Do you have trouble putting money into your Tax-Free Savings Account (TFSA)? A new trick is turning $0 in savings into $5,050 in just 100 days. It’s called the 100 Envelope Challenge. But if you take that cash and put it towards an investment, you can quickly turn that $5,050 into $15,880! It’s the perfect opportunity for TFSA investors looking to invest but without a lot of cash on hand.
The challenge for a TFSA investor
The 100 Envelope Challenge goes like this. You label 100 envelopes from one to 100. Then shuffle them up. Each day, you choose an envelope over the next 100 days. So, the first day you might choose 52. That means you put $52 into that envelope, or transfer that amount into your TFSA.
The next day you do it again, and again the day after that. Some days you’ll hit $98. Others you’ll hit $2. The point is that you’re getting into the habit of putting money aside for saving and investing. You’re building habits and finding ways to save money each and every day. By the time 100 days rolls around, you’ll have put away $5,050!
Now, if you’re a TFSA investor looking to turn that $5,050 into even more cash, here’s what you do next.
Find strong dividend-growth stocks
There are absolutely strong companies out there that offer both growth and dividends. A prime example is Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN). This utility and renewable energy company is perfect for the TFSA investor who wants stability but practically guaranteed returns and who doesn’t want to work for it.
Algonquin stock’s utilities business means it gets reliable revenue no matter what happens in the market. During the last market crash, the stock rebounded well within a year. That’s because no matter what, people and businesses need to keep the lights on.
This has meant it can continue it growth strategy through acquisitions. This, in turn, brings in more revenue to acquire even more businesses. Not all of these are utility businesses, however.
The company is also investing in renewable energy assets. With more and more investment going into renewable energy, this means TFSA investors have the perfect opportunity to also see this company become a growth stock over the next decade or so. But it’s practically already in that territory.
Algonquin stock has grown at a compound annual growth rate (CAGR) of 20% during the last decade. It also provides a 3.85% dividend yield as of writing that’s grown at a CAGR of 28% during that time!
Bottom line: Upgrade your $5,050
You’ve already worked so hard for that $5,050. Now put that cash to work for you without the effort you put in before. Put that $5,050 into Algonquin Power stock and leave it alone for only five years. Then take the dividends you receive and reinvest it into Algonquin stock. By the time five years rolls around, your shares could be worth $15,880.65!
That’s only if the stock grows as it has the last decade. Given the rise in demand for clean energy assets and the trajectory of growth for Algonquin stock, those returns could be even higher. And a reminder, you haven’t added another penny! If you chose to invest more into Algonquin stock, your returns could be massive in just five years, never mind a decade.
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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 Amy Legate-Wolfe has no position in any of the stocks mentioned.