5 main actions to ensure your financial independence

Happy birthday America! On this day, 244 years ago, all but one of the 13 United Colonies officially adopted the Declaration of Independence, thus declaring their collective right to rule without England making decisions. But despite this freedom, too many Americans are still held captive by their finances. A survey published by GOBankingRates last year found that nearly 7 in 10 Americans have $ 1,000 or less in savings, suggesting that many are not where they should be when it comes to retirement planning.

Fortunately, the stock market has proven to be a long-term equalizer. Among the various ways Americans can put their money to work, none has generated stronger long-term returns than the stock market.

If you have extra cash that won’t be needed to pay bills or cover emergencies, then the following combination of growth and income stocks should be perfect to help you ensure your financial freedom.

Four stacks of cash on an American flag.

Image source: Getty Images.


The first top action that will put you on the road to financial independence is the e-commerce giant Amazon (NASDAQ: AMZN). You might get the impression that your nearly $ 1.4 trillion market cap means your best days are in the rearview mirror, but a quick glance at its income statements suggests otherwise.

Most people are familiar with Amazon due to the company’s huge online market. Today, Amazon is responsible for approximately 40% of all U.S. e-commerce sales in the United States. Being the reference source for online ordering means Amazon’s efforts to reduce its overhead and improve its logistics have paid off. Although retail margins tend to be very small, the company’s retail operations are responsible for building the brand and keeping users loyal to the ecosystem of products and services offered by the e-commerce giant.

However, Amazon’s future largely depends on the success of its cloud services segment, Amazon Web Services (AWS). AWS is an infrastructure as a service game that helps small and medium-sized businesses build their clouds. Considering that the 2019 coronavirus disease pandemic (COVID-19) has pushed more companies than ever into the digital realm, cloud service games should see increasing demand.

But what’s important here is that Amazon generates considerably juicier margins from the cloud than from retail, ads, and content. Therefore, as AWS becomes a larger percentage of total sales over time, Amazon’s operating cash flow will expand even faster.

A surgeon holding a dollar bill with surgical forceps.

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Intuitive surgical

Generally speaking, medical devices are a commercialized field that can generate a lot of competition and very slim margins. But that’s not what long-term investors are going to get from the developer of the surgical system. Intuitive surgical (NASDAQ: ISRG).

Intuitive had installed 5,669 of its da Vinci surgical systems worldwide at the end of March, which is far more than all of the company’s competitors. set! Over the past two decades, these facilities have allowed the company to establish an invaluable relationship with the medical community, making Intuitive Surgical’s clients highly unlikely to leave for a competitor.

But it is not the sale of these intricate systems that will drive Intuitive Surgical’s growth. Instead, they are the instruments and accessories sold with each procedure, as well as the service performed on these systems, which provide most of the company’s growth and operating margin. This is excellent news, considering that as the number of installed systems increases, the percentage of income generated by these higher margin channels increases. This is another way of saying that Intuitive’s operating margins should expand over time.

Among healthcare actions, there may not be a safer long-term winner.

A consumer who places their Cash Card into a Square Point of Sale device.

Image source: Plaza.


Another way to achieve financial independence is to add the main financial technology stocks to your portfolio, Square (NYSE: SQ). While it’s fundamentally expensive, there are two key reasons Square is worth every penny of premium investors that currently pay.

First, there is Square’s vendor ecosystem, which was responsible for processing more than $ 106 billion in gross payment volume last year. While this vendor ecosystem is best known for helping small and medium-sized businesses facilitate transactions, what is striking is the steady increase in usage among large companies.

In the first quarter, Square saw a higher percentage of the volume of payments from businesses with more than $ 125,000 in annualized gross payment volume (GPV) than less than $ 125,000, which is a notable change from previous years. If Square can effectively woo these larger merchants, their seller-based fee revenue could skyrocket in the U.S. consumer-driven economy.

The other reason Square deserves a premium valuation is the Cash app, which appears to be their golden ticket to huge earning potential. The peer-to-peer payment system made its monthly active user (MAU) count more than triple from 7 million to 24 million between late 2017 and late 2019. Given concerns around COVID-19, it wouldn’t be surprising if the MAUs potentially doubled in 2020.

With the ability to invest directly from the Cash app, move money to and from traditional bank accounts from the app, and use Cash Card as a traditional debit card that is tied to a customer’s Cash app balance, the “ticket Golden “by Square seems unstoppable.

A cloud in the middle of a data center that is connected to multiple wireless devices.

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Don’t overlook the fact that brand growth stocks can also provide value and revenue. That is why investors looking to take over their financial futures are going to want to add Microsoft (NASDAQ: MSFT) to their wallets.

Every investor wants the luxury of going to sleep at night without having to worry about their wallet. Perhaps there are no “safer” stocks than Microsoft in this regard. You see, Microsoft is one of only two publicly listed companies with Standard & Poor’s highly coveted AAA credit rating. This means that S&P has more confidence in Microsoft to pay its debts than in the United States government that pays its own debts (the United States government has an AA credit rating from S&P).

Microsoft is a major beneficiary of exceptional margin software and cloud services. It continues to increase cash flow from its old Windows operating system (which, by the way, still dominates PCs), and has seen its growth rate increase as Azure software-as-a-service platform has gained new customers. On a constant currency basis, Azure sales grew 61% in the last quarter of the previous year. Like Amazon, Microsoft’s operating cash flow should expand dramatically as cloud revenue turns into a higher percentage of total sales.

It would also be negligent if it didn’t mention Microsoft’s dividend, which has quadrupled in the past decade. The company’s current return of 1% may not seem like much, but Microsoft is distributing around $ 15 billion annually to its shareholders in dividend payments.

Two smiling young women texting on their smart phones.

Image source: Getty Images.


Finally, ensuring your financial independence means ensuring stable income, and there is possibly no better way to do it than with the telecommunications giant. AT&T (NYSE: T).

AT & T’s high-growth days are certainly in the rearview mirror, but that hasn’t stopped the company from delivering higher earnings to its shareholders. AT&T is a dividend aristocrat who has increased his payout for 36 consecutive years and counting. At the end of June 2020, AT&T was generating an appetizing 6.9% per year for its shareholders, which is more than triple the average return of S&P 500.

However, this boring business still has a few tricks up its sleeve. For example, the deployment of 5G networks should be positive in the long term. Although the cost of upgrading wireless infrastructure is considerable, AT&T will see an increase in data consumption at the consumer and business level in the coming years. This technology upgrade cycle should help fuel growth in AT & T’s wireless division, which is where it generates its juiciest margins.

AT&T will also benefit from an increase in consumer streaming activity. While the DirecTV subsidiary has been affected by the cable cut, the recent launch of HBO Max may be able to attract viewers to the AT&T ecosystem.

At less than nine times future earnings, AT&T is a top-tier earning stock at a very fair price.