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TFSA Investors: How to Make $223,000 in 10 Years

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If you have a Tax-Free Savings Account (TFSA), you have access to the easiest method of making money in Canada. Canadian stocks are ripe with opportunities, especially in the next decade. The world is entering a new Roaring Twenties, which means there are plenty of chances to make a lot of money in a short period of time.

Even if you only have a little cash to spare, there is an easy way to make $223,000 in just a decade. All it takes is some planning, consistency, and the right stock.

The plan

Before you even begin to put money into Canadian stocks, TFSA investors should have a plan. That goal could be to pay down debt in a decade. It might be to buy your first house. Or it might be as large as retirement. Whatever the case, having that goal will help you keep on track.

In this scenario, we’re looking at $223,000. But make sure you’re making plans based on your own needs. That said, once you have a goal you need to have plans in place to back it up. For starters, take a look at your budget. See what your income is and what you’re likely to spend on. Be realistic. Don’t say you’ll only spend $50 per month on eating out and then blow it all in one week and forget your investments. A good rule to start with is to put 10% aside of each pay cheque toward investments. You can always increase the amount from there.

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Be consistent!

Now that you have that plan in place, you have to consistently work toward it! If you want to invest in Canadian stocks, you need to have cash readily available for when your watch list shows the perfect time to buy. A great tool you can use to achieve this is through automated payments.

By setting up automated payments with your bank, you can put cash aside each pay cheque at 10% if you choose this route. Your payments will automatically go into your TFSA just like a bill payment. That way, when you’re ready to invest, your cash will be ready and waiting to make you some money!

Just be careful. Don’t aim too high with a TFSA. If you over contribute, you’ll actually have to pay a penalty. You can always check your MyAccount on the Canada Revenue Agency (CRA) website to make sure you don’t make this mistake.

The right Canadian stocks

The right Canadian stocks are those that will be around years and even decades from now and offer value at today’s prices. A great area to begin your search is with renewable energy stocks. This area is expected to see about $10 trillion in global investment over the next decade. So by choosing a stock based on its future outlook and past performance, you’re practically guaranteeing strong returns.

A great option to consider is Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN). Canadian stocks in the utility industry provide stable revenue as energy providers. That revenue in turn helps these companies acquire more businesses. The revenue then increases and they can start again.

But what’s great about Algonquin is the investment in renewable energy. The company owns and operates hydroelectric, wind, solar, and thermal facilities and will likely continue its growth strategy in this area as the world invests in renewable energy.

The results

Algonquin stock has seen a compound annual growth rate (CAGR) of 19% in the last decade as of writing. It offers a dividend yield as well of 3.93% that’s grown at a CAGR of 12.4%. First I would start with just $100 invested in Algonquin. I would then put aside $250 each pay cheque for a total of $6,000 to invest each year.

By doing this each year and reinvesting dividends, investors could have a total of $223,000 in their TFSA portfolio at this same rate of growth from Canadian stocks like this one!

And that's not even with hyper growth, unlike these amazing Canadian stocks!

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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.

 

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