Even with the S&P 500 down 22% so far this year, there is still no better vehicle for creating wealth than investing in stocks. Gold, bonds, real estate, and certainly cryptocurrencies all fall short in comparison.
While over short periods of time one asset class or another may outperform stocks, the long-term results prove that if you want to accumulate large amounts of wealth and have a shot at retiring early, investing in stocks is the way to go.
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Deutsche Bank studied various asset classes over the past 100 years and discovered equities beat out gold by 5.6% per year, housing prices by 6.6%, Treasuries by 6.8%, and oil by 8.4% per year.
There have been only two decades when stocks had negative returns: the Great Depression of the 1930s, along with the 2000s, when the combined impact of the Tech Wreck, 9/11, and the collapse of the financial markets conspired to sink the market, generating negative returns of 0.5% and 0.9%, respectively.
Yet the decades that came after saw strong bull runs. The 1940s produced compound annual returns of 10.2% annually, including dividends, while the 2010s generated a compound annual growth rate of 14%.
It's clear that for investors wanting the best chance of retiring comfortably and doing so early, investing in stocks and staying invested in the market for the long haul is the correct strategy. That's why the nugget of investing wisdom that says "it's not about timing the market, but your time in the market" is so true. By the time working Americans are ready for their gold watch -- or beforehand, if you're savvy enough -- the following trio of winning stocks have the potential to make those who invested wealthy.
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1. Altria
Shares of tobacco giant Altria (MO -0.10%) got smoked recently after an analyst downgraded the stock due to inflation and rising gas prices. Because most cigarettes are sold in gas station convenience stores, the thinking was that consumers wouldn't buy as many cigarettes if they were cutting back on the amount of driving they did to conserve fuel.
That ignores the addictive quality of nicotine, which has kept consumers buying cigarettes through all kinds of turmoil and price hikes. Smoking may be in a secular decline, but there are still tens of millions of smokers, and while they might not buy as many cigarettes at gas stations, they'll likely buy them elsewhere.
Altria's business is one of strong, recurring profits, and it remains committed to sharing those profits with investors. The tobacco stock targets a payout ratio of 80% of adjusted earnings per share and has increased its dividend every year for the past 52 years, firmly establishing it as a Dividend King.
With a yield of 7.9% annually, Altria's dividend can help investors achieve their retirement goals -- perhaps even ahead of time.
2. Clorox
There were a handful of stocks in just about every industry that benefited from the pandemic. Clorox (CLX 1.32%) was able to capitalize on the fear of a virus and the need to sanitize everything. The bleach maker's profits easily doubled during the COVID outbreak, but as consumers increasingly view the health crisis in the rearview mirror, cleaning every solid surface with a sanitizing wipe has diminished.
Where Clorox once had shifts working around the clock to meet the demand for its wipes -- and even hired third-party contractors to produce them -- it has since returned to a more normalized schedule and released those external manufacturers. Sales are now falling, and profits are narrowing, causing Clorox stock to drop by a third compared to recent highs.
That just means its business is returning to a more normalized trajectory, and it's still a solid one at that, with products that typically rank in the No. 1 or 2 slot wherever they're sold. Clorox also has a record of paying dividends that stretches back over 50 years and a consecutive string of dividend hikes that began in 1977, making it a Dividend Aristocrat and one investors can count on for years of profitable, income-generating growth to come.
3. Polaris Industries
A more recent addition to the Dividend Aristocrats is ATV maker Polaris Industries (PII -1.38%), an underappreciated and under-the-radar member of the list. It joined just prior to the start of the pandemic when it raised its dividend for the 25th consecutive time in January 2020. It's tacked on two more increases since then, and investors should consider taking a ride on the off-road vehicle (ORV) maker's stock.
ORVs and snowmobiles account for almost two-thirds of Polaris' revenue and are one of its more profitable segments. The company made a name for itself and came to own the niche when it developed the trail-width-compliant RZR side-by-side product that would catapult Polaris to the forefront of the powersports vehicle industry.
Polaris also owns the iconic Indian Motorcycles brand that it bought out of bankruptcy. Plus, it is a manufacturer of pontoon boats used for fishing and partying, as well as utility vehicles.
Because it's the undisputed leader in powersports -- and has a track record stretching back to its founding in 1954 -- Polaris has shown an ability to navigate through numerous economic difficulties and come out on top, and can round out the portfolio of an investor looking to retire.
