If you are smart with your spending habits and actively work toward a strong retirement plan by saving any money you can, Canada offers a great way to use your savings. The Tax-Free Savings Account (TFSA) can hold all that cash as a savings account for tax-free wealth growth. However, TFSA investing can be far better for your long-term goals.
Instead of using the account to hold your savings as cash, you can use the TFSA as an investment vehicle. Using the contribution room that grows every year to hold a self-directed portfolio of investments can offer far more growth than letting money sit idle in the account. After the 2025 update with the $7,000 increase, the cumulative contribution room since the account’s inception is $102,000.
Like any interest income, any returns on your investments within a TFSA through dividends and capital gains can grow without incurring any taxes. Despite annual increases, the contribution room is limited. Using a portion of the contribution room to hold high-quality stocks that can consistently grow in value can be a great way to maximize the returns from your long-term investment strategy.
Against this backdrop, here are two TSX stocks that can warrant a place in your self-directed TFSA portfolio.
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WELL Health Technologies
WELL Health Technologies (TSX: WELL) is a $948.40 million market-cap Canadian tech stock. What sets WELL Health apart from other tech stocks is its focus on the healthcare sector. The telehealth giant came into the limelight during the pandemic, which shot up demand for remote healthcare services amid social distancing restrictions and safety concerns. The company used the momentum to build an extensive portfolio of primary health clinics and positioned itself for a post-pandemic world.
Right now, WELL Health is the owner and operator of Canada’s largest network of outpatient health clinics. It also owns primary healthcare facilities in Canada and the United States. Between its digital health operations and outpatient clinic network alone, it is a high-quality investment. Even after such impressive growth, the company’s revenues are expected to grow significantly this year.
Dollarama
Dollarama (TSX: DOL) might seem like an odd company to consider if you’re seeking growth stocks. Dollarama is a $47.71 billion market-cap company that owns and operates an extensive network of discount retail stores. While retail might not seem as exciting a space as healthcare technology, it has an appeal of its own. The company provides a wide range of everyday consumer products at fixed and low prices.
The appeal of Dollarama stock is its defensive business model. When economic uncertainty strikes, people look for ways to cut costs. A company offering everyday items at discounted rates is the first place people will go to meet their needs. The company’s business model is one aspect that contributes to its growth in every market environment. The other is its presence throughout the country in major metropolitan areas, small towns, and mid-sized cities.
It performs at its best when the economy is slow but still does well when the rest of the market is doing well. It can be one of the best holdings for tax-free wealth growth through capital gains.
Foolish takeaway
The best way to achieve long-term success with a TFSA is to build a well-balanced portfolio. Growth-focused investments should definitely be part of it. However, you cannot ignore the importance of investing in defensive businesses that mitigate the risks of growth stocks. To this end, WELL Health Technologies stock and Dollarama stock can be good additions to your TFSA portfolio.
