As of January 1, 2022, Canadians have an extra $6,000 that they’re eligible to contribute to their Tax-Free Savings Account (TFSA).
Don’t worry if you’re behind on your TFSA contributions. Unused contributions can be carried over from year to year, bringing the total TFSA contribution limit to $81,500.
What makes the TFSA a fantastic savings account is its flexibility. Canadians have the option to withdraw funds as often as they’d like, without ever needing to pay tax. As a result, the TFSA can be used for both short- and long-term savings goals.
Why TFSA investors should own growth stocks
Another key selling point of the TFSA is the fact that capital gains are not taxed. If you’re a long-term investor, I’d argue that’s the key reason why you’d want to max out your contributions each year.
Investments can compound year after year, without ever being taxed. $81,500 likely isn’t enough for you to retire with. But if you’ve got decades until retirement, a maxed-out TFSA today could fund a significant amount of expenses during your golden years.
Since I’ve still got a few decades until I plan on retiring, my TFSA is loaded with growth stocks. I’ve reviewed two top tech companies that I’ll be looking to add to my portfolio in 2022. And with both stocks trading at a discount right now, I may not be waiting long to start a position.
Constellation Software
There aren’t many other Canadian stocks that have outperformed Constellation Software (TSX: CSU) during its time as a public company. But now that the company is nearing a market cap of $50 billion, Constellation Software is likely past its high-growth days.
The tech stock might have slowed down in recent years, but it hasn’t had any trouble continuing to largely outperform the Canadian market. Shares are up 250% over the past five years. In comparison, the S&P/TSX Composite Index is up not even 50%.
With shares currently trading 10% below 52-week highs, Constellation Software is at the top of my watch list.
Descartes Systems
I’ve had this tech stock on my radar for a few months now. With all the supply chain issues that companies across the globe have been dealing with, Descartes Systems (TSX: DSG)(NASDAQ: DSGX) may stand to see a spike in demand over the next several years.
The tech company provides a range of different cloud-based solutions that help improve supply chain management processes. Descartes System also boasts an international presence, with clients spread across the globe.
Shares are up 200% over the past five years, easily outpacing the Canadian market. But I’m banking on the next five years being better than the last five for Descartes Systems.
From a valuation perspective, Descartes Systems is not exactly a cheap stock. Shares are trading at an expensive forward price-to-earnings ratio of above 50.
Expectations for Descartes Systems are high, which is why the company trades at a premium. Volatility will likely also continue, at least while the tech stock is trading at these levels, so I’d caution investors to be patient during inevitable pullbacks.
But from a stock price perspective, growth investors won’t want to miss this buying opportunity. Shares are down more than 20% from all-time highs set just two months ago.
