Want to retire with a million-dollar-plus nest egg? Most people understand that stocks can offer long-term returns capable of growing a modest annual contribution into a seven-figure sum. However, many don't fully appreciate the idea that less is more and simpler is better. More to the point, it's all too easy to undermine your portfolio's growth by limiting yourself to high-risk stocks and then swapping them out too often.
Here's a rundown of five top names you might want to consider owning for the long haul if you're serious about becoming a millionaire within your lifetime. Each of these stocks is as much a bet on an industry or a business model as it is a bet on the company itself and requires a multi-decade commitment.
1. Bank of America
Bank of America (BAC -0.21%), the nation's second-biggest bank (as measured by assets), has been around a while, and it's apt to be around into the future for at least as long.
Most major banks handle customer deposits, make loans, are capital-market middlemen, and help serve investors. When one is doing well, they're all likely doing about as well. When one's doing poorly, they're all doing poorly. The bigger bet being made with this stock, therefore, is a bet on the banking industry itself.
It's certainly a sound bet. As long as the world uses money to store buying power and conduct commercial transactions, it will need banks. The cyclical ebbs and flows that work for and against banks will certainly continue in the future. But, the business has never failed to recover from its cyclical setbacks, bouncing back bigger than ever. Bank of America, of course, has the size it needs to ensure it remains one of the industry's very biggest names, which is no insignificant nuance.
Don't dismiss the impact of Bank of America's dividend either. Although its yield of 3.1% at the current share price is respectable, it's hardly stellar. And the bank dramatically cut its payouts in the wake of 2008's subprime mortgage meltdown, confirming it's not infallible.
Even so, its dividend payment's long-term growth accounts for a great deal of long-term shareholders' net gains -- directly and indirectly -- by virtue of making the stock more valuable.
2. Invesco QQQ Trust
If it seems to you like most of the market's gains since the late 1990s have been powered by technology stocks, you're not crazy. They have been. That's because the underlying technology companies have introduced the world's most meaningful advancements since then. And, this tech-centric progress isn't apt to run out of steam anytime soon either.
Problem: Owning a stake in every technology name you'd likely want to own can be complicated, and even a little overwhelming.
The simplest solution to this problem is buying shares of the Invesco QQQ ETF (QQQ 1.54%). This exchange-traded fund holds a piece of 100 of the biggest Nasdaq-listed stocks. But because it's based on a cap-weighted index, it holds oversized positions in mega-cap companies like Apple, Microsoft, Amazon, and Nvidia.
These may not always be the world's biggest technology outfits. Assuming the world's most impactful Nasdaq-listed companies will also eventually be its biggest, though, the folks at Invesco will adjust this fund's holdings as needed. All you need to do is stick with the Invesco QQQ ETF even when it's struggling.
3. Realty Income
Whereas the Invesco QQQ ETF is your best shot at long-term market-beating growth, Realty Income (O -0.17%) sits at the other end of the investment spectrum. This real estate investment trust (REIT) is first and foremost a dividend payer, sporting a trailing dividend yield of 5.5% at the current share price.
That's better than Bank of America's current yield -- but it's not exactly a jaw-dropping payout. So what makes this ticker so special? A couple of things.
The first is the frequency of its payments. Unlike most dividend-paying stocks, Realty Income's payments are dished out on a monthly basis. Even if you're only planning on reinvesting its dividend payments in more shares of Realty Income, you're still putting that money to work sooner than you would with a stock that makes dividend payments on a quarterly basis.
And the second noteworthy nuance? Realty Income has paid its monthly dividend like clockwork for more than 53 years and has raised its monthly payments every quarter for the past 26 years.
The key to this consistent payment growth is the nature of its business. Realty Income is a landlord mostly to consumer-facing companies like retailers Walgreens and Dollar General, gyms such as Lifetime Fitness, and convenience store chains like 7-Eleven. Retailers generally seem vulnerable to economic headwinds. The REIT's top tenants, however, tend to stick around once they establish a store. They've got too much invested in a particular build to simply abandon a lease. That's why Realty Income's occupancy rate as of September is still an incredibly healthy 98.8%.
4. Coca-Cola
Don't look for any soaring gains from Coca-Cola (KO) shares -- you're just not going to get them. Rather, look for methodical forward progress in nearly all market environments, with lots of dividend income bolstering your bottom line.
Coca-Cola is, of course, the outfit behind the world's best-known beverage brand; it also owns a host of others, including Gold Peak tea, Minute Maid juice, Dasani water, and Powerade sports drink. It's got something to sell to any consumer at any time in any environment.
That's not a bad bet to make. Coca-Cola is one of the most effective marketers on the planet, with an advertising program ranging from lifestyle ads to coupons to product-specific purchase promotions. The company's also got incredibly deep pockets, and it does spend energetically to ensure its products are top-of-mind names for consumers when they're thirsty. The drinks giant spent over $4 billion on marketing alone last year. Most of its rivals simply can't keep up with that sort of spending on marketing.
Between its slow growth and the dividend increases you can expect -- it has a streak of 61 consecutive years of payout hikes so far -- reinvesting the dividends paid by Coca-Cola shares could help make you a millionaire by the time you retire.
5. Ares Capital
Ares Capital (ARCC 0.73%) is a business development company, or BDC. As the name suggests, such organizations help young (and usually smaller) organizations grow by providing them with much-needed capital when they may not be able to secure (or want) a conventional bank loan. These funds are sometimes offered in exchange for equity in the up-and-coming company. More often than not, however, this capital is supplied in the form of a loan ... a loan usually made at an above-average interest rate. That's how a BDC like Ares Capital can afford to distribute a dividend that at current share prices yields 9.7%.
And its quarterly payout, by the way, has grown from less than $0.29 per share in 2004 to $0.48 per share now. Arguably, those dividends are best reinvested in more shares of the stock paying them.
That being said, the dividend isn't the only compelling argument for owning a piece of Ares for the long haul. This company is also one of the leading names in a narrow niche that has a much more compelling future than many other stocks simply because it's a way of indirectly investing in small, high-growth companies that aren't always publicly traded. As more and more well-hyped outfits like Blue Apron, GoPro, and Beyond Meat end up disappointing investors, people will pursue higher-odds options like this one, putting bullish pressure on this ticker.
