Canadian investors seeking to grow their wealth in a TFSA (Tax-Free Savings Account) for many years and decades at a time may wish to consider tried-and-true Canadian stocks with solid track records of outdoing the broader TSX Index. Indeed, many investors aim to beat the market. However, it may be hard to do consistently over a long duration, especially if the “market” we’re talking about is the S&P 500 or Nasdaq 100 and not the TSX Index!
Though it’s really hard to beat the S&P 500 for more years than not, especially if you’re constantly jumping in and out of stocks based on what’s hot, I view beating the TSX Index as a very realistic goal that many Canadians can shoot for. Indeed, by seeking to beat the TSX Index, you don’t need to have a picture-perfect trading track record. And by embracing U.S. stocks and Canadian tech names, it may be tough not to top the TSX Index.
Heck, you don’t even need to land the biggest winners in any given year. With a long-term mindset, I believe it can be pretty easy to beat the Canadian market. The TSX Index isn’t built for stellar long-term performance, given its exposure to the cyclical energy patch.
When tech and consumers are in a slump and energy stocks are blasting off, then sure, the TSX is primed to outrun other indices. However, in most conditions and over the extremely long term, I’d argue that the TSX Index just isn’t cut out to beat the S&P 500.
The growth to value rotation is unfolding
Though we’ve been caught in a bit of a growth-to-value rotation in mid-July, which could help the TSX Index catch up to the S&P 500 and Nasdaq 100, I think Canadian investors should diversify beyond the TSX Index to achieve appropriate diversification across industries and sectors.
In this piece, we’ll look at one Canadian stock I think would make for a great TFSA buy this summer. The name can help weigh your portfolio towards the sectors (notably tech) in which the TSX Index itself is underweight. Such sectors, I believe, can help you have the edge over the TSX Index over the next 10-20 years and beyond.
Shopify
Shopify (TSX:SHOP) stock suffered a big hit on Wednesday’s brutal trading session, which saw tech and semi stocks lead the way lower. After falling around 7% in a single trading session, I view SHOP shares as a great buy for those who may have missed the prior spike.
Indeed, the horrid move was mostly due to the broader rotation away from growth and back into value. As the e-commerce firm continues innovating on e-commerce and generative artificial intelligence (AI), I view Shopify as a must-hold, even if shares are due for further volatility going into year-end. TFSA investors may wish to buy incrementally to smoothen out the roller-coaster ride that is Shopify stock.
Additionally, Wall Street analysts have become slightly bullish over the past year. With solid growth prospects and some of the best tech talent in Canada, perhaps $88 and change per share is more of a wonderful entry point than an exit point. Canada’s tech scene may not be massive, but it has a heavy hitter in Shopify!
