In the world of investing, a million dollars is often seen as a significant sum. It’s a nice round number that many people can relate to when it comes to their current portfolios or retirement aspirations. With the recent growth of the stock market and real estate values, it’s not unreasonable to think that the average net worth of Americans is approaching or even surpassing $1 million. This makes the question of how to invest $1 million particularly interesting and relevant.
In this article, I will share the portfolio of stocks that I would invest in if I had $1 million to put into the market today. My approach is different from the yield-centric picks that I’ve seen from others. While I appreciate the importance of passive income and will include high-quality dividend growth stocks in my portfolio, my primary focus will be on the growth aspect in today’s market environment. I believe that a well-rounded portfolio of stocks with strong long-term growth prospects can create a durable and long-lasting passive income stream that outperforms the major market indexes.
Constructing the Portfolio
I’ve carefully selected stocks in various categories to build a well-balanced and high conviction portfolio. This portfolio reflects my belief that owning a broad array of stocks, covering the entire spectrum from high growth to high yield, makes sense for investors at any age. Regardless of where you may be on your financial journey, running out of money in retirement is a big concern for everyone.
For the growth component of my portfolio, I’ve chosen companies like Alphabet, Amazon, and Nvidia. These are proven growth stocks with solid bottom-line growth track records and bright prospects for the future. While they may not pay dividends, their long-term growth potential makes them essential building blocks for a portfolio aimed at outperforming the market.
The high dividend growth stocks in my portfolio, such as S&P Global, Thermo Fisher, and Visa, have strong credit ratings, reliable bottom-line growth, and consistent track records of dividend increases. These stocks provide a balance of income and growth, making them ideal for long-term wealth creation.
Next, I’ve included compounder stocks like Agilent Technologies, BlackRock, Canadian National Railway, and Honeywell International. These companies have strong fundamentals, healthy balance sheets, and long-term growth prospects. They may not be the fastest growers, but they are reliable performers that can generate consistent returns over time.
For the cyclicals component, I’ve chosen stocks like Cummins, Deere, RTX Corporation, and Texas Instruments. These companies are well-positioned to benefit from economic cycles and have the potential to deliver strong returns when the economy is performing well. They offer a nice balance of growth and stability in a well-rounded portfolio.
Defensive stocks like Coca-Cola, The Hershey Company, McDonald’s, PepsiCo, and Waste Management provide stability and consistent cash flows. These companies have proven track records of weathering economic downturns and continue to deliver shareholder value over the long term.
Lastly, I’ve included high yielders like Camden Property Trust, Enbridge, Realty Income, and Rexford Industrial Realty to provide additional income. These companies have solid fundamentals, reliable dividend payouts, and the potential for capital appreciation.
To provide liquidity and flexibility, I’ve also allocated a portion of the portfolio to a cash position, specifically the Fidelity Government Money Market Fund. Holding cash allows for capital preservation and provides the option to take advantage of future investment opportunities.
Key Metrics and Analysis
All the stocks in my portfolio carry strong, investment-grade credit ratings and have proven histories of reliable bottom-line growth. The forward earnings per share (EPS) compound annual growth rate (CAGR) estimates show the long-term growth potential of these stocks.
Many of these stocks have impressive dividend growth streaks, indicating their commitment to returning capital to shareholders. Looking at the long-term bottom-line growth track records and forward EPS CAGR estimates, it’s evident that these companies are focused on consistent and sustainable growth.
It’s important to note that this portfolio is not a short-term play. These are blue-chip stocks with strong cash flows, balance sheets, market share positions, and long-term growth prospects. While I can’t predict the future with certainty, I believe that these stocks have the potential to provide reliable dividend growth over the next 12 months and beyond.
When it comes to investing, focusing on high-quality companies is crucial for long-term success. By selecting stocks that perpetually compound cash flows and generously return that money to shareholders, you can position yourself for long-term outperformance.
This $1 million portfolio is carefully constructed to balance growth and income, providing investors with exposure to a diverse array of companies. While there is no guarantee of future performance, investing in well-established companies with strong fundamentals and long-term growth prospects can help increase the likelihood of achieving financial goals.
Whether you have $1 million to invest or a smaller amount, the principles behind building this portfolio can be applied to any net worth situation. By focusing on quality, diversification, and long-term growth, investors can enhance their chances of reaching their financial objectives.