Buying a house is the big Canadian dream, which is getting expensive. Once you have finalized the property, add 8-10% to the house price, which rises faster than inflation. You need around $500,000 to buy a house in a metropolitan area (excluding Greater Toronto). If your house budget is $500,000, you need 5% for a down payment, which is $25,000. The Canadian government introduced the First-Home Savings Account (FHSA) to help housing aspirants save up for the down payment.
Turbocharge your FHSA savings
The Canada Revenue Agency (CRA) allows you to contribute $8,000 annually to FHSA and deduct this contribution from your taxable income. Even if you have already made your tax-saving investments, you can invest in FHSA, as the stock market is ripe with opportunity. Growth stocks are trading at cheap prices.
You can claim the tax deduction on your FHSA contribution in a later year whenever your tax bill is high.
For instance, Dennis has made all his tax-saving investments and reduced his 2023 taxable income to a minimum. He can still invest up to $8,000 in FHSA to buy growth stocks that can double his money in three years. Suppose his 2026 taxable income is $85,000 after all deductions. He can deduct the $8,000 FHSA contribution from 2023 to reduce his taxable income. He can claim the entire $8,000 or a part of it, whichever is best suited.
You can grow your money tax-free in the FHSA and withdraw it to buy your first home.
| Year | Investment | Investment Return @ 20% | Total Amount |
| 2023 | $8,000 | $8,000.0 | |
| 2024 | $8,000 | $1,600.0 | $17,600.0 |
| 2025 | $8,000 | $3,520.0 | $29,120.0 |
| 2026 | $5,824.0 | $34,944.0 |
Your home down payment requirement is $25,000, but it could increase if the house price increases. So, it is better to aim for a higher amount — say $35,000. Assuming you have three years until you buy a home, you will need an investment portfolio that gives a 20% average return to convert three $8,000 contributions into $35,000.
Two TSX stocks to turbocharge your FHSA
The goal is to earn an average annual return of 20% in the next three years. This kind of return is only possible with growth stocks. These two stocks could help you earn a 20% compounding return.
Descartes Systems
The resilient growth stock Descartes System (TSX: DSG) has dipped to $99, making it an attractive buy. The supply chain management software has a diverse client base and is always in demand, as global trade keeps getting complicated. The stock moves in tandem with economic conditions, as its revenue is influenced by trade and e-commerce volumes.
Towards July end, Fitch Ratings downgraded the U.S. sovereign debt rating to AA+, sighting lower confidence in the fiscal management. This move saw the market, especially tech stocks, fall.
Descartes stock fell 6.9%, reducing its Relative Strength Index (RSI) to 34. The RSI is a technical indicator that measures the stock momentum to determine if it is oversold (30 or below) or overbought (80 or above). Now is a good time to buy the stock and lock in a recovery rally. The stock could deliver a 20% average return in the next three years, as the economy recovers from slow growth due to higher interest rates and inflation.
Nuvei stock
Another stock with the potential to generate +20% return annually is the payments platform Nuvei (TSX: NVEI). Nuvei stock dipped 16% since July 20 ahead of the Fed interest rate hike and Fitch’s rating downgrade in the United States. Nuvei has high exposure to America after it acquired U.S.-based Paya in February. The stock continues to trade lower ahead of second-quarter earnings.
The holiday season is strong for the payments platform as e-commerce volumes pick up. Moreover, Nuvei has ventured into enterprise payments to benefit from its higher transaction volumes and normalize its revenue. To add to the combination, Nuvei could benefit from the adoption of crypto as and when it happens. The crypto is a wild card and could boost the stock price significantly.
