Planning your retirement is one area where you think 10 to 20 years ahead. If you are in your 30s, in the first 20 years, you plan to build a million-dollar portfolio. Ensure the ever-changing tax rules don’t take a huge bite (30–40% tax rate) from your portfolio. Hence, choose your investments and savings accounts accordingly. The Tax-Free Savings Account (TFSA) allows tax-free withdrawals making it an ideal choice for long-term growth stocks for the first stage of a 20-20-10 plan.
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How to save in a TFSA for a secure retirement
The next stage is the second 20 in the 20-20-10 plan, which you put into action in your 50s. Here, you gradually allocate your million-dollar portfolio to dividend and fixed-income instruments to derive passive income. You can put the last stage of 10 into action as you retire in your 60s. Set aside a portion of your portfolio in resilient stocks that give stable growth and can come in handy when you are in your 70s to take care of your higher medical expenses.
Top TFSA stocks for long-term growth
Here are a few stocks for the first stage of building wealth over the next 15–20 years. Technology is changing faster than you and I can imagine. In such a dynamic world, choosing long-term growth stocks can be challenging. Therefore, look if the company’s offerings will be in demand even after 15 years.
Nvidia stock
Nvidia (TSX:NVDA) stock is riding the artificial intelligence (AI) bubble, trading at its all-time high. This stock has the potential to give you 10 times growth as the company’s graphics processing units (GPU) beat all competition. It offers a full stack AI data center infrastructure, from network to data centre, to PCs and workstations, to edge devices. Moreover, Nvidia doesn’t stop innovating. It is also working simultaneously on AI at the edge.
Nvidia will ride the AI data centre boom in five to seven years and then move to autonomous cars. But now is not the right time to buy the stock as it is riding a bullish momentum. A correction is likely in the stock. You can add it to your watch list and buy it at a price point of US$305. This stock can give you capital growth.
If you are worried about taxes, Nvidia is a perfect US stock for your TFSA. The Internal Revenue Service only taxes dividends and not capital gains. And the Canada Revenue Agency (CRA) doesn’t tax anything on US stocks trading on Nasdaq. While Nvidia offers dividends, it is just a drop in the ocean compared to the growth the stock brings.
Descartes stock
Descartes Systems (TSX: DSG) is a resilient stock as its logistics solutions will always have demand as long as there is trade. Trade is a traditional business, given the interdependence of states, countries, and even cities for goods and services. And with businesses adopting global supply chains, they need one or more trade solutions to efficiently procure supplies. Descartes offers end-to-end logistics and supply solutions from global trade information to booking a shipment, tracking it, and regulatory compliance filings, to the settlement and audit of invoices.
The growing complexities in trade increase demand for some of Descartes’ solutions. For instance, Brexit increased demand for regulatory compliance solutions and the Russia-Ukraine war for global trade intelligence. Descartes thrives on the complexities of logistics, making it a stock that can keep growing for decades. The right price point for Descartes is when the stock trades below $100. DSG could double your money in five years or earlier.
The above two stocks can bring significant growth in the long term and help you build a TFSA portfolio you could be proud of when you turn 50.
