How to Turn a $10,000 TFSA Into $100,000 Through Stock Investing

In addition to an initial investment of $10,000, all it takes is time and discipline to grow that into $100,000.

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Who says the Tax-Free Savings Account (TFSA) can’t be used for long-term savings goals? Due to the enormous tax benefits, the TFSA can be a huge wealth generator for investors that have time on their side. 

In 2022, the annual contribution limit of the TFSA is set at $6,000. However, going back to 2009, when the TFSA was introduced, the total contribution limit is $81,500. Don’t worry if you’re behind on your savings; unused contributions can be carried over from year to year.

Perhaps one of the most significant benefits of investing in a TFSA is the tax-free compounded gains. The total contribution limit is $81,500 today, but there’s no cap on the gains or income generated off of those contributions.

If, for example, your investments held within a TFSA grew by 10% last year, those gains can be withdrawn at any point in time, completely tax free.

Building a $100,000 TFSA

Being able to fully max out your TFSA today may seem out of reach. It takes time to save $81,500. Let’s instead look at an example of a TFSA with $10,000 in it and see what the long-term growth opportunities look like.

If that $10,000 was invested in a high-yield savings account earning 1% annually, it would be worth just over $11,000 in a decade. In 25 years, it would have grown close to $13,000.

Let’s now look at an example where that $10,000 was invested in stocks. At an annual return of 10%, you’d be sitting on a nest egg of $25,000 in a decade. If you were to instead keep that invested for a total of 25 years, it would be worth close to $110,000.

Now, the question is how to earn 10% a year annually. Fortunately, it can be easier than you think. The TSX is full of high-quality stocks that have a long history of delivering annual returns of 10% and higher. 

If you’re looking to take your TFSA to the next level, here are two top Canadian stocks that should be on your radar.

Brookfield Asset Management

If I had to choose just one Canadian stock to build a long-term portfolio around, Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) would likely be my choice.

The $100 billion asset management company provides instant diversification to a portfolio. Brookfield Asset Management has operations spread across the globe, spanning a range of different industries.

Shares are up 100% over the past five years and more than 300% over the past decade. On top of that, the stock’s dividend yield is above 1% at today’s stock price.

Constellation Software

If you’re looking for even more growth potential, Constellation Software (TSX:CSU) may be a better fit for you. 

The tech stock is up close to 200% over the past five years and more than 1,000% over the past decade. Growth has been slowly meaningfully in recent years but annual returns for the stock continue to come in far above 10%.

Seeing growth slow certainly isn’t a reason not to invest in this tech stock today. Compared to many of its younger and higher-growth tech peers, Constellation Software is far less volatile and much more affordable from a valuation perspective.

TFSA investors looking to fast-track their way to a $100,000 investment portfolio should have this tech company at the top of their watch lists.

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 Nicholas Dobroruka has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Asset Management Inc. CL.A LV and Constellation Software.

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