If you dont have time to constantly check the market and conduct detailed research on your investments, the best strategy is to build a buy-and-forget portfolio.
Companies with solid fundamentals that have a business model designed to stand the test of time make perfect buy-and-forget investments.
Three top picks
Managing pensions, savings and life insurance is a long-term process that takes plenty ofskillto get right. Luckily, these companies have perfected the process over the past 200 years.Indeed, Legal &General, StandardLifeand Aviva have all been around, in one form or another, since the early 1800s (Aviva can trace its history back to 1696).
Despite a few speed bumps, these companies have all produced impressive returns for shareholders since inception.
Whats more, this trend is set to continue. The worlds population isageing, and global wealth is growing, which means that an increasing number of people are searching for ways to invest theircash for the long term.
Legal & General believes that over the next 15 years the value of savings in UK defined contribution pension schemes will nearly quadruple. Its estimated that the value of defined contribution pension schemes will jump from around 700bn today to approximately3.3trn by 2030, as more people take control of their own pensions.
The key driver behind this trend will be workplace pensions, and Standard Life is the leading provider of workplace pensions in the UK. Standards defined contribution assets under management have risen by 50% since 2011. The companys shift to a fee-based business model has led to a tripling of cash flow generated from operations since 2010.
Over the sameperiod,the companys dividend payout has increased at a steady rate of 7% per annum. Since 2010 Standard Life has returned 147p per share to investors, including the recent special dividend and over five years the shares have produced a total return of 180%. Based on the estimated growth of the UK pension market, the next five years could see a similar performance.
Avivas shares have lagged Legal & General and Standard Life by 150% and 50% respectively over the past five years as the group has worked through some troubles. However, now the company is on the road to recovery. Costs are falling, profits are rising and Avivas recent deal to acquire Friends Life has helprecapitalisethe balance sheet, giving the company a solid foundation for future growth.
Unfortunately, as Legal & GeneralandStandard have bright futures ahead of them, they dont come cheap.Legal & General currently trades at a forward P/E of 14 and supports a dividend yield of 5%. Standard Life trades at a forward P/E of 17.7 and supports a yield of 4.3%. However, sometimes you have to pay a premium for quality.
Aviva, on the other hand,appears to be undervalued. The company currently trades at a forward P/E of 10.9 and is set to support a dividend yield of 4% this year.
So overall, Legal & General, StandardLifeand Aviva are all set to benefit from the increasing demand for pension managementservices, making them perfect buy-and-forget investments.
But these are not the only companies that have all the traits required for a buy and hold investment.
Our top analysts here at The Motley Fool have identifiedfive other companiesthat they believe have all the qualities for you to buy and hold forever in your retirement portfolio.
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How To Get Started With Small-Caps
Investing in a handful of cracking small-cap companies could bag you much bigger returns than a stodgy set of blue-chip stocks and may make a smart addition to your existing portfolio if you can handle a little more risk.
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