Building a $1 million Tax-Free Savings Account (TFSA) portfolio is easy and achievable if you make your money work for you. Money takes time to gain momentum. But when it does, it can grow by leaps and bounds if put to the right use. The stock market gives individual investors an opportunity to use their money to grab a share in business and economic growth.
Unleashing the power of stock returns for a legit shot at $1 million
No doubt, you have read about Elon Musk being among the wealthiest individuals. But his wealth is the value of his stock portfolio and not the cash he has. While you may not become the wealthiest, you can become wealthy in 20 years. For a $1 million TFSA portfolio, you can adopt various investing strategies like investing a flat $12,000/year for 20 years or growing your investments alongside income. While investing is in your hands, controlling the investment returns is not completely in your hands.
In some years, your investments might give 20% or even 50% returns, as they did in the 2021 tech bubble. While in other years, your investments might give negative returns or even halve as they did in the 2020 market crash. But returns normalize in the long term. All you need is a portfolio that can generate a 10% compounded annual growth rate (CAGR) in the next 20 years to get a legit shot at $1 million.
| Year | Investment | Investment Return @ 10% | Total Amount |
| 2023 | $12,000 | $12,000.0 | |
| 2024 | $12,600 | $1,260.0 | $25,860.0 |
| 2025 | $13,230 | $2,586.0 | $41,676.0 |
| 2026 | $13,892 | $4,167.6 | $59,735.1 |
| 2027 | $14,586 | $5,973.5 | $80,294.7 |
| 2028 | $15,315 | $8,029.5 | $103,639.5 |
| 2029 | $16,081 | $10,363.95 | $130,084.6 |
| 2030 | $16,885 | $13,008.5 | $159,978.3 |
| 2031 | $17,729 | $15,997.8 | $193,705.6 |
| 2032 | $18,616 | $19,370.6 | $231,692.1 |
| 2033 | $19,547 | $23,169.2 | $274,408.0 |
| 2034 | $20,524 | $27,440.8 | $322,372.9 |
| 2035 | $21,550 | $32,237.3 | $376,160.5 |
| 2036 | $22,628 | $37,616.0 | $436,404.3 |
| 2037 | $23,759 | $43,640.4 | $503,803.9 |
| 2038 | $24,947 | $50,380.39 | $579,131.5 |
| 2039 | $26,194 | $57,913.15 | $663,239.1 |
| 2040 | $27,504 | $66,323.91 | $757,067.2 |
| 2041 | $28,879 | $75,706.72 | $861,653.4 |
| 2042 | $30,323 | $86,165.34 | $978,142.1 |
| $97,814.21 | $1,075,956.3 |
If you start with a $12,000 investment and grow your investment by 5% annually, you could achieve a $1 million target at a 10% CAGR.
Two TSX stocks that can help your TFSA achieve $1 million potential
You need a mix of high dividend and growth stocks to achieve a 10% CAGR for your $1 million portfolio. High dividend stocks will reduce your downside, and growth stocks will enhance your upside, preparing you for all market cycles.
BCE stock
BCE (TSX: BCE) offers a 6% dividend yield and a 5% dividend CAGR. The telecom giant is ready to ride the 5G revolution that will set the stage for the Internet of Things (IoT) proliferation. Industrial robots, smart cameras, drones, and automated cars will all be connected to the internet through the 5G network. More devices mean the more subscriptions and more user services BCE can offer. The Telco can increase the average revenue per user and grow its dividends for another decade.
You could invest $4,000 to buy 61–65 shares of BCE and lock in a $3.87 dividend/share. You can then reinvest this dividend to buy growth stocks with the potential to generate 20–50% returns. While BCE will secure a 6% return, the remaining returns might vary based on the growth stock’s performance.
BlackBerry stock
The 5G ecosystem facilitated by telcos will enable IoT to perform mission-critical applications. Given the importance of these applications, the need for endpoint security will grow, leading the way for BlackBerry (TSX: BB) to offer its cybersecurity solutions for IoT and automotive. The recessionary environment has delayed BlackBerry’s growth momentum as supply constraints impacted car production and governments delayed contract renewals. But this is a short-term headwind.
BlackBerry is using this time to secure design wins and lock in order backlog ($640 million) for its platform royalties. The impact of the recession on the automotive industry will determine how much of these backlogs Blackberry will realize when the economy starts recovering.
BlackBerry stock is trading at a 30% discount from its average trading price of $8. You could invest $2,000 and buy over 350 shares of Blackberry. Keep a portion of these shares to book short-term profits at $8, $10, and $12 share prices, and some shares for long-term wealth generation.
