The FHSA (First Home Savings Account) is a new tax-free account for aspiring first-time homeowners who are looking to save up for that down payment. Indeed, the FHSA launched on April 1, but the big banks needed just a bit more time to prepare. Over the coming weeks and months, Canadians who meet the guidelines will be able to contribute to the new account.
Last week, Royal Bank of Canada (TSX:RY) announced its FHSA offering via its platforms, including RBC Direct Investing and InvestEase.
Currently, the annual contribution limit is set at $8,000. The lifetime maximum is pinned at $40,000. As an investor, it’s important to give the criteria a close look to ensure you’re eligible.
The FHSA is an intriguing new account for those who are eligible
Undoubtedly, the FHSA probably won’t be a game changer for potential first-timers in hot housing markets in Vancouver or Toronto. However, the FHSA can make a notable difference if used effectively and in an optimal manner. And if you consider investing FHSA funds in stocks that can appreciate over the course of years, that seemingly minor bit assist from the FHSA could evolve to become a massive help in helping future first-timers afford a new home.
Indeed, there are many things to know about the FHSA that I won’t cover in this piece.
I’d strongly encourage readers to learn more about the account and how it fits into their long-term financial goals. Speak with your bank’s financial advisor; they can help educate you on a new account that many Canadians will be sure to talk about for years to come.
In short, I find the FHSA to be a valuable tool that can really help aspiring first-time homeowners reach their goals. If you’re like so many Canadians who are struggling to save up for that first home down payment, the FHSA could prove incredibly useful in helping you get on that path to affordability five years down the road.
Criticize the new account, if you will, but it’s a good deal for those Canadians who’ve never owned a home but have the desire to do so at some point in the next 15 years.
In this piece, we’ll have a look at one stock that could make for a great fit in an FHSA or any other tax-free account (think the Tax-Free Savings Account, or TFSA) for that matter.
CPKC Rail
CP Rail (TSX:CP) or CPKC, as it’s referred to following its acquisition of Kansas City Southern, is a terrific company that can grow at a solid pace over the long haul. I’m a big fan of the extensive rail network and would not hesitate to stash it in a TFSA or FHSA.
It will take a bit of time before CP can bring out the full potential of its new rail assets, but as an investor committed for at least five years, I think CPKC will prove a magnificent wealth builder, with Chief Executive Officer Keith Creel at the helm.
For now, CPKC faces challenges, as the recession headwinds come in at full speed. As CP manages through a tough time, I think investors should watch the firm if it stumbles.
At $110 and change, shares go for just shy of 30 times trailing price to earnings. That’s richly valued but not absurd by any means. I’d look for a pullback to around $100 or so before pounding the table, though.
