Over the past year, Canadians have had a major opportunity to grow their savings, as the entire market recovered from the market pullback caused by the pandemic. Canadians have been taking advantage of cheap stocks to buy and the tax-free nature of their registered accounts, like the Tax-Free Savings Account (TFSA). This has led to some big gains for many investors.
When the market is recovering from a pullback, as it has over the last 12 months, it’s a lot less difficult to find stocks that can grow your money. After a year where so many stocks have performed so well, now most are back to fair value, which means it’s all about long-term investing.
Luckily, with powerful tools like the TFSA, long-term investing is a great way to grow and compound your money. In fact, with a little discipline and patience, investors who have just $20,000 today have the potential to grow their portfolio to $150,000 by the end of 2030. And what’s more, it’s not that difficult to achieve.
How to grow your money rapidly
The end of 2030 is just under a decade away. That’s a lot of time to grow and compound your money. The TFSA is an especially powerful tool for Canadians. However, you need to make sure you’re buying the best stocks.
If you can manage to contribute just $500 a month ($6,000 a year) for each of the next 10 years, while your portfolio grows at a compounded annual growth rate (CAGR) of 10%, that portfolio would be worth more than $150,000 by the end of 2030.
That would be $80,000 of savings and more than $70,000 of earnings in just 10 years. What’s more, if you continued that for another 20 years (30 years total), your portfolio would be worth just shy of $1.4 million, on just $200,000 of savings. That’s the power of compound interest.
A 10% CAGR may sound like a lot, but several Canadian stocks have achieved that over the last decade and have the ability to continue to achieve that over the coming decade. Here are three to consider for your TFSA.
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A top Canadian blue-chip stock
Many of the top long-term stocks will be well-known Canadian stocks that have been growing for years. That’s certainly the case with Canadian National Rail (TSX:CNR)(NYSE:CNI), one of the best Canadian stocks there is.
CNR is the perfect stock to buy and forget about. Railway transportation has long been the most efficient way to transport goods. So, as the economy grows, these companies tend to grow along with them.
Over the last 10 years, CNR has earned its investors an impressive 331% total return. That’s a massive 15.7% CAGR, showing exactly why it’s the perfect long-term stock to own.
The top financial stock to buy in your TFSA
Another well-known Canadian stock for investors to buy long term is Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM), the alternative asset manager.
Brookfield has been one of the top stocks in Canada for years. The company has proven to be a high-quality investment manager capable of consistently increasing shareholders’ value and the cash flow its assets generate.
The massive company is extremely well capitalized and has businesses all over the world. It’s always looking to take advantage of any deals and is continuously recycling capital into newer, higher-growth projects.
So, it’s no surprise that the stock has earned a total return of 383% over the past decade or a CAGR of more than 17%.
A top retail stock to buy for your TFSA
One of the best-known retail stores across Canada is Dollarama (TSX:DOL), as it’s exploded in popularity over the last 15 years.
This increase in popularity has translated directly to the growth stock. Not only has the business been opening up hundreds of new locations for years, but it’s also been increasing its prices steadily as well as the average purchase size that consumers are making.
Canadians love to save money, especially on items you need but don’t necessarily want to spend on. This massive growth in its operations is evident in Dollarama stock. Over the past decade, it’s gained well over 1,000%, or just shy of an incredible 28% CAGR.
There are numerous Canadian stocks that can grow your money considerably when you invest for the long term. Plus, when you let it compound tax-free in a TFSA, it can grow exponentially.
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 Daniel Da Costa owns shares of BROOKFIELD ASSET MANAGEMENT INC. CL.A LV. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of and recommends Brookfield Asset Management and Canadian National Railway. The Motley Fool recommends BROOKFIELD ASSET MANAGEMENT INC. CL.A LV and Canadian National Railway.