If you want to turn $5,000 into $50,000, the Tax-Free Savings Account (TFSA) could be one of your best tools to get there. The TFSA allows you to invest completely tax-free. As a result, you can compound your capital at faster rates than anywhere else.
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Maximize long-term returns by using the TFSA and picking great stocks
To turn $5,000 into $50,000 in 10 years, you would need to earn a 26% compounded annual return. That is a pretty aggressive rate of return given that the TSX Index has only delivered a 9% compounded annual total return over the long term.
If you increased your investing horizon to 20 years, you would only need a 12% compounded rate of return to 10 times your $5,000. That rate of return might be more attainable for many investors.
An industrial stock ideal for compounding
However, in several instances, the 10 years-to-10X timeframe was attainable. TerraVest Industries (TSX: TVK) is a perfect example.
It 10X’d in just over five years. TVK stock has compounded by a 57% compounded annual growth rate (CAGR) over the past five years and a 38% CAGR over the past 10 years.
Given its substantial returns, investors would be surprised at what TerraVest does. It operates an industrial conglomerate focused on specialized tank and trailer manufacturing, boiler production, and energy services. There is nothing exciting about these businesses.
However, what is exciting is TerraVest’s ability to smartly acquire cheap businesses, drastically improve operational and financial performance, and then smartly re-deploy its strong free cash flows. This formula has helped fuel substantial compounded growth and profit margin improvement.
The company is likely fairly valued at today’s price. However, with a market cap of only $3.6 billion, it still could have substantial room to grow in the years ahead. I wouldn’t be a buyer here, but it could be attractive on a broader market pullback.
A software stock that has been ideal for a TFSA
Another stock that would have delivered great returns for TFSA investors is Descartes Systems Group (TSX: DSG). Even though Descartes stock is down 14.5% in 2025, its stock is up 88% in the past five years, 637% in the past 10 years, and 2,257% in the past 15 years.
That equates to respective CAGRs of 13.5%, 21%, and 23%. Investors who held this stock since 2013 have 10X’d their money.
Descartes operates a crucial information/communication network for the global transportation industry. It compliments this network with a plethora of software services that help businesses save time, energy, and money.
The transport industry has been thrown into chaos due to Trump’s global trade war. As a result, Descartes stock has declined this year.
Yet, this is a high-quality business. It has high recurring revenues, elevated cash flow and profit margins, and ample balance sheet strength (it is cash-rich). It has the firepower to keep growing by smart acquisitions.
While it is never a cheap stock, it does trade at the low end of its valuation range over the past three years. Buying and holding a quality compounding stock like this is a perfect TFSA strategy.
The Foolish takeaway
Look for stocks like TerraVest and Descartes to compound your wealth over 5, 10, or 20 years. Often small-cap stocks are a great place to look for the multi-bagger gains. Some interesting small-cap stocks to dig further into for 10 times returns include Firan Technology, VitalHub, and Sylogist.
