When crafting a Tax-Free Savings Account (TFSA) portfolio, Canadian investors should prioritize a blend of growth and stability. It’s essential to assess your risk tolerance, investment horizon, and financial objectives. Diversifying across various sectors can help mitigate potential downturns in specific industries. Regularly reviewing and rebalancing your portfolio ensures alignment with your goals and adapts to market changes.
Opting for Canadian stocks within your TFSA offers distinct advantages. Investing in domestic companies eliminates currency exchange risks and allows you to benefit from familiar market dynamics. Moreover, dividends from Canadian corporations are often eligible for the dividend tax credit, enhancing after-tax returns. Given the TFSA’s tax-sheltered nature, capital gains and dividends grow tax-free, maximizing your investment’s potential. Now, let’s turn our attention to two stocks that could be strong options. Plus, how to use them in your TFSA.
The stocks
National Bank of Canada (TSX:NA) stands out as a compelling choice for TFSA investors. As one of the country’s leading financial institutions, it has demonstrated consistent performance and resilience. In its fourth-quarter report ending October 31, 2024, National Bank reported a profit of $955 million, up from $751 million in the same quarter the previous year. The bank also increased its quarterly dividend to $1.14 per share, reflecting confidence in its future prospects.
Meanwhile, Great-West Lifeco (TSX:GWO) is another strong contender for a TFSA portfolio. Specializing in life insurance, health insurance, and investment services, it offers a diversified revenue stream. In the third quarter of 2024, Great-West Lifeco reported record base earnings, underscoring its robust financial health.
Examining recent earnings provides insight into a company’s financial trajectory. National Bank’s fourth-quarter results showcased a significant profit increase. Driven by growth across its personal, commercial, and wealth management sectors. Similarly, Great-West Lifeco’s record base earnings highlight its effective business strategies and market position.
Stable growth
Past performance is a valuable indicator of a company’s stability and growth potential. Both National Bank and Great-West Lifeco have exhibited resilience amid economic fluctuations. Maintaining steady earnings and rewarding shareholders with consistent dividends. This track record instills confidence in their long-term viability.
Looking ahead, both companies have promising outlooks. National Bank’s strategic acquisition of Canadian Western Bank is poised to enhance its domestic growth in 2025. Plus, Great-West Lifeco’s focus on expanding its wealth and insurance products, coupled with investments in digital tools, positions it well for future growth.
Incorporating well-established Canadian companies like National Bank and Great-West Lifeco into your TFSA can provide a balance of growth and income. The strong financials, consistent dividend payouts, and strategic initiatives make them attractive options for investors seeking stability and long-term appreciation.
Bottom line
Remember, while past performance and future prospects are encouraging, it’s crucial to conduct thorough research and consider your individual financial situation, especially before making investment decisions. Consulting with a financial advisor can provide personalized guidance tailored to your goals.
Yet building a TFSA portfolio with a focus on Canadian stocks like National Bank of Canada and Great-West Lifeco offers the potential for tax-free growth and income. The proven track records and strategic plans align well with the objectives of many Canadian investors. And both are stocks that should be considered today.
