You can build a $1 million portfolio tax free by investing through a Tax-Free Savings Account (TFSA). To become a millionaire, you need growth and high-dividend stocks that can outperform the market in the long term and grow your money five- to 10-fold.
For instance, Descartes Systems stock jumped 11-fold from $9.75 in April 2013 to $107.24 in April 2023. A $10,000 investment in Descartes in 2013 is $109,675 today, growing at an average annual rate of 27%.
If you have a portfolio of 10-15 such stocks that give an average annual return of 20%, you can become a millionaire in 15 years by investing $10,000/year. But that rarely happens. A more realistic target would be a 12-15% average annual return on a $12,000 annual investment for 17-20 years.
How to choose stocks with millionaire-maker potential
You can look at Motley Fool’s top growth stocks to identify high-growth stocks. Shortlist the stocks you understand and do your own research. Understand how the company earns revenue and its growth plans. It is better to look for companies that are tapping secular growth trends. These companies might possibly be making losses at present, but what is important is revenue growth and order book. You invest today to benefit from the growth four to five years from now.
Two TSX stocks that could make you a millionaire
Here are two high-growth stocks that have the potential to give a 10-fold growth in 10-15 years.
Ballard Power Systems stock
Hydrogen fuel cells are an effective solution to reduce carbon emissions and achieve energy independence. But like all new tech, hydrogen fuel cells are not cost efficient as of yet. It will take time to create an infrastructure conducive to the wider adoption of hydrogen fuel cells.
And when the time comes, Ballard Power Systems (TSX: BLDP) will be ready with its hydrogen fuel cells for heavy vehicles like buses, trucks, rail and marine, and select stationary power applications. The initial stages of commercialization have begun. Ballard Power is receiving orders (US$133.4 million) and generating revenue (US$20.5 million) in the fourth quarter. However, it has a long way until it becomes profitable.
BLDP stock is trading at its three-year low, as a weak business environment is drying financing for capital-intensive, low-yield projects. Ballard Power Systems’s U.S. competitor Plug Power reported a slowdown in activity, making it difficult for the company to realize its 2023 guidance.
Now is the time to buy and hold Ballard Power Systems, as the recessionary environment keeps the stock low. The company’s US$913.7 million cash reserve can help it continue its research in a recession while maintaining its ability to benefit from the green hydrogen revolution.
Bombardier stock
Bombardier (TSX: BBD.B) is a turnaround story that has just taken off on the recovery path. The company is seeing strong growth, since Eric Martel took the helm in 2020. In the past three years, Bombardier significantly reduced its debt from over $10 billion to $5.6 billion, with no debt maturities till March 2025.
On the demand front, Bombardier is seeing strong uptake of business jets (order backlog of $14.8 billion) due to an increase in high-net-worth individuals. A recessionary environment could slow business activity but is unlikely to impact the demand for business jets. This turnaround story could take new momentum when the company brings its flagship, large-size Global 8000 aircraft into service in 2025.
The initial stage of a turnaround since 2020 has pushed Bombardier stock up 750% in three years. The strong growth could continue for the next five to seven years but at a slower pace before it normalizes.
How to invest like a future millionaire
These stocks are highly volatile in the short term. Keep buying small amounts of these stocks at the dip and reduce your average cost till the company’s future growth remains intact. When the time comes, you can trade them for a 10 times higher price and accumulate the capital gains in the TFSA.
