The start of the year is the time for good resolutions -- and an investment plan. But I'm not talking about an investment plan for just this year. I'm talking about the long term. This means at least the next five years. That period of time allows you to more fully benefit from companies' growth. It also offers you the opportunity to generate passive income through dividend stocks.
If you have $5,000 to invest, you're off to a great start. But even if you have much less, you can set off on this path to making yourself richer. Many of the companies or sectors I'll talk about offer investment opportunities for less than $100. And there is also the possibility of buying fractional shares of the higher-priced names. So, let's get started. Here's where to invest your money for the next five years.
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Set for post-pandemic growth
My first idea is to look at consumer companies that managed the coronavirus crisis well. This shows their strength even through the worst of times. And it also means they don't have to spend a considerable amount of time trying to recover today. Instead, they're all set for growth in a post-pandemic world.
One example is Target (TGT 0.54%). The company has grown its digital sales during the pandemic -- and increased the number of shoppers who buy online and in-store. These multi-channel shoppers spend about 10 times more than a digital-only consumer over time.
Starbucks (SBUX +0.78%) is another consumer goods winner. The coffee chain giant revamped its store portfolio to focus on pickup and digital ordering -- priorities for today's customer. Starbucks is already benefiting. The company reported record revenue in the most recent quarter, and active members of its loyalty program reached nearly 25 million.
Target and Starbucks shares climbed 31% and 9% last year, respectively. So far this year, they've retreated -- offering an opportunity to get in on these great long-term players.
Recurring revenue and profit
Healthcare companies make another smart addition to a long-term portfolio. You can count on recurring revenue and profit from some of the bigger players. That's because their goods and services are often necessities for patients and doctors. Two strong companies here are Intuitive Surgical (ISRG +0.68%) and Abbott Laboratories (ABT +2.88%).
Intuitive is the leader in robotic surgery. It makes the da Vinci robot that's used in various minimally invasive procedures around the world. Intuitive generates revenue on sales and leasing of the da Vinci as well as on the sales of services and accessories. Intuitive saw a dip in profit and revenue during the earlier stages of the pandemic as surgeries were postponed. But generally, this company has grown earnings -- into the billions -- over time.
Abbott is also making billions of dollars in revenue and profit. Sales of the company's COVID-19 tests bumped earnings even higher since the early days of the health crisis. Even if testing sales wane, though, Abbott makes a solid investment. I like the company's diversification. Its businesses include diagnostics, medical devices, nutrition, and pharmaceuticals.
Now, the next decision depends on your risk tolerance. If you're an aggressive investor, you may want to consider a small position in cryptocurrency -- or in Coinbase Global (COIN +1.30%). Coinbase is a leading cryptocurrency exchange, so it gains in revenue when trading of these assets increases or remains at a strong level. As for cryptocurrencies themselves, have a look at one of the up-and-coming players such as Cardano or Avalanche. They may play a role in reshaping how business is done. When investing in cryptocurrencies, though, always remember this: Don't invest more than you can afford to lose. The industry is high-risk.
Dividend Kings
If you prefer to avoid high-risk investments and want some security, opt for dividend stocks. You may want to go for one of the Dividend Kings. These are stocks that have increased their dividends for 50 consecutive years. Here, we have Warren Buffett favorite Coca-Cola, as well as other mega-cap stocks like Johnson & Johnson. Both of these players have a dividend yield of more than 2.5%.
And if you want to truly balance the idea of risk and security, you may want to include both cryptocurrency and dividend players in your portfolio.
As for how much to invest in each area, that also depends on your risk tolerance. If you prefer safety, you should weigh healthcare and dividend players more heavily, for example.
Then, the next step is to sit back and relax. Long-term investing isn't about buying and selling the latest trend. Instead, invest in the companies and sectors you believe in and give them the time they need to flourish.
