Just imagine how things will be in 20 or 30 years. If you are in your forties now, you will be reaching your retirement years. If you're younger, you have a little more to go, but you can still think about what it will be like. Now, while you're in the future, imagine what companies will be in business still. Apple? McDonalds? Coca-Cola? Some may still be serving your children or grandchildren.
That is the kind of staying power your retirement portfolio requires. There will always be other stocks that you buy and sell, but which ones will be the bedrock of your financial future? The dividends by themselves could make life a little more comfortable and investment income can continue long after your own working days have ended.
That is a major problem for retired people. Their career incomes fall and they are left to live off of whatever they were fortunate enough to squirrel away into superannuation and savings.
Foolish investors have that long-term foresight for investing. I can imagine that in the future, Commonwealth Bank of Australia (ASX: CBA) and Woolworths Limited (ASX: WOW) will still be around. Here are three reasons why they could be part of your wealth creation.
1) Market leaders
Commonwealth Bank is the largest bank in Australia by market capitalisation. Its wide depositor base keeps it connected to more people than other banks. It holds the largest share of residential home loans of all lenders. Woolworths is one of the two largest food retailers, along with Wesfarmers Ltd (ASX: WES), but its name is synonymous with supermarkets and it has been in food retail business much longer than Wesfarmers.
2) Long-term earnings and share price growth
Over the past 20 years, both companies have achieved average annual share price gains of around 12% – 13% at a compounded rate. That is massive for such a long time period. That isn't even including all the dividends they paid over those years. Imagine what the share price and dividends will be in another twenty.
3) A growing Australian population
Due to their current size, these mature companies aren't going to be fast growers like small, nimble tech stocks. They will grow at the growth rate of the population and gross domestic product. Over the next few decades many new families will be started and a great number of people will come from overseas. The companies' revenues are really big now, but even at a moderate rate of growth, those numbers will be much larger twenty years from now.
