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Do you want $1 million in retirement? 3 stocks to buy now and hold for decades

A million dollars is a large sum, but if you still have decades to go before retirement, it’s within reach for most investors. The key is finding an investment approach and sticking to it through good and bad markets.

Three stocks that are currently out of favor (two that pay dividends and one that doesn’t) to consider buying and holding and helping you reach that $1 million investment goal are Toronto Dominion Bank (NYSE:TD)landlord Real estate income (NYSE:O)And Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). Here’s a quick look at each.

1. Toronto-Dominion Bank: Real concerns, but exaggerated risk

Toronto-Dominion Bank, or TD Bank as it is better known, is one of the largest banks in Canada. That country’s banking regulations are very strict, which has meant that a small number of large banks (such as TD Bank) are effectively protected from new competition. These heavy-handed regulations have also created a conservative ethos within TD Bank and its peers. All in all, it is a reasonably safe bank.

That being said, Canada’s housing market is in a worrying state. First, there was a prolonged rise in house prices, and now the rapid rise in interest rates has investors worried that loan defaults will increase.

TD Bank has an additional concern. Recently, the company was forced by U.S. regulators to halt an acquisition due to concerns about the company’s anti-money laundering controls. Canada is the foundation of the bank and the US operations are expected to be the growth engine. That engine just stalled, but this is probably only temporary.

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As a result of these concerns, investors have pushed the bank’s dividend yield to 5%, which is near its highest level historically. Given that the bank has been paying dividends for more than 100 years and has North America’s third-highest Tier 1 capital ratio, a measure of its ability to weather adversity, the risk here seems modest.

Meanwhile, the growth opportunities in the American market are still quite large, even if it takes longer to exploit them. Wall Street’s concerns appear to be a buying opportunity.

2. Real estate income isn’t exciting, but that’s the point

Realty Income’s 5.8% dividend yield is near its highest level in the past decade. The investment-grade real estate investment trust (REIT) has increased its payout annually for 29 years in a row.

That said, this is a slow and steady REIT, not a fast-growing one. But that makes it a good fundamental investment on which to stack faster-growing dividend payers like TD Bank and non-paying companies like Berkshire Hathaway.

What’s perhaps most compelling about Realty Income is its size, given that its $45 billion market cap is roughly three times that of its nearest competitor among net lease REITs (net leases require tenants to pay most operating costs at property level).

Yes, rising interest rates have been a headwind for business, but Realty Income has advantageous access to the capital markets thanks to its size and financial strength. That gives it the opportunity to close deals that colleagues cannot. It’s also big enough to be a consolidator in the sector, having bought two net-lease peers in recent years.

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Reinvesting dividends in these slow-growth, high-yield stocks can provide a solid foundation (albeit boring) for a more diversified portfolio.

3. Berkshire Hathaway is a strange beast

Speaking of giant companies: the conglomerate Berkshire Hathaway has its fingers in a wide range of companies. It owns many, including a major insurance company, a railroad company and energy companies, and it invests in individual stocks such as Coca-Cola And Western petroleum.

But it is probably best known for its CEO, Warren Buffett, whose ethos permeates the company and all its investments.

What’s interesting here is the success it has achieved over time, focusing on using the huge amount of cash the company generates to invest in other assets. Today, Berkshire has a cash pile of nearly $34 billion and short-term investments of nearly $130 billion. All that available money is waiting to be deployed in new businesses when the time is right, as Buffett and Berkshire tend to invest in a contrarian way.

The story at Berkshire is: buy low and hold as long as possible. That has worked exceptionally well in the long term, even if it has led to weak performance over shorter periods. That’s why Berkshire Hathaway is the kind of stock you want to own for decades.

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In terms of the right time to buy, it appears to be fairly valued at the moment, with price-to-earnings ratios and price-to-sales ratios both close to and below their five-year averages. A fair price is a good price for a company like Berkshire Hathaway.

A balanced mix of assets

While each of these stocks is worth a look, TD Bank, Realty Income, and Berkshire Hathaway together create an interesting mix: one stock for income and growth, another for income only, and a third for equitable growth, creating a diverse and balanced portfolio arises. The key, however, is to buy and hold for a very long time so that the companies you own can continue to grow. That’s what will build your seven-figure nest egg.

Should You Invest $1,000 in Berkshire Hathaway Right Now?

Consider the following before buying Berkshire Hathaway stock:

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Reuben Gregg Brewer has positions in Realty Income and Toronto-Dominion Bank. The Motley Fool holds positions in and recommends Berkshire Hathaway and Realty Income. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

Do you want $1 million in retirement? 3 Stocks to Buy Now and Hold for Decades was originally published by The Motley Fool

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