Profit ratio

New Investors: Don’t Fear Recessions. Seize the investment opportunity

Image credit: Photo by CIRA/.CA.

Some experts believe we are already in a recession that will hit its peak by the end of 2022 or early next year. However, new investors should not fear recessions. Recessions are part of the business cycle after a period of economic expansion. Eventually, after a period of recession, the economy will return to expansion mode.

Recessions are usually accompanied by downturns in financial markets. In fact, the stock market is a leading indicator, which means that it tends to get ahead of the official announcement of a recession (which may or may not happen). Nobody knows when the bottom will be reached. All I know is that it’s a good time to buy good stocks when their prices are falling.

Here is quality TSX stock ideas if you have excess cash that you don’t need for a long time. A long investment horizon will increase your chances of making a profit. In fact, if you invest in stocks that can grow persistently, the holding period could extend to or into retirement for wealth building, assuming you have years or even decades to go. ‘retired.

Dividend stocks you can stick with

Investors have muted demand for Canadian bank stocks in a looming recession. This gives you the opportunity to buy them at cheaper long-term valuations and juicier yields for greater dividend income.

Dividend income is taxed at a lower income tax rate than income from your work. It therefore makes sense to invest capital for the long term in stocks with strong dividends. Of course, if you have room in tax-efficient accounts like TFSAs or RRSPs, you can also invest there for tax-free or tax-deferred income.

A big Canadian banking stock I’m watching in this market correction is Toronto-Dominion Bank (TSX:TD)(NYSE:TD). Like other major Canadian banks, it conducts its main business in Canada. But it also provides significant exposure to the US economy, which could potentially recover sooner from an impending recession given that the US stock market appears to be a bit ahead of us – already in a bear market that is falling. +20% from a peak.

Additionally, TD Bank’s main exposure to retail banking is lower risk, which is why the market commands a higher valuation of around 10.2 times earnings and a lower yield of around 4 times. .3% compared to Bank of Montreal price/earnings ratio of 9.3 and dividend yield of almost 4.5%.

Both stocks will do well in the long run and are solid buys in this market correction, but TD is a low risk play. After buying stocks at discounted prices, new investors can start earning passive income and watch them grow over the long term.

Looking for greater growth?

A quality tech stock, a growth name that new investors can consider is Constellation Software (TSX: CSU). Unlike a whole bunch of other tech companies, Constellation Software has real profits. In fact, the tech company is so amazing that it was one of the best performing stocks on the TSX!

Its five-year total returns are approximately 26% per year, essentially tripling an initial investment! In other words, it roughly doubled investors’ money in about 2.8 years.

Constellation Software is a terrific buy in this market correction. The stock looks “expensive” at around $1,922 per share at the time of writing. However, that’s about 31.6 times earnings compared to its estimated earnings-per-share growth rate of nearly 22% annually over the next three to five years. So that’s a reasonable PEG ratio of around 1.4 for a quality company.

Trading platforms like Wealthsimple make it easy for new investors to start investing by buying partial shares and investing less than $1,922.