The TFSA (Tax-Free Savings Account) is a completely tax-free savings and investing account (the name pretty much says it all). You don’t pay tax on any income (capital gains, interest, or dividends) earned and you don’t pay any tax when you withdraw from the account.
Some bank advisors recommend putting dividends and interest-bearing investments in the TFSA. That is because those types of income have the highest tax rates. Capital gains earn the lowest tax rate.
Use the TFSA for your biggest potential winners
However, you need to use the TFSA for its total tax savings. The way you get the most tax savings is by owning stocks that create substantial capital gains by compounding and multiplying in value.
You don’t want to pay any tax on a $100,000-plus gain (or any gain for that matter). If you hit the right stock, a 20, 50, or even 100 times return is possible. It only takes one or two of those stocks to make life-changing returns.
Don’t split any of those gains with the government. Instead, put the best stocks in the best companies in your TFSA. Here are three Canadian stocks that are perfect for tucking into your TFSA and holding just about forever.
A small cap tech stock for a long-term TFSA hold
With a market cap of $530 million, VitalHub (TSX:VHI) is still in its early days of growth. The company had a great run in 2024. It rose over 170% last year.
Since the start of the year, VHI has pulled back by over 12%. It is still a pricey stock at 22 times free cash flow, but its valuation is starting to look more attractive.
VitalHub is building out a strong portfolio of software solutions for the healthcare industry. If any industry is due for technological disruption, it is the healthcare industry. Health systems are incredibly stressed, understaffed, and underfunded.
VitalHub’s software can help alleviate these challenges around the world. This TFSA stock has a large market to grow into. With a strong balance sheet and ample acquisition opportunities, it could continue to deliver substantial returns ahead.
A growing North American insurance stock
With a market cap of $1.6 billion, Trisura Group (TSX:TSU) is an established business that could still grow significantly. This TFSA stock provides specialty and fronting insurance solutions in Canada and the United States.
It has spent the past few years building out the infrastructure to be an effective insurance provider in its core geographies. With its strategy defined, it is now ready to steadily grow into a substantial player in those markets.
The company has a great long-term track record. This stock has soared by 250% in the past five years. TSU has flatlined in recent history, but that has allowed its valuation to become attractive. It could be a great time to add to this TFSA stock today.
Hold this Canadian software stock for years
Even though Topicus.com (TSXV:TOI) has an $11.5 billion market cap, not many Canadians have heard of it before. This is largely because it has only been publicly listed for a couple of years. Also, the software firm operates through many small, focused software companies. Lastly, it operates mainly in Europe, so its software is largely unknown in Canada.
The company has a strong development platform, which has fueled mid-single-digit organic growth. The rest of the growth has come from making smart acquisitions around Europe. It recently announced some big strategic deals, and the market is starting to take notice.
This is a high-quality business perfect for a TFSA. Buy it, hold it, and let this stock compound tax-free inside a TFSA for the years and decades ahead.
