There are no shortage of strategies when it comes to growing your TFSA. You can be aggressive or conservative in deciding which stocks to choose from. However, the best way to accelerate that growth is to build up your savings and to be able to keep contributing over the years as well.
Below I’ll show you how using that approach can help you get your TFSA to the $1,000,000 mark as quickly as possible.
Finding a good growth stock is key
The first step is always selecting which stock(s) you’ll invest your funds in. In this example, I’ll use Alimentation Couche-Tard Inc (TSX:ATD.B). The company has achieved terrific growth and acquisitions have been a big part of that over the years.
Despite how large Couche-Tard has gotten over the world, there are still many opportunities for the company to grow even more, especially through acquisitions.
It’s been a terrific growth stock over the years, rising 130% in a span of five years. That averages out to a compounded annual growth rate of over 18%.
However, as promising as Couche-Tard looks to be today, that’s not a rate that would be realistic to expect the stock to continue growing at and that would be a best-case scenario for investors.
In addition to its impressive growth, Couche-Tard also pays investors a very modest dividend yield of around 0.6%. It’s not likely going to attract many investors looking for recurring income, but it is a good way to pad the stock’s already impressive returns even further.
It’s just another way that investors can benefit from owning the stock and if the company runs out of ways to grow, significantly raising the dividend could be an option.
Getting to $1,000,000
Overall, Couche-Tard is a very appealing attractive investment option, which is why I’ve decided to use it in the model below.
In the following example, I’m going to assume that $63,500 is invested in Couche-Tard in year one, which is the cumulative limit for TFSAs as of 2019, and then every year afterward an additional $6,000 will be invested in the stock as well.
Here’s how that would look:
| Year | Total Contributions | Beginning Portfolio Balance | Growth | Ending Portfolio Balance | Total Dividends | Portfolio + Dividends |
| 1 | $63,500 | $63,500 | $5,755 | $69,255 | $381 | $69,636 |
| 2 | $69,500 | $75,255 | $6,820 | $82,075 | $798 | $82,873 |
| 3 | $75,500 | $88,075 | $7,982 | $96,058 | $1,251 | $97,309 |
| 4 | $81,500 | $102,058 | $9,249 | $111,307 | $1,740 | $113,047 |
| 5 | $87,500 | $117,307 | $10,632 | $127,939 | $2,265 | $130,204 |
| 6 | $93,500 | $133,939 | $12,139 | $146,078 | $2,826 | $148,904 |
| 7 | $99,500 | $152,078 | $13,783 | $165,860 | $3,423 | $169,283 |
| 8 | $105,500 | $171,860 | $15,576 | $187,436 | $4,056 | $191,492 |
| 9 | $111,500 | $193,436 | $17,531 | $210,967 | $4,725 | $215,692 |
| 10 | $117,500 | $216,967 | $19,664 | $236,631 | $5,430 | $242,061 |
| 11 | $123,500 | $242,631 | $21,990 | $264,621 | $6,171 | $270,792 |
| 12 | $129,500 | $270,621 | $24,526 | $295,147 | $6,948 | $302,095 |
| 13 | $135,500 | $301,147 | $27,293 | $328,440 | $7,761 | $336,201 |
| 14 | $141,500 | $334,440 | $30,310 | $364,750 | $8,610 | $373,360 |
| 15 | $147,500 | $370,750 | $33,601 | $404,352 | $9,495 | $413,847 |
| 16 | $153,500 | $410,352 | $37,190 | $447,542 | $10,416 | $457,958 |
| 17 | $159,500 | $453,542 | $41,105 | $494,646 | $11,373 | $506,019 |
| 18 | $165,500 | $500,646 | $45,374 | $546,020 | $12,366 | $558,386 |
| 19 | $171,500 | $552,020 | $50,030 | $602,049 | $13,395 | $615,444 |
| 20 | $177,500 | $608,049 | $55,108 | $663,157 | $14,460 | $677,617 |
| 21 | $183,500 | $669,157 | $60,646 | $729,803 | $15,561 | $745,364 |
| 22 | $189,500 | $735,803 | $66,686 | $802,489 | $16,698 | $819,187 |
| 23 | $195,500 | $808,489 | $73,273 | $881,762 | $17,871 | $899,633 |
| 24 | $201,500 | $887,762 | $80,458 | $968,220 | $19,080 | $987,300 |
| 25 | $207,500 | $974,220 | $88,294 | $1,062,514 | $20,325 | $1,082,839 |
Under this model, it would take roughly 25 years to hit the $1,000,000 mark. It assumes that Couche-Tard will continue growing at roughly 9% per year and that it will continue paying dividends at 0.60%.
However, the stock has been growing at a much quicker pace; if that that happens, it would take fewer years to get to $1,000,000.
Ultimately, this is built off assumptions, and there’s no guarantee what the future will hold for Couche-Tard or any stock. However, by investing in a stock with strong fundamentals, pays a dividend, and is committed to growing, investors are giving themselves great odds the stock will continue to produce good results for years to come.
Rather than investing in one stock, investors can put the funds into an ETF. The trade-off, however, is that investors obtain more security in exchange for lower returns.
Whether it’s Couche-Tard or any other stock, investors can obtain the best returns by investing both a lump sum as well as making annual contributions each year.
