How to Strategically Invest Your TFSA in 2025

Here’s why Shopify (TSX:SHOP) and Constellation Software (TSX:CSU) represent two of the best investments to put into a TFSA right now.

Investors looking to utilize a Tax-Free Savings Account (TFSA) may certainly be asking the question: Which investments make the most sense to include in this particular account?

Given that capital gains are not taxed upon the sale of TFSA holdings in retirement (or before retirement for that matter), most financial experts believe that the higher-growth portion of one’s overall portfolio may be best-placed in a TFSA. From a tax perspective, this certainly makes sense and can result in thousands of dollars of excess gains (in many cases much more than that) for the average investor.

With that in mind, here are two growth stocks I think are perfect picks for the average Canadian TFSA right now.

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.

Source: Getty Images

Shopify

Shopify (TSX: SHOP) has revolutionized e-commerce by empowering businesses of all sizes to create and operate online stores. The company’s platform provides tools for its clientele to manage everything from payments to marketing, ultimately providing a one-stop shop for digital commerce. As e-commerce continues to grow globally, Shopify remains a dominant player in the space. The company’s recurring revenue model, driven by subscriptions and merchant services, provides stability even during volatile market conditions.

Shopify has been actively expanding its ecosystem by introducing new features, such as Shopify Markets, for cross-border commerce and partnerships with platforms like Amazon. These initiatives can drive higher merchant adoption and revenue in 2025 and beyond. While Shopify faced a temporary slowdown during the post-pandemic normalization, it has rebounded strongly with improvements in profitability and operational efficiency. Its investments in AI and data-driven tools for merchants further solidify its position as a leader in e-commerce technology.

Thus, by investing in Shopify within your TFSA, you can take full advantage of the potential for exponential growth of the stock without worrying about capital gains taxes. The focus of the company on innovation and expanding global reach ensures it will continue to be a key player in the e-commerce revolution.

Constellation Software

Constellation Software (TSX: CSU) is a lesser-known gem in the tech sector, specializing in acquiring and managing vertical market software (VMS) businesses. Unlike Shopify, which focuses on organic growth, Constellation thrives by strategically acquiring smaller software companies and turning them into profitable entities.

Constellation has built its reputation as a master of mergers and acquisitions. The company’s decentralized model allows acquired businesses to retain their autonomy while benefiting from Constellation’s financial and operational expertise. This strategy has driven consistent revenue and earnings growth over the years. With over 500 businesses under its umbrella, Constellation Software operates in a wide array of industries, from healthcare to public transportation. This diversification reduces risk and ensures steady cash flow, even during economic downturns.

Constellation has delivered outstanding returns for shareholders since its inception, consistently outperforming the broader market. Its focus on acquiring niche software companies with recurring revenue models ensures long-term profitability and growth. Constellation’s business model is ideal for long-term investors seeking compounding growth. By including CSU in your TFSA, you can benefit from its consistent performance and high returns without worrying about taxes eating into your gains.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Amazon and Constellation Software. The Motley Fool has a disclosure policy.

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