The beauty of the Tax-Free Savings Account (TFSA) is its flexibility. Short-term savers have the luxury of being able to make withdrawals at any point in time, completely tax-free. Long-term investors, however, can benefit from earning tax-free compounded gains.
Long-term investors who are looking to maximize returns in their TFSA will want to choose their investments wisely. If you’re going to benefit from tax-free compounded gains, you will want to own funds with some growth potential.
Building the right portfolio for your objectives
Fortunately, Canadians have flexibility when it comes to choosing what to hold within their TFSA. Those saving for a short-term goal may opt for a low-risk option, such as cash or a Guaranteed Investment Certificate (GIC). Long-term investors would be wise to consider investing in individual stocks or a broad index exchange-traded fund (ETF) — both of which have the potential to drive serious returns over the long term.
With that in mind, I’ve reviewed a top tech stock that has been making investors rich for decades. Not many stocks on the TSX can match Constellation Software’s (TSX:CSU) market-beating track record.
Shares may not be cheap but this is one growth stock that is certainly worth paying a premium for.
Constellation Software
When stocks across the tech sector plummeted last year, Constellation Software held strong. The stock was just shy of ending 2022 in positive territory. The momentum that began in the second half of 2022 has carried right into 2023. Shares are now up 20% on the year, having set a new all-time high earlier this month.
The tech giant is nearing a market cap of $70 billion, making Constellation Software one of the largest companies on the TSX. Despite its massive size, the stock continues to defy the odds and continues to largely outperform the broader Canadian stock market’s returns.
Shares of Constellation Software are up 250% over the past five years. In comparison, the S&P/TSX Composite Index has returned less than 40%, excluding dividends.
At a share price that’s now above $3,000, it is a steep commitment for investors to make, especially with the stock trading just shy of all-time highs. However, Constellation Software’s track record speaks for itself. The company is in a league of its own when it comes to returning growth to its shareholders.
If market-beating growth is what you are after, you cannot go wrong with this tech leader.
Foolish bottom line
At an annual contribution limit of $6,000 in 2023, Canadian investors won’t be able to own many shares of Constellation Software in their TFSA. What matters, though, is the amount of money you have invested and not the amount of shares you own.
Additionally, there is no need to worry if you are behind on your savings. Unused TFSA contributions can be carried over from year to year. Anyone who was 18 years or older in 2009, when the TFSA was introduced, has a total TFSA contribution limit of $88,000.
For those polishing their TFSA shopping list for 2024, Constellation Software deserves a spot at the top of that list.
