The Canadian real estate market has been very difficult for first-time buyers to enter for many years now. The Canadian government has recognized this and created the First Home Savings Account (FHSA) in an attempt to make it easier for new buyers to enter the market. If you’ve never heard of this account, don’t feel too bad, since it was just released in April 2023.
For those that aren’t familiar, Canadians can think of the FHSA as a child account to the Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP). Like the TFSA, any gains generated in an FHSA can be withdrawn tax free. However, Canadians can also reduce their income tax by contributing money into this account. With that kind of structure, it makes it very hard not to open one of these accounts.
It should be noted that Canadians that have been previously saving up for a home using their RRSP can apply withdrawals from an FHSA and an RRSP (through the home buyer’s plan) to the same purchase. That means any of those previous savings won’t be going to waste with this new account.
In this article, I’ll discuss two stocks that I would feel confident holding in an FHSA.
This is one of the best Canadian stocks around
If I could only choose one stock to hold in a FHSA, it would be Constellation Software (TSX:CSU). This company has been one of the best-performing TSX stocks since its initial public offering. Over the past 17 years, Constellation Software stock has gained more than 14,000%. That means a $10,000 investment would be worth more than $1,000,000 today.
It’s generally accepted that companies won’t be able to grow as fast as they once did, as they continue to grow in size. However, despite Constellation Software’s outstanding previous growth, this company appears to not be slowing down whatsoever. Over the past year, Constellation Software stock has gained more than 33%. If you managed to buy shares when the stock was at its lowest point in November 2022, then you’d be sitting on a 40% return.
Still led by its founder, Mark Leonard, Constellation Software seems like a no-brainer for the new FHSA. This company has found a way to perfect its acquisition strategy and I think investors should heavily consider buying this stock today.
A reliable company for your portfolio
Canadian National Railway (TSX:CNR) is another stock that first-time home buyers should consider investing in today. Over the past year, Canadian National stock has managed to gain more than 12%. Looking out to a longer timeframe, investors would be able to see that Canadian National stock has gained about 60% over the past five years.
As far as industry leading companies go, very few names in Canada are as impressive as Canadian National. This company operates nearly 33,000 kilometres of track which spans from British Columbia to Nova Scotia. That wide reach has helped it become one of the most recognizable companies in the country. With a fairly stable business behind it, I think Canadian National would be a great addition to your FHSA.
