Taking advantage of the Tax-Free Savings Account (TFSA) is a must for Canadians. The account offers lots of flexibility, making it a great choice for both short- and long-term goals. In addition to that, there is a list of different types of funds to choose from to hold in the account.
For short-term savings goals, cash might be the desired choice. It won’t yield much of a return but you don’t need to worry about any type of volatility.
For those with long-term savings goals, mutual funds, exchange-traded funds (ETFs), or individual stocks may be more interesting. Those three options provide investors with a chance to earn a return on their investment.
Using a TFSA for stock picking
The reason I’d argue for long-term investors to max out their TFSA is because of the tax-free growth. Not only can you make withdrawals at any point in time, completely free of tax, but the gains earned within the account are also not taxed. Meaning, you can enjoy the beauty of compound interest year after year, without ever needing to pay any tax.
For anyone looking to maximize their returns, I’d strongly suggest investing in stocks. ETFs can be an excellent choice for the hands-off investor. But for those looking to be more involved in their portfolio, I’d suggest giving a try to investing in individual stocks. That being said, as you slowly build a portfolio of individual companies, owning a few different ETFs to provide much-needed diversification would be a wise idea.
With that in mind, I’ve reviewed two top TSX stocks that any long-term Canadian investor should have on their watch list today.
Stock #1: Shopify
It’s been a wild ride for Shopify (TSX:SHOP) shareholders since the early days of the pandemic. The high-growth tech company surged in the second half of 2020 through the end of 2021. That was shortly followed by a massive selloff that occurred throughout almost the entire year of 2022.
Close to halfway through 2023, shares of the tech stock are already up more than 50%. Still, Shopify is down close to 70% from all-time highs set in late 2021.
Say what you want about the stock’s valuation, the business itself is loaded with long-term growth potential. At its current price levels, which are not cheap, I wouldn’t bank on volatility slowing down anytime soon for the stock. But if you’re bullish on the continued rise of e-commerce and have a long-term time horizon, Shopify deserves serious consideration.
Stock #2: Brookfield Renewable Partners
For long-term TFSA investors not willing to take on as much volatility as you’d expect with Shopify, Brookfield Renewable Partners (TSX:BEP.UN) would be a great option.
The renewable energy company boasts a dependable market-beating track record in addition to an impressive dividend yield.
Excluding the company’s current 4% dividend yield, shares are up close to 100% over the past five years. In comparison, the S&P/TSX Composite Index has returned just about 25%.
As a current Brookfield Renewable Partners shareholder and a massive bull on the renewable energy sector, I’ll likely be adding to my position while shares continue to trade at a discount.
Brookfield Renewable Partners is down more than 20% below all-time highs that were set in early 2021.