Tax-Free Savings Account (TFSA) portfolio construction for new self-guided investors doesn’t need to be intimidating. If you educate yourself and follow the greats (think Warren Buffett and Charlie Munger), you too can position yourself for a fairly comfortable retirement. Undoubtedly, many first-time market participants are lured in by raging bull markets and bubbly stocks driven by hot trends. Today, it’s all about artificial intelligence (AI). A few years ago, it was all about crypto.
What’s next will be anyone’s guess (possibly spatial computing). In any case, chasing trends is not investing. Spotting shares of companies priced at below their true worth (intrinsic value) is. Like bargain hunting at the grocery store, you must always weigh the price you’ll pay before anything else.
Of course, you’ll need to pay up for quality. But at the end of the day, beating the market is more about getting just a little more for every dollar you put in. Wonderful businesses are worth paying up for, but you must not be willing to pay any price, especially if you plan to get in after an already sizeable move.
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New investors: Use your TFSA to buy and hold, not trade!
Fortunately, you don’t need to chase what’s “sexy” or “hot” at any time. You shouldn’t strive to land a quick 50% gain in a matter of months. Though it can still happen, I’d argue that realistic expectations and a strong emphasis on patience are more than enough to help you achieve your long-term investment goals. And, of course, you need discipline to be a buyer when others sell, or a seller when others are getting too far ahead of themselves with the buying.
As is the case with most new bull markets, TFSA investors must be mindful of the price of admission to ensure they’re not paying for many years’ worth of growth upfront. When growth expectations are too high, the stage can be set for vicious corrections.
That’s why, as a value investor, I prefer wonderful companies that have seen shares fall on rough times than “hot” companies that only seem to go up on the day to day! Though momentum doesn’t indicate overvaluation, neglecting valuation metrics with a shallow investment thesis that’s common to everyone on Wall Street tends to lead one toward dangerous territory.
In this piece, we’ll look at two stocks that I think are not getting enough attention from Wall and Bay Street. I think they’re worth a very long-term spot in your TFSA fund.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX: ATD) is the master of convenience retail, with a stock that’s done remarkably well over the past 10 years. Even though the business of gas stations and convenience stores will change in the next 10 years, as electric vehicles (EVs) hit the roads, I view Couche-Tard as a company that can pivot effectively.
Charging stations could be the new gas pumps. And fresh food and grocery items could be the new draw of convenience stores. It’s an exciting, albeit uncertain time for Couche. Regardless, I think the road is higher from here. The recent 5% pullback seems buyable.
Amazon
Amazon (NASDAQ: AMZN) is a disruptive force that’s also worth a permanent (or semi-permanent spot) in one’s TFSA. The stock has come roaring back over the past year, now up more than 17%. Still, there’s room to run, as Amazon uses technology to disrupt new markets.
The stock is still down more than 30% from its high and could hit new heights as soon as mid-2024. The $1.3 trillion company stands out as a very intriguing option for those looking to grow wealth over 10-15 years.
Do fasten your seatbelts, though, as volatility is a given with the mega-cap American firm that continues to create value for its loyal customer base.
