How much do you need to retire fearlessly? You can retire without worrying about your daily expenses if you have a million-dollar portfolio invested in the market. Firstly, your Canada Pension Plan (CPP) payout will give you 25-33% of your average annual salary at age 65. As for the remaining amount, a 5% dividend yield on a large Tax-Free Savings Account (TFSA) portfolio could fill the gap. Moreover, a small investment in safe growth stocks that grow at an average annual rate of 10% could give you that extra money for emergencies and recreation.
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How to build a strong TFSA portfolio
The Canada Revenue Agency (CRA) has set a limit on your TFSA contribution. But this limit is on how much money you can invest from your pocket. You can compound your returns inside TFSA by selling growth shares at their highs and reinvesting the proceeds in more growth or dividend shares.
And if you are earning dividends, you can reinvest that money to buy more shares. For instance, if you invested in Hive Blockchain Technologies (TSXV:HIVE) stock while it traded at $4 earlier this year, now is a good time to sell the stock and book profit while it trades near $8. The stock is riding as Hive launched its digital solutions service. This service opens Hive’s Nvidia graphics processing unit-powered data centre to developers for artificial intelligence (AI) and high-performance computing.
But Hive still depends heavily on Bitcoin price for growth, and BTC remains volatile. So, to make money on Hive stock, buy it at $4 or below, sell it at $8 or above, and double your money.
I suggest not putting more than 5% of your portfolio in Hive. Invest only the amount you are willing to lose. Suppose you invested $700 in Hive in February when it fell to $3.6. You purchased 194 shares and set a target of $8. If you sell Hive shares now, you’ll earn $1,500. You can invest this amount in buying long-term growth or dividend stocks.
With this active investment, you increased your TFSA investment by $800. Remember, do not trade too much on TFSA, or you might catch the attention of the CRA for trading in a savings account.
Long-term TFSA stock to build wealth ahead of time
Now, for a long-term investment in growth stocks, look for those trading below their 52-week high. To enhance your returns, buy a stock when it is closer to oversold.
Bombardier stock
Bombardier (TSX: BBD.B) stock has returned 500% to those who bought the stock at the start of its turnaround story in November 2020. But there is still a lot of potential to tap as the business jet maker pays off its debt and accelerates its profits. The company has also increased its 2025 revenue guidance from $7.5 billion to $9 billion.
Last year, Bombardier built aftermarket service facilities across several locations. It expects to see revenue from this segment in 2023. Moreover, it expects strong demand for its Challenger 3500 jet launched last year.
Bombardier stock is declining, as there is news around a possible defence contract for Bombardier Global 6500 jet modified for defence use. If the Canadian government considers bidders other than Boeing, Bombardier has a chance as it is a domestic company and could match Boeing’s price.
If Bombardier wins the defence contract, its stock price could surge significantly. Even without this contract, Bombardier expects strong demand until 2025, which could drive growth.
Now is a good time to buy this turnaround stock while it trades 21% below its March peak. It could add a double-digit return to your growth portfolio and help you build wealth.
