Build a Fully Loaded TFSA With Just 4 Stocks

It’s possible to make a good portfolio with a handful of securities, but the choices have to be careful because of the impact that just one failed security might have on the portfolio.

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One thing that many Canadian investors who are just starting to learn how to invest in stocks need to understand is that a collection of stocks doesn’t need to be extensive to be considered a healthy (and diversified) “portfolio.” You can build a healthy TFSA portfolio with a handful of stocks, and if you hold it for long enough, you may have a decent retirement nest egg on your hands.

So, if you are looking to build a full-fledged TFSA portfolio with just a few stocks, there are four companies that you should consider parking your capital in.

A REIT stock

Dividends are the first thing that comes to most investors’ minds when they think of REITs, but there are quite a few REITs that offer a good combination of growth potential and dividends.

Granite REIT (TSX:GRT.UN) is a compelling specimen of this breed of REITs, and it’s currently available at a modest discount. The stock offers decent long-term growth potential, as evident by its price appreciation of 103% in the last decade.

As for the dividends, the REIT ticks multiple boxes. It’s currently offering a decent 4.4% yield and has grown its payouts long enough to be considered a Dividend Aristocrat.

Its dividends are usually financially sustainable if we evaluate this sustainability using the payout ratio, though this year is an exception (so far). But its financials are rock solid, so the chances of the REIT slashing its payouts are quite low, making it a viable long-term choice for both dividends and growth.

A railway stock

Canada only has a couple of railway stocks, and Canadian National Railway (TSX:CNR) is the larger (by market capitalization) of the two players in this highly consolidated industry. It’s a supply chain giant that has served North American populations for over a hundred years.

The 20,000-mile railway network it controls connects hundreds of cities and towns to three North American coasts. Its massive trucking fleet further expands its geographic reach.

Canadian National Railway is a characteristic blue-chip stock, but it offers more than just financial and business stability. It also offers decent growth and reliable dividends, though the yield is a bit low (2%) at the moment. The stock returned over 258% to its investors through both its dividends and capital appreciation, and it is well positioned to repeat this feat (or even improve upon it) in the coming decades.

A bank stock

Bank stocks are a staple in Canadian investment portfolios. Dividends are cited as the primary reason for this phenomenon, as all major Canadian banks (the Big Six) are stable Dividend Aristocrats with attractive yields.

However, National Bank of Canada (TSX:NA) offers a cherry on top of this dividend sundae in the form of decent capital-appreciation potential. It’s easily the best-growing stock in the bunch if you evaluate it on the basis of the last 10 years’ performance.

The stock returned over 280% in the last decade through dividends and growth. Its financials are solid, dividends are financially sustainable, and the stock is fairly valued.

The three factors combined inspire an adequate amount of confidence that if the market remains healthy enough in the future, the stock may offer similar returns in the coming decades as well, making it a powerful growth element in your TFSA portfolio.

An insurance company

Intact Financial (TSX:IFC) is an insurance leader that dominates the Property and Casualty (P&C) insurance segment in Canada and is counted among the leaders in this niche in a couple of other international markets. The P&C insurance industry is quite different from life insurance, and it’s reflected in the performance of Intact Financial stock.

It has risen by over 200% in the last decade alone. If we also add the dividends to the total returns that the stock has offered to its investors over that period, the number gets quite close to 300%. It’s currently offering a modest 2.3% yield and is a well-established Dividend Aristocrat with a healthy payout ratio history.

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Foolish takeaway

The four companies can help you build a healthy, well-diversified TFSA portfolio. You can maximize the benefits these stocks offer by buying them discounted and locking in even better yields than the stocks are offering right now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway, Granite Real Estate Investment Trust, and Intact Financial. The Motley Fool has a disclosure policy.

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