Make Your Money Work Harder: Why Canadian Investors Should Seek Growth in U.S. Stocks

Your money grows steadily with Canadian stocks. But you can give it a boost by investing in the growth of U.S. stocks.

Puja Tayal

Author Bio

Puja Tayal grew up in a small-business family where dinner conversations often centred on working capital and savings. Her early experiences with investing, particularly during the 2008 financial crisis, shaped her approach to understanding markets and evaluating investment opportunities. She began her career at a mutual fund company before moving into investor education and financial writing for asset and wealth management firms. Before joining The Motley Fool, Puja wrote for Market Realist, where she extensively covered the semiconductor industry. Her published work has also appeared in The Indian Express. Puja believes every stock has a story that can help investors understand its potential returns. She combines business analysis with different investing approaches to help investors make informed decisions and align their portfolios with their long-term financial goals. Outside of finance, Puja enjoys long drives, catching up with friends, watching superhero and science-fiction movies, and managing her family portfolio. She also has a keen interest in artificial intelligence and its potential to reshape the world.

Education

Bachelor's degree in Accounting and Finance, University of Mumbai (2007)
CFA Level I

Areas of Expertise

Qualitative company analysis, management strategy, risk assessment, long-term investing, portfolio diversification and rebalancing, dividend reinvestment, cyclical growth opportunities, compounding strategies, growth stocks, and dividend stocks.

Social Media Profiles

Favorite Investment Quote

"Risk comes from not knowing what you're doing." — Warren Buffett

Published July 4, 2023 11:00 am EDT

Investing your money is better than keeping it locked up in the safe. The question is, where to invest? Every country’s economy is influenced by its geographic location, culture, labour, and capital. The TSX has a rich collection of bank, energy, and mining stocks, which are less volatile and great dividend payers. However, Canada’s growth stocks are not as advanced as those of the United States.

The growth potential of the U.S. stocks

The U.S. is the world’s most powerful economy and houses the world’s largest stock market, the New York Stock Exchange. The tech-heavy Nasdaq has created trillion-dollar companies. You can not only get exposure to the best U.S. companies driving the upcoming growth trends of artificial intelligence (AI), 5G, and electric vehicles (EVs), but you can also buy stocks of foreign companies trading on NYSE.

Your Tax-Free Savings Account (TFSA) allows you to invest in U.S. stocks trading on NYSE and Nasdaq. And you get the same tax benefit as investing in TSX stocks. But dividends earned from U.S. stocks are taxable, even in the TFSA. Hence, I suggest investing in growth stocks and enjoying a tax-free capital appreciation.

Two U.S. stocks to buy through TFSA

Investing in one’s strengths can help you enhance your returns. And the strength of the U.S. is in technology and manufacturing. Here are two no-brainer stocks to invest in and forget, as they are on the road to a new era of growth.

Tesla stock

Tesla (NASDAQ: TSLA) is a stock you want to own when it falls next, and yes, it will fall if the looming recession finally materializes. One reason for Tesla’s stock price volatility is its founder Elon Musk and his distraction risk. Musk is involved in several ventures, from Starlink to Twitter to Dogecoin. But Tesla remains his pet project, and he has returned to it once again after the Twitter distraction.

Tesla sells its EVs in the world’s major automotive markets. While it is facing strong competition from BYD in China, it plans to expand in the world’s biggest consumer market India.

While expanding globally, Tesla is strengthening its roots in the home country. It has opened its EV charging infrastructure to auto giants General Motors and Ford, tapping a $3 billion service revenue opportunity. Moreover, Tesla is looking to lower the price of its cars by leveraging economies of scale.

It also has new products — Cybertruck, Semi freight truck, and second-generation Tesla Roadster — in the pipeline. Tesla is even testing full self-driving technology and looks to monetize it by running robotaxis. Summing it up, a lot is happening in the Tesla workshop, and successful developments could reward shareholders through enormous growth.

Tesla stock has surged 850% since 2020, which means a little over US$1,000 investment in January 2020 is worth more than US$9,500. Canadian investors could have earned US$8,500 in tax-free investment income.

TSMC

America is the world’s largest semiconductor market. Many supercomputers worldwide use the high-performance computing chips of Nvidia. Most PCs and game consoles run on AMD’s chips. And over 90% of mobile phones have Qualcomm’s chips. Even Apple designs its chips for MacBook.

While these companies design the most complex tech, they do not manufacture them. Taiwan Semiconductor Manufacturing Company (NYSE: TSM) manufactures these advanced chips on behalf of chip companies. While Intel is trying to catch up in the chip manufacturing space, its tech is way behind TSMC’s.

Taiwan, as a location, has come under stress due to geopolitical tensions between America and China. Hence, TSMC is making a chip manufacturing plant in America. Even though this will increase the cost of chips, TSMC’s fabrication facilities could run at full capacity, as its manufacturing tech is unmatched.

The 5G and AI revolution and growing semiconductor content in automotive will lead the growth of TSMC in America. While TSMC stock may not give Tesla-like growth, it does give better growth than many Canadian tech stocks. A US$1,000 investment in TSMC in January 2020 is worth more than $1,700 today. The stock pays a dividend, but it’s negligible (1.78% yield) in front of its capital appreciation.