TFSA Investors: Make Your Recession Watchlist Now!

These long-term stocks offer immense value for TFSA investors looking to create immense returns coming out of a recession.

| More on:
Man holding magnifying glass over a document

Image source: Getty Images.

The Tax-Free Savings Account (TFSA) is one of the best places store your cash during a recession. While we aren’t in one yet, that doesn’t mean you shouldn’t prepare. It was said that a recession would hit first though late 2022, then in early 2023, and now economists are predicting mid-2023 for a moderate recession. So, time will eventually run out.

With that in mind, here’s what I would consider when creating a TFSA recession watchlist.

Think long term

A TFSA was first introduced in 2009 as another method of saving for retirement. With the Registered Retirement Savings Plan (RRSP), you can’t take out cash without being taxed before retirement. But what if an emergency happens? Or what if you want to have other investments? Or what if you simply don’t want to be taxed on income you’ve earned?

Now, there are certainly benefits to the RRSP, but for the TFSA this is an excellent option if you’re unsure of what the next year or so will bring. A recession could happen, leading to a drop in the market. But when the market begins to recover, perhaps you’ll want to cash out and invest elsewhere!

No matter what you decide, your investments should be considered in tandem with your long-term goals. You don’t want to lose money and cash out? Fine; you might want to put your cash in some Guaranteed Investment Certificates (GICs) for now. This will help guide you towards your long-term goals without losing money.

But when the market recovers, I would certainly get back in for long-term growth. GICs are up now, but will drop back quickly. And when that happens, here’s where I’d invest.

Buy blue

Look at blue-chip companies that are going to be around for decades. These are household names that have a strong future outlook coupled with solid historical performance. And there are two I would consider on the TSX today.

First I would look at Canadian Pacific Railway (TSX:CP) on your watchlist. Should shares in this company dip, buy big. This blue-chip company is now the only single line rail that can span North America. It has additional revenue streams coming in from its Kansas City merger and is a substantial opportunity for long-term holders.

Shares are up just 5% in the last year alone, jumping after the merger became official. That means there could be a drop in a recession, as investors look to take their earnings. So, add this to your watchlist and certainly buy on the dip.

Then there’s Brookfield Renewable Partners (TSX:BEP.UN) I would even consider buying now. This was a growth stock that climbed when Joe Biden became president. The thing is, the reason to buy didn’t change. Investors simply took their returns and ran.

Now, Brookfield stock is in a prime position to become a household name when it comes to renewable energy. And it’s a great opportunity with shares trading down 21% in the last year, offering a 4.62% dividend yield as well. While shares may be down in the last year, they’re up 12% year to date. So, I would again wait for another dip before buying in.

Bottom line

Plan for growth in your TFSA by watching opportunities with some of the best blue-chip companies out there. In this case, I would certainly continue to watch CP stock and Brookfield Renewable stock now and in the future. When these two dip as we enter a recession, buy what you can to allow your TFSA to return to profit faster than with any GIC.

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 positions in Brookfield Renewable Partners and Canadian Pacific Railway. The Motley Fool recommends Brookfield Renewable Partners and Canadian Pacific Railway. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

Stocks for Beginners

Invest in These Stocks to Make the Most of Your TFSA

If you are unable to find fundamentally strong stocks for your TFSA in 2023, here are two great stock picks…

Read more »

Stocks for Beginners

2 TSX Stocks to Smooth Over the Market’s Bumps

Here are two of the safest TSX stocks you can buy in June 2023 without worrying about high stock market…

Read more »

healthcare pharma
Stocks for Beginners

3 Undervalued Canadian Healthcare Stocks to Watch in 2023

These three healthcare stocks remain down during this market, making them all great opportunities for those seeking long-term gains.

Read more »

tsx today
Stocks for Beginners

TSX Today: What to Watch for in Stocks on Thursday, June 1

An early morning recovery in oil and base metals prices could help the commodity-heavy TSX index start the new month…

Read more »

Woman has an idea
Stocks for Beginners

My Top 5 Stock Picks for June 2023

June is the time to buy seasonal stocks. But with fears of recession looming, my stock picks are resilient growth…

Read more »

analyze data
Dividend Stocks

How to Build a Diversified Portfolio With These Top TSX Stocks

Looking to diversify your portfolio? The market is full of stellar options to consider, including these top TSX stocks to…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

Why 2023 Will Be a Stellar Year for Growth Stock Investors

There are plenty of options for growth stock investors to consider. Here are two options outperforming the market right now.

Read more »

funds, money, nest egg
Stocks for Beginners

I’d Aim for $1 Million Buying Just 5 To 10 TSX Stocks

Are you looking to build a $1 million portfolio? Then focus your investments on 5 to 10 stocks instead of…

Read more »