New TFSA (Tax-Free Savings Account) investors should be thinking more in the mind of an investor looking to keep their next big investment on lockdown for the next 15 years. Indeed, many market newcomers just trade way too much. And most of the time, more trading does not necessarily lead to better returns or a reduced risk profile.
Heck, if you have to pay a hefty commission on every trade (think $9.99 at certain banks or closer to $5 at a major brokerage), every trade you make, you work against your total returns. Indeed, it can be counterintuitive, but sometimes, a “set-and-forget” or “sit-on-your-bum” style of investing can lead to the best results over the long haul.
Additionally, it requires way less effort than jumping into a hot stock, jumping out of a cooled one, or rotating the portfolio into sectors based on something you may have heard from a big-name talking head on a financial television program. Indeed, it’s tempting to take lots of action based on yesterday’s market moves. With the growth-to-value rotation underway, the case for buying the mid-cap stocks or the Russell 2000 (in the U.S. market) makes a lot of sense.
By chasing such moves and jumping out of the large-cap gems while they’re under a bit of pressure, however, you may just be setting yourself up for disappointment if recent trends and momentum do not continue going into year’s end. Indeed, the road behind seldom looks like the one behind.
Don’t time the market with your TFSA: Think longer term
So, instead of looking to time your entries and exits from a stock, REIT (real estate investment trust), commodity, or any other asset class so that you get all of the gain and none of the pain, I’d argue that it’s far better for you to be ready to ride the markets’ ups and downs. You won’t be able to time every pop and every drop. Instead, be ready for the drops and ensure you’re staying invested because the pops will eventually arrive.
Remember, few talking heads saw the big rally of 2023 (and now 2024) coming in the middle of 2022, when high rates were the talk of the town, and stocks (especially) tech had a bit of a year-long valuation reset.
In this piece, we’ll examine one dirt-cheap stock that may be worth putting away in your TFSA for the next 10, 15, or even 25 years. It’s not an exciting name, but it can allow you to sleep comfortably at night, knowing that you’ll do well over time, regardless of where stocks head tomorrow.
Hydro One: A steal of a dividend stock
Consider shares of Hydro One (TSX:H), a utility firm with a profoundly dominant position over Ontario’s transmission lines. Some may say Hydro One has a monopoly in that market.
With new transmission projects slated to come online over time, Hydro One’s highly regulated cash flow stream is slated to grow. And with that, the dividend is also poised to keep on running, regardless of what the economy or rates do in the back half of 2024.
Further, I’m a big fan of the company’s ability to thrive once rates drop like a rock. The Bank of Canada could go on a cutting spree in the next year and a half, and if it does, I’d look for H stock to get going.
The only knock against H stock?
It’s at new highs, with shares going for a rich 23.13 times trailing price-to-earnings multiple. With a nice 2.96% dividend yield, though, I’d not be against opening a starter position here if your TFSA needs that steady, secure type of name for the long haul.
