It’s that time of year again: Tax-Free Savings Account (TFSA) top-up time. The contribution limit for the year has been raised by a modest $500, likely due to inflation. Undoubtedly, it would have been nice if the TFSA limit were increased by a more generous amount (a return to $10,000 would have been nice).
In any case, many new Canadian investors will have a tougher time making the full contribution with the affordability issues that are due to continue in the new year. With lingering inflation and a labour market that could take a hit to the chin, it’s hard to tell what the next chapter of this bear market will be as it enters its second year.
Undoubtedly, it seems safe to just put your next $6,500 TFSA contribution in a GIC (Guaranteed Investment Certificate). That way, you’ll get more than 4% interest for a 12-14-month issue without having to risk any of your principal. GICs are looking very competitive this year. And it seems prudent to stick with such risk-free assets now that we’re (likely) in a recession year.
TFSA contribution 2023: Are GICs or stocks more enticing to invest $6,500?
Despite the relative attractiveness of GICs and bonds, I still think stocks are a great asset class for long-term investors. If you’re more than 10 years away from retirement, you shouldn’t take a raincheck on stocks amid this bear market. Eventually, stocks will trend higher again, and you’ll want to be invested before the fact. Otherwise, you could miss the biggest gains and have to buy back at higher prices.
It’s not easy to stay invested here, even if you are young, with time on your side. For many new investors, this will be our first year-long bear market and recession. Investing ahead of bad times seems very unwise, especially if our personal finances haven’t been in a great spot.
If you have the means, though, 2023 could prove to be a year that could help investors achieve above-average prospective returns through the next decade. It’s far better to invest while stocks are in the gutter than surging toward unprecedented highs. In any case, investors have a tough task on their hands as they look to allocate their next $6,500 in TFSA funds.
If you’re willing to stick with stocks, the potential returns relative to GICs could have the potential to be so much greater. Higher risks always tend to come with higher rewards. While all stocks are technically “risky,” investors can tilt the risk/reward scenario in their favour with underpriced defensive dividend stocks that can roll with the punches en route to the market’s inevitable post-bear-market recovery.
In this piece, we’ll consider Restaurant Brands International (TSX:QSR).
Restaurant Brands International
Restaurant Brands International is a fast-food heavyweight that could have a big 2023. The company brought on former Domino’s Pizza top boss and turnaround artist Patrick Doyle to help make Burger King a rival to be feared again.
It’s not just the Doyle factor that makes me bullish on shares of QSR.
The stock has a depressed valuation relative to many peers in the fast-food space. Remember, fast-food firms tend to view tough times as a sort of tailwind. In that regard, QSR and the rest of the industry, I believe, are deserving of a premium valuation.
At writing, QSR stock trades at 20.9 times trailing earnings, with a 3.36% dividend yield. Though QSR stock may be pricier than it was a few months ago, I continue to like the name as it looks to transform its brands. I like where Burger King and Popeyes Louisiana Kitchen are headed most.
Hard landing or not, QSR stock stands out as a top pick for conservative investors in 2023.
