The annual contribution limit of the Tax-Free Savings Account (TFSA) is set to jump to $7,000 in 2024, which is up from $6,500 this year. That puts the total TFSA contribution at $95,000. Anyone aged 18 years or older in 2009 has access to that entire contribution limit.
One of the main selling points of the TFSA is its flexibility. Both short- and long-term savers can benefit from maxing out their TFSA each year. Additionally, Canadians have a choice when it comes to the funds being held within their TFSA.
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Using stocks to maximize returns in a TFSA
Those saving for a short-term goal in their TFSA are likely better off going with a low-risk fund, such as a Guaranteed Investment Certificate (GIC) or cash. If you plan on withdrawing your funds in a short period of time, you’d be wise to limit your risk exposure to avoid having to withdraw your funds at a loss.
Long-term investors, however, have the luxury of having time on their side. As a result, they are in a much better position to take on more risk. And with more risk comes more growth potential.
Owning individual stocks will certainly carry some volatility with them, but the goal is that the growth will far outweigh that volatility over the long term.
I’ve reviewed two discounted TSX stocks that are trading at must-buy prices right now. If you’ve got the time horizon that allows you to be patient, a TFSA is an excellent place to load up on these stocks.
TSX stock #1: Lightspeed Commerce
The tech sector as a whole rebounded impressively well this year. In 2022, investors across North America saw major losses in some of the largest tech stocks around. But after a monster run-up in the last two months of this year, many of those discounted tech stocks from 2022 came roaring back with double-digit performances in 2023.
Lightspeed Commerce (TSX: LSPD), however, was not one of those companies. The tech stock continues to trade more than 80% below all-time highs that were set in late 2021. However, it’s worth noting that shares surged more than 1,000% between their 2020 lows and 2021 all-time highs.
Lightspeed has certainly endured no shortage of volatility since the beginning of the pandemic. What’s also remained consistent since early 2020 has been the company’s ability to continue to grow. Management remains as focused as ever on growing both its already established international presence and its cloud-based suite of offerings.
If you’re looking for a stock with multi-bagger growth potential, this is the company for you.
TSX stock #2: Brookfield Renewable Partners
Brookfield Renewable Partners (TSX: BEP.UN) is a perfect choice to balance out a high-volatile pick like Lightspeed.
At a market cap of more than $20 billion, the renewable energy company is a global leader. Shareholders of the energy stock gain instant and well-diversified exposure to the growing renewable energy sector.
Like many others in the space, shares of Brookfield Renewable Partners are trading at an opportunistic discount today. Excluding dividends, shares are down close to 40% since the beginning of 2021. But even with that pullback, the stock has more than doubled the returns of the S&P/TSX Composite Index over the past five years.
In addition to market-beating growth potential, Brookfield Renewable Partners can provide a portfolio with passive income, too. The recent pullback has also shot the dividend yield way up, which is above 5% at today’s stock price.
It may be a while before we see this top energy stock trading at bargain prices like these again.
