“How a $7,000 Investment Can Secure Your Woriless Retirement” This version maintains the essence of your original title but presents it in a more engaging manner. It emphasizes security and worry-free retirement directly in the headline, which can attract readers looking for financial peace of mind.

Retirement planning

It revolves around producing dependable income while safeguarding your principal – and preferably increasing it over time. With $7,000 available for investment now, aiming for a stress-free retirement stream, I would combine two tried-and-true methods: putting money into stocks offering high dividends.

exchange traded fund (ETF)

and selectively buying quality

dividend stocks

At attractive valuations. The main point is to control risk, particularly in the current elevated stock market.

Why dividend income matters

Stocks and exchange-traded funds (ETFs) that pay dividends offer consistent earnings, which makes them ideal for retired individuals. In contrast,

growth stocks

that rely on capital appreciation, dividend investments pay you to hold them. Even during flat or volatile markets, dividend income can help smooth out returns and support your living expenses.

Strategy 1: Opting for a trustworthy ETF to achieve ease of use along with broad diversification

For passive investors or those seeking ease of use, the

Vanguard FTSE Canadian High Dividend Yield Index ETF

(

TSX:VDY

It stands out as an attractive option. This ETF provides access to a collection of high-dividend-paying Canadian firms, largely within secure industries such as finance, energy, and utilities.

Today, VDY offers an approximate yield of 4.2%. Thus, investing $7,000 might result in roughly $294 annually. Additionally, VDY includes inherent diversification, which can help mitigate the risks associated with owning single stocks directly.

Nevertheless, there’s an caveat: the stock market is presently close to record-high levels. Putting a large amount of money into the market right now might make you vulnerable to potential short-term declines.

market correction

To minimize this risk, I would use dollar-cost averaging (DCA) for VDY. By distributing my $7,000 investment evenly over six to twelve months, I can lessen the effect of market fluctuations and prevent purchasing all my shares when prices are highest.

Strategy 2: Select high-quality dividend stocks carefully

If you’re up for conducting some investigation (or already possess market expertise), assembling your own selection of dividend stocks could result in greater income along with potential capital growth. Currently, there are two companies trading at moderate valuation levels which include:

• 
  Brookfield Infrastructure Partners L.P.
  

  This global infrastructure powerhouse owns and operates essential services like utilities, transportation, and data infrastructure. It currently offers a dividend yield of about 5.3%. Brookfield has a track record of increasing its distribution annually and is backed by strong cash flows. With global demand for infrastructure rising, BIP.UN offers both income and growth potential.

• 
  Bank of Nova Scotia
  

  Recently, one of Canada’s six major banks, Scotiabank, hasn’t performed as strongly compared to its competitors, causing its dividend yield to rise attractively to 5.9%. Despite current challenges like sluggish loan expansion and worldwide economic instability, the bank remains reasonably valued for those with a long-term investment outlook. In essence, you’re getting rewarded handsomely for your patience.

An allocated investment—such as $3,500 in VDY through Dollar-Cost Averaging (DCA), along with another $3,500 evenly distributed between Brookfield Infrastructure Partners and Scotiabank—would offer both diversification and a solid initial dividend yield of around 4.9%, which equates to approximately $343 annually.

The Foolish investor takeaway

Using as little as $7,000, it’s completely feasible to begin establishing a secure retirement income flow. You can opt for the straightforward approach of investing in a dividend ETF such as VDY or take a more active role by picking specific stocks like Brookfield Infrastructure Partners and Scotiabank. The main focus should be on acquiring steady, revenue-generating investments. Additionally, incorporating dollar-cost averaging can help minimize risks, resulting in a robust strategy aimed at ensuring your financial well-being over time.

The post

How I’d Build Hassle-Free Retirement Income With a $7,000 Investment Now

appeared first on

The Motley Fool Canada

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More reading

• 
  Putting $7,000 into your TFSA? Think About These 2 Canadian ETFs for Retirement
  
• 
  How I’d Transform My TFSA’s $14,000 Into a Financial Growth Engine
  
• 
  Invest $10,000 in This ‘High-Growth’ Dividend ETF for Passive Income
  

Fool contributor

Kay Ng

holds stakes in Bank of Nova Scotia and Brookfield Infrastructure Partners. The Motley Fool endorses shares of both Bank of Nova Scotia and Brookfield Infrastructure Partners. The Motley Fool has a

disclosure policy

.