2 Smart Ways to Reach Your Financial Goals in 2020

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Everyone’s journey through work-life toward retirement is different. Some people try to make the most of what they have today and don’t put much stock in the future. Others choose to spend less and save more today, so they can truly enjoy their life after retirement. You might be one of the two or you might have a differently balanced approach toward life.

A better, more balanced approach would be to decide on some short-term and long-term financial goals. Your short-term goals can be to enjoy life as it is. Going on a vacation, buying a better car, or completely renovating your home can be your short-term goals. Your long-term goal is usually the same for almost everyone: saving up for a cozy retirement.

Two smart ways to achieve both your goals are the careful investment and smart allocation of your assets. In other words, put the two blessed accounts, the TFSA and RRSP to good use.

A good TFSA pairing

Let’s say you have a fully stocked Tax-Free Savings Account (TFSA), but only want to invest a portion of it, say $20,000, for a short-term goal. You have decided to let it grow however much it can in a relatively short amount of time (five years).

Now, you can either invest in a low-risk but slow-growing stock or a relatively higher-risk but fast-growing account. Nobody wants to lose their hard-earned money, so why not trying for a stock that offers you the best of both worlds?

In my opinion, one such example would be Alimentation Couche-Tard (TSX:ATD.B). It has one of the best growths in the past 10 years on the TSX. Plus, it has a very recession-resilient business of convenience stores.

If we look at the volatility factor, it has a negative beta of 0.11, which shows no correlation to the broader market. Another feather in Alimentation’s cap is its status as a Dividend Aristocrat, with a 10-year history in increasing payouts.

The company is currently trading at $44.4 per share at writing. If we look at the company’s past five-year growth, the CAGR comes out to 14.5%. If the company keeps growing its market value at the same rate, you will almost double your money in the next five years ($39,360).

A long-term RRSP pairing

Your RRSP is where you put your buy-and-forget stocks in hopes that they will keep growing at the rate you hoped they would. For such a long-term investment, you should go with a fast-growing bank.

Toronto Dominion (TSX:TD)(NYSE:TD) has a fantastic history of growth, especially compared to its peers in the Big Five. The country’s banking sector is the safest and most stable in the world. The bank is also a Dividend Aristocrat. Given all this, TD seems like the stock you can place in your RRSP for decades and hope it will earn you enough by the time you retire.

Say you invest $50,000 from your well-stocked RRSP in TD and you’ll retire in 30 years. Even if we take a very conservative number of 10% growth each year (lower than TD’s CAGR for past five and 10 years), you’ll be sitting on about $87,000 in 30 years. You might hit a million if you add $10,000 in your initial capital.

Foolish takeaway

Rather than avoiding fast-growing stocks, it’s a better idea to study and research them. If you feel that the growth is justified and it will likely continue in the future, then investing in fast-growing stocks is not as risky.

You can protect your portfolio even further with smart diversification in your investments.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC.