Lets say you have $5,000 to invest now in a tax-free account such as a Roth IRA.You have a long-term investment horizon and you do not need to withdraw this money or the returns until you retire. In this article,I will discuss one way to make this money grow to a decent sum for those retirement days.

One way to invest this $5K is to save in a CD. As per Bankrate.com, the average yield on a one year CD is 3.09%. This is pathetic considering the taxes one has to pay and is lower than the inflation rate. By putting the money in a CD, one will actually loose money. The highest CD rate I can find is 3.54%. Of course the rate may remain the same or go lower/higher depending on the fed funds rate over the long-term.

So a better way to invest this money is to invest in foreign utility stocks that pay nice dividends and have some stable growth in times like now and in bull market periods.

An easy way to invest this $5,000 is to put $1K into 5 different foreign ADRs of 5 different countries as follows. At Friday’s closing price, this tiny portfolio will look like this:

1. Eni Spa – E – Italy
Yield 5.05%
Number of shares = 14.72

2. EON AG – EONGY – Germany
Yield – 2.39%
Number of shares = 15.81

3. Energias De Portfgual SA – EDPFY – Portugal
Yield – 2.49%
Number of shares = 16.64

4. Suez ADS – SZEZY – France
Yield – 2.66%
Number of shares = 16.52

5. Companhia Energetica de Minas Gerais – CIG – Brazil
Yield – 9.80%
Number of shares = 54.00

Note: Brokerage commissions are not included in this calculation

This portfolio will yield a total dividend of $224 per year. That equals to a yield rate of 4.48%.

This 4.48% is higher than the average CD rate for 1 year of 3.09% or 3.54%.

Hypothetical Scenarios:

1.In 5 years, at 4.48% our $5K would have grown to $6,225. This assumes that dividends were not reinvested into additional shares. If that was done, the return would be even higher.

At the CD rate of 3.09%, in 5 years this $5K would have grown to only $5,822. That is $400 less than investing in the above portfolio. Also this difference will be higher since the taxes on qualified dividends is a lot lesser than ordinary income taxes levied on interest earned.

2.Let’s assume that there is a share price appreciation rate of 5% average per year for the portfolio and the dividend rate remains the same. Of course the stock prices can go down as well. But over many years the growth rate will be positive.

Note: Most high quality companies especially utilities and banks increase dividends year over year.

Then the $5,000 will grow at 9.48% (5% capital growth rate + 4.48% dividend rate) per year.

This $5K will be worth as below:

In 1 year = $5,474
In 5 years = $7,864
In 10 years = $12,369
In 20 years = $30,596
In 25 years = $48,122
In 50 years = $463,137

Thus someone who invests their $5K as in the above portfolio and does nothing with it for the 50 years, will easily get nearly half a million $. Since most companies increase dividends and the stock price appreciation rate will be higher then 5% average, this small investment will be a wonderful nest egg during retirement.

Some of the places you can vacation with a fruitful investment such as the above are:

Photo: Seychelles, Indian Ocean

Photo: Mauritius, Indian Ocean

When an investor is looking for long-term invest opportunities, he/she may have to look beyond the usual popular stocks. In this post, I will discuss two stocks from Peru and Colombia that have great runs in the past.

1. CreditCorp Ltd. – Peru – BAP

Photo: Machu Picchu, Peru

This holding company provides financial services in Peru.The corporate website says:
“It primarily operates via its four principal subsidiaries:

* Banco de Credito del Peru (BCP)
* Atlantic Security Holding Corporation (ASHC)
* El Pacífico-Peruano Suiza Compañía de Seguros y Reaseguros (PPS)
* Grupo Credito

Credicorp is engaged principally in commercial banking (including trade finance, corporate finance and leasing services), insurance (including commercial property, transportation and marine hull, automobile, life, health and pension fund underwriting insurance) and investment banking (including brokerage services, asset management, trust, custody and securitization services, trading and investment). BCP is the Company’s primary subsidiary; as of the period ended December 31, 2005, it contributed 97.0% of Credicorp’s total revenues. ”

As of December 31, 2006, (BAP) operated 339 branches. Credicorp was founded in 1889 and is headquartered in Lima, Peru.

Investment Factoid:
A $10,000 invested in this on Jan 2, 2003 would have to grown to $78,676 today.That is a return on investment of 686%.

On Feb 7th, the company announced that the net income for 4th qtr, wentup by 49% to $94M.

http://biz.yahoo.com/ap/080207/peru_credicorp.html?.v=1

2. BanColombia SA – Colombia (CIB)

BanColombia is the largest bank in Colombia and one of the largest in Latin America. The company was founded in 1875 with headquarters in Medellin, Colombia. Yahoo finance says: “As of December 31, 2006, Bancolombia operated 701 branch offices and 1,330 ATMs operating in 162 cities in Colombia. The company was founded in 1945 under the name Banco Industrial Colombiano S.A.”

CIB has increased dividends for the past years and has a yield of 2.79%

Motley fool wrote about CIB this week. The article “The World’s Best Dividend Stocks” says that in the past 5 years CIB stock went up an astounding 1,220%.

You can read that article here:

http://www.fool.com/investing/dividends-income/2008/02/22/the-worlds-best-dividend-stocks.aspx