Millennials have been dealt a pretty tough hand, with two of the worst crises coming within a span of just over 12 years. While a million-dollar Tax-Free Savings Account (TFSA) may seem like a pipe dream, it’s really not for millennials who can stay on top of their contributions while using the proceeds to systematically invest in equities.
Growing your TFSA wealth over the long run
The key here is “systematically” investing. With the markets blasting off to new all-time highs, it may seem tempting to wait for the next market crash or correction to arrive, but by doing so, one stands to surrender a considerable amount of gains. Such gains could dwarf the magnitude of the next correction, leaving young TFSA investors in a tough spot with their cash hoards that will stand to be eaten away through the insidious effects of inflation.
In this piece, we’ll have a look at three attractively valued TFSA growth stocks that can power your wealth to the next level over the next 10, 20, and 30 years.
Royal Bank of Canada
Royal Bank of Canada (TSX:RY)(NYSE:RY) is the king of Canadian banking and should be a preferred choice of millennial TFSA investors who want prudent management through the inevitable crises that’ll hit over the coming decades. Amid the 2020 coronavirus crisis, Royal Bank gets top marks. Not only did management do a good job of managing expenses, but the capital markets and wealth management businesses were a major bright spots in what was a gloomy year.
Today Royal Bank stock is back at $104 and change, down under 5% from its all-time high. As steep provisions and crisis management falls into the rear-view mirror, it’ll be back to the earnings growth track, and I think the broader basket of bank stocks is due for a re-valuation to the upside, with RY stock leading the way.
At 13.4 times earnings, RY shares trade at a premium to the peer group, but it’s a well-deserved one. With a 4.1% dividend yield, Royal Bank is truly royalty for prudent TFSA investors.
If you’re a young investor, small-cap exposure is a must if you want to beat the markets and put the TSX Index to shame. Badger Daylighting (TSX:BAD) is one of my favourite small- to mid-caps to play a potential increase in infrastructure spending across the board.
For those unfamiliar with the name, it’s in the business of non-destructive soil excavation through the use of a hydrovac. Essentially, the firm uses pressurized water and vacuums to help its customers dig up buried infrastructure, thus exposing them to the light of day.
While Badger’s service may be “unsexy,” I think demand could surge in conjunction with infrastructure spending over the next decade. The stock trades at 2.2 times sales and 3.8 times book, which is way too cheap for the calibre of growth you’re getting.
Shopify (TSX:SHOP)(NYSE:SHOP) is one of the hottest growth stories of the last decade. The company had clocked in blowout after blowout, and just when you thought the firm’s best growth days were over, the firm got a boost from major pandemic tailwinds.
While such tailwinds are poised to fade over the coming months, I don’t think Shopify’s growth story is about to come to a crashing halt anytime soon. If anything, I expect Shopify will build upon its strength in the new year. While the stock is quite expensive at north of 54 times sales (sales, not earnings), I’d still encourage TFSA investors to get a little bit of skin in the game today as they look to add on any dips moving forward.
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