The Canada Revenue Agency (CRA) increased the Tax-Free Savings Account (TFSA) limit to $7,000. Make the most of this higher limit, as the tax benefit offered by the TFSA outweighs other registered accounts. To give you an idea of the tax benefit, suppose you invest $7,000 in growth stocks that double your money in five years. Investment income is added to your taxable income. Even if we take the minimum federal tax rate of 15%, you pay $525 in federal tax on 50% of your capital gain plus provincial tax. But the TFSA removes this tax bill. The higher your profits, the higher your tax benefit.
How can you use your $7,000 TFSA limit in 2024?
Now that you know the benefit of a higher TFSA limit, how can you make the most of this increased limit? Your investments should be in sync with your financial objectives. The tax-free withdrawals of TFSA make it ideal for wealth creation. You can consider investing in growth stocks of various degrees: resilient, highly volatile, short-term, and long-term stocks.
If you are looking for inspiration, here is a strategy I would consider for 2024. The current market is uncertain as the economic growth is weak, and economists have not yet ruled out the possibility of a recession. But hopes of interest rate cuts could build market momentum in the second half.
Instead of using your entire $7,000 limit in January, consider investing $500 every month in the top stocks of that month. Now, set aside $1,000 for opportunistic purchases, as the market might bottom out in March or June 2024, creating an opportunity to buy long-term growth stocks at heavy discounts.
TFSA stocks you could consider buying in February
February will see many earnings releases, but the focus will be on the 2024 guidance. You could consider buying Bombardier (TSX: BBD.B) stock through your TFSA for the long term due to a turnaround in its balance sheet. The business jet maker is not immune to a recession. But it has a strong orderbook, with over US$1 billion in liquidity and no debts maturing until 2025. And its latest Challenger 3500 mid-sized jet is gaining traction. Moreover, the company is seeing some momentum in the defence sector.
If it is a mild recession, Bombardier stock could be quick to recover and give you a 40-50% growth towards the end of the year. It could also double your money in a growing economy. You could consider investing your $500 for February in Bombardier.
Opportunistic stock
As for opportunistic buying, you could consider buying Hive Digital Technologies (TSXV:HIVE). Hive stock has slipped 31% year to date, as optimism around the rate cuts faded and fears of recession spurred. It is a range-bound stock you can consider buying at $4 or below and selling at $7 and above. Even if you buy 100 shares, $400 can become $700, giving you a capital gain of $300. However, note that this stock comes with high risk as its price is influenced by Bitcoin’s price. Although Hive has expanded into the cloud business, it is a small part of Hive’s revenue.
Unless the cloud business shows noteworthy progress, I would look at Hive as a blockchain company that mines Bitcoin and validates transactions.
Resilient growth stock
If you are not confident about any of the stocks in your watchlist in any given month, you could consider buying the evergreen growth stock Descartes Systems (TSX: DSG). Its growth consistency comes from its resilient business model of supply chain management.
A recession could pull down the stock price as trade volumes fall and slow its revenue-growth rate. However, a recovery in trade could drive order volumes and set the stock back on its long-term growth — the more complex the trade, the better for Descartes. Moreover, the summer season could see an uptick in leisure travel, driving seasonal revenue.
