TFSA (Tax-Free Savings Account) investors are about to get another boost in their savings/investing plans for 2025. The TFSA contribution will rise by another $7,000 in 2025. Canadians who were born before 1991 can now invest an accumulated total of $102,000 in their TFSA!
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No tax! Grow your investment wealth faster in a TFSA
While $7,000 might not seem like a lot, when it is invested and compounding tax-free, it can quickly become an attractive sum. For example, if you invested $7,000 into a stock that earned a 15% compounded annual rate of return. It would only take five years for that $7,000 to turn into $14,000. If compounded for 10 years at that rate, it would be worth over $28,000!
The point is that even small amounts can become large amounts if you pick smart stocks to hold in your TFSA. When you pay no tax, you keep all your gains. You can compound wealth much more efficiently in a TFSA than in a non-registered account.
If you are looking for some stocks that could give you a nice 10-15% average annual return over the coming years, here are two stocks that would work nicely in a TFSA.
A specialized lender with a great record of income and capital returns
goeasy (TSX: GSY) has delivered exceptional income and capital returns. Its stock is up 140% (for a 19% compounded annual growth rate (CAGR)) in the past five years. It has grown its dividend per share by 148% (a 27% CAGR) in that time.
goeasy has become one of Canada’s largest non-prime lenders. It now offers everything from point-of-sale loans to home equity lines of credit to vehicle loans. It is also planning to provide a credit card product specialized for people with poor or no credit.
This TFSA stock can be volatile. However, over time it has steadily compounded earnings-per-share growth by a high teens rate.
With a large retail network, a strong online platform, and a growing offering of products, it still has plenty of market share to expand into. Despite a great track record, its stock is relatively cheap at only nine times earnings. It also pays a nice 2.89% dividend yield.
A specialized insurer for growth in your TFSA
Another stock worth adding to your TFSA is Trisura Group (TSX: TSU). Not a lot of Canadians have even heard of this company. However, their interest might pique when they see that this stock has delivered a 318% return (33% CAGR) over the past five years.
Trisura is a specialized insurer with commercial and insurance fronting operations in Canada and the U.S. Its solutions tend to be very bespoke and in areas requiring specialized underwriting expertise. As a result, it tends to earn above-industry-average margins and strong returns on equity.
Trisura still has a large market in which to grow. The U.S. is a particularly large and attractive market for Trisura to expand into
Despite its nice mid-teens earnings growth prospects, it trades at a low price-to-earnings (P/E) ratio of only 14. Most peers in the specialty insurance segment trade at significantly higher valuations.
If Trisura can continue to prove its growth story, there could be substantial upside ahead. Its stock has recently consolidated, and it could march up higher on good business execution.
