Building a sizable nest egg in your Tax-Free Savings Account (TFSA) can be arduous if you rely solely on dividend or conservative growth stocks. The yearly contribution limit of the TFSA has already reduced the total amount you can park in this account, so you have to make up for it with relatively robust growth stocks.
A retail chain
Montreal-based Dollarama (TSX:DOL) has a long and proud history. You can trace its origin back to the early twentieth century when it started out with a single store. Now, there are over 1,500 stores under the Dollarama banner and the company has grown its geographic footprint to include Peru. The company is on track to open 2,000 stores by 2031.
The footprint is impressive, and about 85% of the Canadian population lives within 10 kilometres of a Dollarama store. While the business model and reach are impressive, the most alluring part for investors is its growth history and potential.
The stock rose over 185% in the last five years alone, which is quite impressive for a company this size. The growth has been eerily consistent, especially considering that it included the unstable pandemic and post-pandemic markets.
Dollarama pays dividends as well, but the yield is too low. If the stock maintains this growth pace, it may double your capital in the next three years, giving your TFSA nest egg a significant boost.
An e-commerce stock
Even though many tech stocks in Canada offer amazing growth potential, Shopify (TSX:SHOP) is in a league of its own, or at least it was until the massive post-pandemic slump that pushed the value of the company down 83%. But even if we take that into account, the stock has grown over 2,100% since inception (nine years ago). That’s an annualized growth of about 233%.
Expecting similar growth in the future would be tall order, especially now when the company and tech sector as a whole is in a bearish phase. However, even the modest growth pace of this stock far outstrips most steady growth stocks.
It may be some time before the stock goes appropriately bullish, especially considering the weak outlook it proposed. But when that happens, the stock may propel your capital to new heights, especially if the growth pace is similar to its early days.
Foolish takeaway
The two stocks can help you build a solid nest egg in your TFSA, but they can also help you earn relatively short-term tax-free gains. So, even if you are not planning on holding the stocks long-term and wish to cash out at the end of the next bullish cycle, all your gains from the stock would be tax-free and won’t impact your tax bill if you stash them in your TFSA.
