Every Canadian above 18 years can invest through a Tax-Free Savings Account (TFSA) and grow their investments tax-free. Since you don’t have to pay any tax on the investment income, the TFSA is an ideal account to invest in high-growth and high-yield stocks that have the potential to make you a millionaire in the long term.
Four stocks every Canadian should have in a TFSA
Consider building a diversified TFSA portfolio across different asset classes, sectors, and stock types to ensure multiple sources of income and profits. Each asset class, sector, and stock has a different return potential. They react differently to a situation, giving you the best of all scenarios. Here, I have identified four stocks across asset classes and sectors you should consider having in your TFSA. However, the allocation of funds can differ as per your risk appetite.
Shopify stock
Shopify (TSX: SHOP) is a must-have tech stock in your TFSA as it has a moat in the e-commerce space. The company has overcome the volatility caused by the pandemic and is now on a normal growth trajectory. However, it has some degree of seasonality to it. The stock tends to do well in the holiday season when consumers spend on discretionary items. And it tends to fall in the first quarter when sales are the lowest.
Shopify has been steadily growing its subscribers and gross merchandise volume. However, its business has not yet reached the level of stable profits. So you can expect the stock price to remain volatile in the short term. You can use this volatility to buy the stock at a dip. For instance, Shopify stock fell 23% last week to around $80 after it reported weak second-quarter guidance. The stock has dropped to the lower end of the seasonal range, making it a buy-and-hold for the long term.
This stock will grow along with the economy and has the potential to generate wealth in the long term, riding the e-commerce wave.
Hive Digital Technologies stock
Hive Digital Technologies (TSXV:HIVE) is a highly volatile stock and should only be bought at the dip. The company has high-performance data centres, which it uses for Bitcoin mining. However, it is aware that the margins from mining are slipping, and it needs to diversify. Hence, it is offering its data centre space for artificial intelligence (AI) computing. The revenue from AI computing can help it produce stable cash flow and normalize the volatility from Bitcoin.
Hive can give your TFSA portfolio exposure to the crypto asset class. Note that you are not allowed to invest in crypto directly through your TFSA. However, since Hive is not a cryptocurrency but a business, you can benefit from the next crypto bubble. This stock will grow in a strong economy. Now is a good time to buy this stock as it has fallen 20% below its lower range price of $4. You could consider selling the stock when it reaches $7 to $8 for short-term growth or holding it for the long term.
Hive will give you exposure to alternate asset classes as well as the secular AI trend.
Barrick Gold
One should have some exposure to gold as an asset class to hedge a portfolio in a crisis. Barrick Gold (TSX: ABX) is one of the largest gold mining companies. The gold miner has reduced its debt significantly and can give you exposure to gold price volatility. Barrick Gold may not give you long-term capital appreciation as the above two stocks, but it will protect your portfolio from a severe downside. Gold prices tend to go up when the dollar value falls or inflation rises.
Never buy this stock at its peak since there is no long-term growth. You could consider buying the stock when it falls below $20. ABX might underperform in a strong economy and outperform in a weak economy. In either case, you can enjoy a 2-3% annual dividend yield.
Enbridge
Apart from the above shares, consider adding a dividend aristocrat like Enbridge to have some assurance of a regular payout even in a crisis. You can use the dividend money to add to the above stocks.
