It can be an uneasy (or exciting) feeling to get started in the world of investing. There are times when it can be painful or euphoric to be an investor. As an investor, you must temper your expectations and emotions. Otherwise, you may be the one that stands in the way of a nice retirement. Indeed, the markets can move by excess pain or greed.
Chasing a stock or the broader markets with an ETF based on such emotions can get you a pretty raw deal. Instead, take timing out of the game, or, if you’re able, try to act as a contrarian when it comes to stocks on your radar that dip while the rest of the market is worried about some sort of macro event.
For more than a year, we’ve heard many chatting about that dreaded coming recession. It’s proven elusive thus far, even in the face of the rapid rate hikes we’ve seen coming in.
It’s really hard the next downturn will hit, given how many people have already penciled in a recession in their calendars for some time this year. Though Canada is likely to endure a mild recession, I think it could be so mild (and expected) that contrarian stock investors may be able to ride on the wave of the new bull market. The S&P 500 recently climbed more than 20% off its lows.
TFSA investors: It’s the early innings of the new American bull market
Doubt the strength of the bull, if you will, but I think TFSA (Tax-Free Savings Account) investors should just get started with their investment journeys already. There will always be something to be concerned about as a market participant. When many have a downturn already on their radars, I’d argue the risk/reward scenario isn’t as questionable as it seems.
It doesn’t seem like a bull market right now. As the market rally continues, though, we could see the bears slowly change their tune, just as the bulls turned into bears through 2022.
Though nobody knows what to expect from markets moving forward, TFSA investors should feel content putting a smaller amount (say $1,000) to purchase their first stock. If stocks fall, you’ll be able to buy more at a lower price, as you implement a popular strategy known as dollar-cost averaging (or DCA).
When it comes to first stock candidates to average into, I like Shopify (TSX:SHOP), especially for a TFSA.
Shopify: Back in rally mode
Shopify is one of those high-growth stocks that tend to boom and bust by a great magnitude. The stock collapsed in 2022, only to recover meaningful ground in 2023. Having a look at the longer-term chart, it’s still apparent that this year’s impressive gains (up 79% year to date) are still “dwarfed” by last year’s declines.
If Shopify stock is to return to new heights, it has a lot of gain in store for investors. Will Shopify get there? As Shopify returns to its roots, while pulling the curtain on impressive new products (think AI or point-of-sale innovations), Shopify could have room to march even higher, perhaps past $100 per share.
Further, if rates fall in the next two years (it could as inflation backs off), Shopify could experience considerable relief. In 2022, when rates were surging, the magnitude of fear surrounding expensive tech got a tad out of hand. After considerable damage was in the books, I boldly stated that the high-growth stocks had become the new value plays.
Indeed, after Shopify’s surge, it does appear that growth was the new value. Though Shopify isn’t as cheap anymore, I still think the current rally has legs. Investors like where the firm is headed after its latest quarterly result, which outlined some key changes to its roadmap from here.
Though Shopify could pullback over the near term, I find the name as an intriguing longer-term option for a young investor’s TFSA.
