3 Secrets of TFSA Millionaires

Uncover three proven strategies used by TFSA millionaires to build significant tax-free wealth. Learn how successful investors transform their TFSAs into wealth-building machines.

| More on:
Investor reading the newspaper

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Building a million-dollar Tax-Free Savings Account (TFSA) isn’t achieved by following hot stock tips or making risky bets on the next big thing. Instead, it’s about understanding the mechanics of this unique Canadian investment vehicle and implementing strategies that successful investors have used for years.

While many Canadians view their TFSA as a simple savings account, those who’ve built seven-figure portfolios know it’s a sophisticated wealth-building tool that, when used strategically, can generate life-changing tax-free wealth.

Today, we’ll pull back the curtain on three proven strategies that TFSA millionaires consistently use — approaches accessible to any investor willing to think differently about their financial future.

Identifying winners early

The TFSA was introduced in 2009, and the cumulative contribution room for the registered account in 2025 has risen to $102,000. To convert this sizeable contribution room to $1 million, it’s crucial to identify growth stocks as part of rapidly expanding addressable markets such as Shopify (TSX:SHOP).

One of the largest technology companies in Canada, Shopify, went public in 2015 and has returned 4,810% to shareholders. It means an investment of $10,000 in SHOP stock soon after its initial public offering would be worth $490,000 today.

Created with Highcharts 11.4.3Shopify PriceZoom1M3M6MYTD1Y5Y10YALL8 Jan 20167 Jan 2025Zoom ▾201720182019202020212022202320242025201820182020202020222022202420240www.fool.ca

Valued at a market cap of US$138 billion, Shopify can’t replicate its historical gains. For instance, if it surges 4,800% from current levels, the tech stock would be valued at US$5.5 trillion, making it (arguably) the largest company globally.

Shopify’s market-thumping gains show us it’s not impossible to create game-changing wealth within a decade if you can successfully identify quality growth stocks at an early stage.

Shopify has increased its sales from US$105 million in 2014 to US$7.06 billion in 2023. In the last 12 months, its top line has grown by 23.5% year over year to US$8.2 billion. While revenue growth has decelerated in recent years, the company has focused on profitability expansion. Its free cash flow in the last four quarters has totalled US$1.43 billion, indicating a healthy margin of 17.4%.

Hold stocks for the long term

While identifying long-term winners is the first step, holding these growth stocks for several years is equally essential to benefit from the power of compounding. Over the last decade, Shopify stock has lost over 50% in market value several times, which would have made investors extremely nervous.

However, during periods of significant drawdowns, the most seasoned investors double down on their investments, which eventually translates to outsized gains.

Diversification remains key

The dynamic nature of the global economy suggests that even the best companies are not immune from innovation-powered disruption and macro shocks. For example, mobile phone manufacturers such as Nokia and BlackBerry were once market leaders. Still, they failed to build on their innovation, which allowed Apple and Samsung to entirely disrupt the segment within the next decade.

Hence, it is essential to create a portfolio of stocks, mutual funds, and exchange-traded funds across sectors and asset classes to benefit from the power of diversification, which lowers investment risk.

The Foolish takeaway

The path to $1 million isn’t paved with complex trading strategies or market timing — it’s built on time-tested principles and disciplined execution. Remember, TFSA millionaires didn’t achieve their success overnight — they built it methodically, one wise investment decision at a time.

Should you invest $1,000 in Fortis right now?

Before you buy stock in Fortis, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Fortis wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Apple. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Stock Market

stock research, analyze data
Stock Market

Why I Keep Investing in Canadian Stocks Despite Market Fluctuations 

Market fluctuations are an opportune time to buy value stocks. Some good Canadian stocks are on sale, encouraging you to…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, April 2

Trump’s trade tariffs-related remarks could reintroduce volatility to TSX today, especially if he signals a hardline stance.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Tuesday, April 1

Any updates related to trade policy will remain on TSX investors’ radar today as we come close to the implementation…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Monday, March 31

TSX stocks may face increased volatility this week as Trump’s reciprocal tariffs are set to kick in.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, March 28

Alongside any trade policy news, U.S. personal consumption expenditure data will stay in focus for TSX investors today.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, March 27

TSX stocks may remain volatile today as investors digest the implications of U.S. trade policy shifts and await fresh cues…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Wednesday, March 26

Despite lingering macro concerns and trade uncertainties, the TSX Composite has climbed 4.5% over the past 10 sessions.

Read more »

rising arrow with flames
Stock Market

The Canadian Stocks That Led Their Sectors in 2024

Some mid-cap stocks outperformed large-cap stocks and led their sector’s growth in 2024. Are the outperformers of 2024 still buys?

Read more »