A comfortable retirement is the dream for most American workers. But in order to truly retire in comfort, most experts agree you'll need to have at least $1 million stashed away (and probably more). Not to worry: Choosing top investments and holding them over the long term has been a proven way to help your portfolio outperform and get you one step closer to that million-dollar retirement account.
Those who are interested in racking up market-crushing returns might want to consider picking up shares of iRobot (IRBT 4.41%), Royal Dutch Shell (RDS.A) (RDS.B), and Brookfield Asset Management (BN -0.23%). Here's why these three stocks can help your portfolio outperform over the long term.
The stock market is a top option for building retirement wealth. Image source: Getty Images.
Battered down but poised to grow
The smart home revolution has just gotten started, with brands like Amazon Alexa, Google Home, and Nest finding their way into more and more consumers' homes. It's a trend that's only projected to grow as new smart home products -- including thermostats, lights, and security systems -- become more widespread and cheaper to produce.
One company that's poised to ride this smart home trend like a cat riding a Roomba is home robot manufacturer iRobot. Not only does the company manufacture the popular Roomba robotic vacuum, but also robotic mops, pool cleaners, and now even a lawn mower. Better yet, iRobot is working with Amazon and Google to allow its latest generation of products to interface with their smart speakers. If sitting on the couch watching TV while you tell your robotic lawn mower to trim the yard on a 100-degree day sounds appealing, you can see why the market for iRobot's products is huge.
iRobot's shares have stumbled recently thanks to concerns about how the trade war might affect the company's bottom line. While it's still expecting double-digit sales growth for 2019, its growth expectations are lower than they were at the start of the year, which prompted some investors to exit the stock. Still, this drop could be a buying opportunity given the massive market that exists for iRobot's products. Picking up shares now could be doing your retirement portfolio a huge favor down the road.
A reliable dividend payer
iRobot is a young company poised for rapid growth, but it pays no dividend. That means if you buy in, you'll probably want to add some ballast to your portfolio by also investing in some established companies that pay out a reliable dividend, and an excellent choice is oil major Royal Dutch Shell.
For starters, Shell currently offers the best dividend yield among the oil majors, at an impressive 6.6%. And that dividend is very reliable: The company didn't even cut it during the oil-price downturn of 2014-2017. That stability is a big point in Shell's favor.
The company itself has proven to be one of the better-managed oil majors. Its return on capital employed -- a measure of how well management deploys the company's capital -- is the highest among its oil major peers. Yet a rare stumble in Q2 2019 caused a drop in the company's share price. That could be a buying opportunity for investors looking to plug a solid dividend stock into their retirement portfolios.
iRobot and Royal Dutch Shell shares have stumbled in 2019. On the other hand, Brookfield Asset Management has shown consistent growth. BAM data by YCharts.
Alternative assets
Maybe stocks and bonds aren't exactly your thing, but you're not sure how to get into other types of investments like real estate. Well, good news: With this next pick, you can let some alternative asset experts do the hard work for you!
Brookfield Asset Management is a Canadian asset management firm that invests in a number of sectors, including energy infrastructure like gas pipelines and solar farms, real estate like office buildings and hotels, railroad lines, miners, and much, much more. The company has some $388 billion under management, and it's always looking for new opportunities to invest. Recent purchases include the Genesee and Wyoming railroad and fellow asset manager Oaktree Capital Group. The company has been growing by leaps and bounds lately, with accelerating double-digit cash flow growth projected through 2023. That cash can be reinvested or distributed to shareholders.
Brookfield also manages four master limited partnerships (MLPs), which are separate publicly traded entities and good businesses in their own right. However, because of their MLP structure, they aren't appropriate picks for a retirement account, which is why I'm recommending picking up shares of the parent company instead. This well-run investment should bring not only diversity but growth to your portfolio. Plus, it pays a small 1.2% dividend to boot.
Retire rich
When considering what stocks to put in your retirement portfolio, it's tempting to buy hot stocks. But hot stocks can quickly fizzle. It's more important to pick different kinds of assets to give your portfolio balance, so if one sector underperforms, it doesn't ruin your chances of being a millionaire retiree. iRobot, Shell, and Brookfield are three very different companies with very different strategies for outperformance. Consider all three as part of your diversified retirement plan.
