Investing is not rocket science if you know what you want. The right way to set a financial goal is to give it a number, plan for a decent investment horizon, and practice disciplined investing. For instance, your goal is to have a million-dollar Tax-Free Savings Account (TFSA). Now that you have a well-defined destination ($1 million), you can plan your journey.
A faster route to a million-dollar TFSA
The fastest route to travel from Canada to India is a direct flight that will allow you to reach your destination in 14 hours. A faster route to a million-dollar TFSA is buying growth and high-dividend stocks in a bear market.
Now is the time to buy top stocks at the dip, as the TSX Composite Index is down 12%. Some long-term stocks are down more than 30% and can accelerate your journey to a million-dollar TFSA.
High-dividend stock
You might have dividend aristocrats like Enbridge and Canadian Utilities in your passive income portfolio. But your million-dollar portfolio needs a high dividend stock that can compound your returns. True North Commercial REIT (TSX:TNT.UN) is a small-cap stock with an average distribution yield of 9%.
This commercial REIT has been paying regular monthly distributions since 2013 from the rental income it collected from tenants. Around 76% of its rental income comes from government and high-credit-ranking companies. It aims to attract a high-quality tenant base and secure a higher occupancy rate by buying and maintaining properties in strategic areas.
Instead of putting a significant amount in True North Commercial REIT, make the most of the bear market by investing small amounts every month. The stock has dipped 22% since March. A $500 monthly investment in this REIT starting in April would have reduced your average cost per share to $6.35 and given you an average distribution yield of 9.3%. In terms of dollars, if you had invested $3,500 over seven months and gotten 550 shares of True North Commercial REIT, you’d have secured a monthly passive income of $27.
As your financial goal is not to just earn passive income but also grow your portfolio to $1 million, a dividend reinvestment plan (DRIP) is an ideal option. Even if you stop investing in the REIT after seven months, the DRIP will keep buying shares monthly on your behalf. A $27 monthly distribution can buy more than four shares at the current trading price. In 10 years, your share count will be 1,120 shares and your portfolio value over $9,300!
High-growth stock
A high dividend stock can provide you with sustainable growth. Club it with a high-growth stock and you can really boost your returns and give your TFSA portfolio the push it needs to reach a million.
Tesla (NASDAQ:TSLA) is one such stock that is popular for its electric vehicles (EVs) and founder Elon Musk. Musk is known as a disruptor and visionary who uses technology to change the way people live. Tesla has made EVs a reality and is now aiming to make them the world’s household car.
But supply chain issues have slowed production, and rising inflation has slowed demand. These are temporary setbacks that will ease in the long term. EVs have a huge market, and Tesla is continuously improving technology to make them more affordable. I expect Tesla stock to achieve more than 30% average annual growth in the long-term.
If Elon Musk’s risky ventures pan out, like the Twitter acquisition or cryptocurrency investment, these ventures could boost Tesla’s stock price. For instance, Tesla stock surged 180% in the 2021 crypto bubble. Even after the 40% dip in 2022, the share is 60% above the pre-crypto bubble.
Your TFSA allows you to invest in U.S. stocks. So, invest $250-$500 monthly in Tesla for the next 12 months to reduce your average cost per share and enhance your upside.
The journey to a $1 million TFSA starts with $100 a week
You don’t need thousands of dollars to make a million. Invest regularly, even if it’s $10 a day, and build a portfolio of the top 25-28 stocks. The stock market will take it from there and grow your TFSA portfolio to $1 million.
As Martin Luther King Jr. said, “If you can’t fly, run. If you can’t run, walk. If you can’t walk, crawl, but by all means, keep moving.”
