TFSA investors need to start thinking about long-term wealth creation. Undoubtedly, 2022 showed many new investors the dangers of chasing “what’s hot,” or stocks with considerable momentum behind them. While the act of buying momentum stocks itself is not harmful to your wealth per se, doing so without conducting the appropriate amount of research and due diligence can be.
TFSA investors should not only put in a proper amount of due diligence, but they should also go above and beyond. At the end of the day, every investor has their own “circle of competence” (a term coined by the brilliant Warren Buffett). If you invest within yours, you may know more than the average investor about industry dynamics and how a company under question can justify its current price tag.
Keeping it simple with your TFSA
If you’re a master at valuing utility companies, why bother chasing cryptocurrencies, small-cap AI stocks, or anything else that makes for a good conversation at a party or the water cooler? By sticking with what you know how to value, you can steer clear of a lot of trouble. Sure, you may miss out on a quick gain, but at the very least, you’ll be investing as opposed to speculating.
Seek long-term investments for your TFSA. Not a stock you’ll seek to ditch in a week or quarter down the road. Instead of maximizing returns over an arbitrary timespan, seek to maximize returns relative to risks you’ll take over a long-term timespan (ideally, 10 years or more). That way, you’ll be able to easily say no to bubbles and concentrate on building a comfortable retirement nest egg for yourself.
In this piece, we’ll look at two steady firms with long track records of long-term appreciation. Neither name will make you the most interesting person at your next party. That said, at the very least you’ll know you’re on the right track regarding your long-term retirement goals!
TFI International (TSX:TFII) is a less-than-load trucker that provides a vital service to the Canadians it serves. The stock has felt the pressure of late, sinking around 17% from its peak. I think the dip is a great buying opportunity for TFSA investors looking to prepare for the next inevitable bull run. Demand for transport will have ups and downs depending on the state of the economy. With a recession partially factored in, I do think TFII stock has modest expectations ahead of it.
The real upside, I believe, could arise if the recession is, in fact, shallow. In any case, TFI is well-equipped to deal with a harsher recession. Though a deep recession could lengthen a recovery, long-term investors will likely still be around to ride the bounce back. At 11.9 times trailing price-to-earnings, TFII stock stands out as a compelling value.
Waste Connections (TSX:WCN) provides waste collection services across North America. In bad times, waste still needs to be picked up. In that regard, WCN stock is a very durable stock that’s good for all seasons. With a wide moat and rich history of delivering gains for investors over time, I think WCN stock should be atop TFSA investors’ radars.
The 0.74% yield may not seem like much. But it’s poised to grow at an above-average rate annually. Recession or not, the payout looks incredibly safe.