Your Tax-Free Savings Account (TFSA) can be your go-to account for wealth creation as it allows your investment to grow tax-free, and you can even withdraw any amount at any time tax-free. No doubt, you have heard stories of investors who made millions by investing $10,000 in a company. Imagine that million-dollar investment being tax-free.
If only you had invested $10,000 in Apple, Nvidia, or Constellation Software in 2005, you would be a multi-millionaire. There is no point in reminiscing about the lost opportunities of the past because that investment income would be taxable. The TFSA was introduced in 2009.
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How to build a $7,000 TFSA that grows every year
From today’s standpoint, ask yourself what the world will look like 20 years from now. The above three stocks that made their shareholders millionaires changed the way we work, communicate, and operate. Artificial intelligence (AI), self-driving cars, and digitization trends are shaping the future.
A U.S. stock for your TFSA
Nvidia (NASDAQ: NVDA) is a no-brainer stock to buy and hold even at its current price of over US$144. Its graphics processing units (GPUs) are shaping the AI revolution. It is also at the forefront of the self-driving car revolution. No matter which generative AI rules the world – Chat GPT, Gemini, or DeepSeek – they are powered by Nvidia GPUs. Hence, Nvidia will thrive in the AI race.
There are concerns about a slowdown in AI infrastructure spending. That is the nature of the hardware industry. Just like personal computers, there are upgrade and refresh cycles, when Nvidia sees strong enterprise orders. While the first cycle of AI infrastructure might be over, upgrades will follow, and demand will increase with each upgrade.
Beyond the data centre, AI at the edge is the next big growth opportunity Nvidia is working on. Using AI to drive cars, automate industries, manage traffic, and create smart cities could drive the demand for Nvidia GPUs even more than data centres. You could consider investing $4,000 in Nvidia and see your money grow as technology evolves.
A resilient European stock for your TFSA
The next growth stock is Topicus.com (TSXV: TOI), a spin-off of Constellation Software. Focused on the European market, Topicus.com has been acquiring vertical-specific software companies with strong and recurring cash flow from maintenance services. The trend of digitization and AI will make software an integral part of running any system. Mission-critical software will be indispensable and become the utility of the future.
Topicus.com is a holding company of such mission-critical software companies. Instead of transferring the cash flow to shareholders, it is using that cash to buy more such companies. The new acquisitions add value to the company and increase the share price.
Some acquisitions of Topicus.com are value additions, and some are overpriced. However, the consolidated returns are positive over time. In 2021, the company made losses as the tech sector was overvalued, but the effect of compounding has started kicking in. In a downturn, it acquires companies at attractive prices and increases returns.
TOI is a stock to buy at the dip and hold for the long term for better returns. Compounding works best when given time.
A Canadian growth stock
Canada is an export-led economy. Oil and minerals are commodities and may not generate long-term wealth, but a tech stock that makes logistics and supply chain management efficient can.
Descartes Systems (TSX: DSG) has a wide range of customers across verticals that use its solutions – customs and compliance, global trade intelligence, inventory management, and route planning. Descartes makes logistics efficient for e-commerce, airlines, oil and gas, and many other companies.
Now is a good time to buy Descartes stock as it dipped 15% in June over concerns of tariff uncertainty delaying decisions and slowing trading activity. As the tariff situation eases, trade will pick up and drive Descartes’s stock upwards. Technology, the geopolitical situation, and globalization will further complicate trade, fueling demand for Descartes. The stock is poised to grow as its solutions remain relevant to trade complexities.
Diversifying your TFSA growth portfolio across countries can help you mitigate country-specific risk.
