New Tax-Free Savings Account (TFSA) investors don’t need to trade in and out of high-tech stocks they don’t fully understand or dabble with options to do well over the long run. Instead, I’d argue that complexity could get in the way of a TFSA investor and their retirement goals.
With that, it may make more sense to keep it simple with stocks you can value and understand fully. And if you can keep that TFSA portfolio diversified, across a range of quality stocks at good prices, I do not doubt that the average Canadian investors can exceed their expectations over the long haul.
Indeed, the key phrase here is long haul. Far too many new investors want to make money quickly. And by chasing momentum stocks and taking too much risk with options they don’t fully understand, one can stand to lose money, perhaps a lot of money, over a short-term timespan.
By keeping it simple with blue-chip stocks and allowing them years to run, I think new investors can set themselves up on the fast track to a comfortable retirement.
In this piece, we’ll look at three names I like to start a TFSA retirement fund.
CN Rail
CN Rail (TSX:CNR) is a Canadian railway that looks poised to keep chugging higher. The stock is fresh off a 10% correction and could be in a spot to high new highs, even as the Canadian economy slams the brakes by a bit.
Indeed, one has to think a slowdown in the economy is partially priced in at these levels. Though Canada may not be able to completely steer clear of a recession, I think the track has been cleared for greater gains given the modest 19.78 times trailing price-to-earnings ratio.
The stock also has a great 2% dividend yield, which will likely grow at a steady pace year after year. My takeaway? Stay aboard the profit train, new TFSA investors!
Aritzia
Aritzia (TSX:ATZ) stock has crashed, and hard, over the past year. Shares have shed 60% from their peak and seem headed lower from here. At $23 and change, Aritzia trades at 16.3 times trailing price to earnings. I believe that’s too cheap for a retailer with such a strong brand backing it.
Indeed, the historic implosion has left a bad taste in investors’ mouths. And while a recession could weigh further on clothing demand, one has to think that a bear-case scenario is already priced in right here.
If you believe in the Aritzia brand and are bullish on the longer-term expansion prospects, I view ATZ stock as a deep-value bargain hiding in plain sight. The latest quarter was ugly, but the company can move on.
Apple
Finally, we have iPhone maker Apple (NASDAQ:AAPL), which, I believe, every Canadian investor should have exposure to. Indeed, the stock recently slipped into a correction, falling around 9.6% from its peak, thanks in part to good, not great, earnings results, and a broader distaste for high-multiple growth stocks.
At around 30 times trailing price to earnings, AAPL still does not come cheap. However, I don’t think it deserves to be cheap, even as the iPhone faces growth challenges.
As the economy recovers, I think the iPhone could be in a spot to do quite well. For now, too many people view Apple as overvalued, given lacklustre growth in recent quarters. I think they’re missing what’s up ahead by looking too closely at the rear-view mirror!
For now, I view Apple as undervalued, given it’s well equipped to capitalize on a recovery in the consumer.
