola shouldn't have much difficulty increasing its top line or maintaining its generous profit margins.
Additionally, there is the constant and expanding dividend. Its current yield of 2.8 percent is significantly higher than the average of S & P 500 component companies and a large number of comparable blue-chip stocks. So, Coca-Cola is a terrific investment for people hoping to achieve some financial independence this Independence Day because of its fundamentals that are recession-resistant and its large and consistently growing dividend.
Target is reaping the rewards of its fulfillment investments.
The pursuit of financial independence is a great objective. Target is one investment that can support you on your journey. The brick-and-mortar merchant may experience challenges in the near future as a result of people adjusting their purchasing patterns as the economic recovery picks up speed.
Target has successfully altered processes to give customers additional options for how they purchase and receive their orders. Target customers can pick up their orders inside the store, have them delivered to their cars in a Target parking lot, or have them delivered in as little as an hour to their houses. Customers love these alternatives for fulfillment.
They are also more profitable than the customary free shipping to consumers' homes, which is good news for investors. The increase in these services may contribute to the explanation of Target's record $14.10 earnings per share during its most recent fiscal year. This was a 63.2 percent increase over the previous year. Target has increased its earnings per share at a compound annual rate of 12.7% during the past ten years.
Investors who follow the principle of buying low and selling high can become financially independent. Target is currently trading at a price-to-earnings ratio of 11.78, which is almost at the lowest level in the preceding five years. Because of these factors, Target is one of my favorite companies for long-term investors looking for financial freedom.
Possibly, a better strategy to purchase the market
(Invesco S & P 500 Equal Weight ETF): Over extended periods of time, index investing, which is straightforward and inexpensive, typically outperforms the best and brightest on Wall Street. It is so effective that Warren Buffet, one of the world's most successful investors, suggests using it as a major tactic for most people.
The fact that the majority of index funds are market cap-weighted is the only drawback to index investing. In other words, the index's largest companies account for the largest portion of it. Due to the way most S & P 500 index funds are constructed, only 10 businesses account for roughly 30% of the index's value. That's great if those businesses succeed, but if even one of them struggles, it will have a disproportionately large impact on the index as a whole.
The Invesco S & P 500 Equal Weight ETF enters the picture here. It makes the same 500 investments in companies as a standard S & P 500 index fund makes, but it makes almost an equal dollar investment in each one. The top 10 holdings of this fund represent just 2.7 percent of the total assets, which is far more balanced than the typical 30 percent. Therefore, investors in the Invesco S & P 500 Equal Weight ETF would hardly notice it if any of those top 10 holdings struggled.
All things considered, the Invesco S & P 500 Equal Weight ETF provides you with the majority of the low-cost advantages of investing in index funds while also enhancing at least one significant aspect of the diversification of your portfolio. Because of this, you should strongly consider including it in your investing plan as you work toward financial independence.
Start right now
With a strong foundation in place, achieving any major financial objective becomes simpler. Purchasing Coca-Cola, Target, or the Invesco S&P 500 Equal Weight ETF will give you ownership in some of the most well-established companies in existence. They are, therefore, excellent choices for you to take into account as you work toward financial freedom. However, achieving financial independence is a journey that frequently takes decades, so the sooner you begin, the greater your likelihood of success. So begin going right away and make today the day you take the first step toward a future that has the potential to be much brighter.
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