How to Make $1 Million Tax-Free

Here’s why Constellation Software (TSX:CSU) tops my list of millionaire-maker stocks right now.

| More on:
Growth from coins

Image source: Getty Images

Making a million dollars, tax-free, sounds more like a fantasy to most investors. But what if I tell you it can be a reality for some?

If you’re looking to take your Tax-Free Savings Account (TFSA) to seven figures in a short period of time, high-growth stocks like Constellation Software (TSX:CSU) could surely make your dream come true. Here’s why.

TFSA provides the ideal playground for growth stocks

If you ask anyone who has invested in Constellation Software over the past 10 years about its performance, they’ll tell you how the company managed to convert $75,000 into more than $2 million during this timeframe. Moreover, if they’ve invested in a TFSA, they can spend that money as they please; the taxman will not be coming to catch them.

A TFSA is undoubtedly the best tool for individuals buying growth stocks with a long-term investment horizon. There’s a cap of $6,000 per year in terms of how much investors can deposit into this fund. However, the total accumulated room for investors who fulfill the eligibility criteria since the introduction of TFSA in 2009 is $75,500. I believe that it’s a substantial amount that you can work with when investing in growth stocks, like Constellation Software.

Another great advantage of TFSA is liquidity. Contrary to other registered accounts in Canada, investors can deposit or withdraw money at their convenience with this one. Thus, they can rely on this investment account in case of financial emergencies.

Possible dividend cuts to fund larger acquisitions

The chairman of Canada’s second-largest software company by market value disclosed that Constellation is planning to eliminate quarterly dividend payouts to fund larger acquisitions. I am convinced that this is great news for growth investors. This is because Constellation’s management team has a proven track record of providing outsized returns for investors. Indeed, it’s evident the company’s acquisition strategy is working. More acquisitions are better than less for investors.

Furthermore, Constellation Software is looking to specifically acquire vertical-market software (VMS) companies. It is putting together a team of experts at its headquarters to specialize in the search for large VMS organizations. It believes that this would be a much more efficient use of the free cash flow than special or quarterly dividend payouts.

Bottom line

To sum it up, I strongly believe that there is no better growth stock right now on the TSX than Constellation. The company has built enough credibility to assure investors that its aggressive acquisition strategy actually works wonders. So, investors should buy and hold their investments and make the most of such buy-the-dip opportunities.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Software.

More on Tech Stocks

grow dividends
Tech Stocks

2 ETFs That Grew Over 98% in the Last 5 Years

Unlike individual stocks that represent a market unit, ETFs usually represent a market segment. If they follow sector-specific indexes, they …

Read more »

work from home
Tech Stocks

RRSP Investors: Want to Turn $10,000 Into $50,000?

With February fast approaching, our focus naturally turns to RRSP investing. This is a good time to make note of …

Read more »

Shopping and e-commerce
Tech Stocks

Can Shopify Recover to New All-time Highs in 2022?

With more than 1.7 million merchants on its platform, Shopify (TSX:SHOP)(NYSE:SHOP) is undoubtedly a core platform for SMBs. The company’s software-as-a-service platform …

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

The 5 Best High-Growth TSX Stocks to Buy on the Dip

The broader market selling, primarily in high-growth stocks, provides a solid opportunity for investors to buy future winners at lower …

Read more »

Coronavirus written newspaper close up shot to the text.
Tech Stocks

The 2 Best Tech Stocks to Buy Today for Low-Risk Investors

Overvalued tech stocks are undergoing a major correction after inflating on the back of high liquidity from fiscal stimulus packages. …

Read more »

Choose a path
Tech Stocks

Is Ripple Primed for 100% Growth in 2022?

From an investment perspective, most cryptocurrencies seem similar. Almost all of them seem volatile, and while some get more limelight …

Read more »

Tech Stocks

Tech Crash: 2 Tech Stocks Analysts Have Sliced in Half

The TSX has continued to wax and wane over the past week. After a huge fall on Monday, shares started …

Read more »

Hand holding smart phone with online shop concept on screen
Tech Stocks

Shopify Stock Selloff: Could it Turn Around in February?

Shopify (TSX:SHOP)(NYSE:SHOP) continues to be one of the worst-affected stocks amid the ongoing market selloff. After posting its worst weekly …

Read more »