Most investors understand how powerful the Tax-Free Savings Account (TFSA) is and why it’s important to take full advantage of it. And while maxing out your registered accounts, especially your TFSA, as early as possible is important, it’s just as critical to make sure the stocks you buy are the top stocks available on the TSX.
Since the TFSA allows your investments to grow completely tax-free, every dollar of capital gains and dividends stays working for you. That means the higher the quality of the stocks you own in your TFSA, the more money you’re effectively saving in taxes over the long run.
It’s also worth remembering that while you get new TFSA contribution room every year, any room you lose from poor investments is gone for good. That’s why you want to avoid owning low-quality or speculative stocks in your TFSA.
Therefore, it makes the most sense to focus on companies that can compound your capital consistently over time, not stocks you’re planning to trade in and out of. Long-term investments are typically more reliable, less stressful, and far less risky than trying to time the market.
All you really have to do is identify a few high-quality businesses, monitor them casually to make sure they stay on track, and then let time do the work. It’s simpler, lower risk, and far more effective.
So, if you’re looking for top TSX stocks you can buy now and confidently hold in your TFSA for years, here are three worth considering.
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Two top defensive growth stocks to buy and hold in your TFSA
When it comes to finding the top stocks in Canada to buy for your TFSA, defensive growth stocks such as Jamieson Wellness (TSX:JWEL) and Brookfield Infrastructure Partners (TSX:BIP.UN) are among the best.
Jamieson, for example, is one of the top stocks to hold in your TFSA because it’s a business that has steady demand, a trusted brand, and the ability to quietly grow and compound investors’ capital for years.
As a health and wellness company that’s best known for its vitamins, supplements, and wellness products, Jamieson’s business is highly defensive. Regardless of what the economy is doing, people continue buying these products, especially as health awareness continues to grow.
However, in addition to the reliability of its operations, Jamieson is also an impressive long-term growth stock. For example, since going public in 2017, both its revenue and adjusted earnings per share have increased at a compound annual growth rate above 12%.
That mix of defence and growth is exactly what makes both Jamieson and Brookfield Infrastructure two of the top stocks to buy in your TFSA.
In Brookfield’s case, its portfolio of essential infrastructure assets all over the world, which includes utilities, pipelines, transport networks, and data infrastructure, generates predictable cash flow and makes the business highly reliable.
At the same time, while Brookfield owns highly defensive assets, it operates like a growth stock, constantly selling off its more mature or non-core assets and recycling that capital into new opportunities that can generate strong returns for years.
Plus, even with the consistent recycling of capital, Brookfield pays an attractive and growing distribution with a current yield of roughly 5%.
So, if you’re looking for top Canadian stocks to buy for your TFSA, it’s undoubtedly one of the best on the TSX.
One of the easiest ways to invest your capital
Another option investors have, especially if you’re newer or don’t have the time to research individual stocks, is buying an ETF for your TFSA that owns a basket of top TSX stocks, like the iShares S&P/TSX 60 Index ETF (TSX:XIU).
The XIU gives investors instant exposure to 60 of Canada’s largest and most established publicly traded companies. That includes the top banks, energy producers, railways, telecoms, and infrastructure businesses.
These are some of the safest and most defensive businesses in the Canadian economy, and many of them have long track records of paying and growing their dividends consistently over time.
So, if you’re looking for a simple investment to buy in your TFSA that offers exposure to numerous top Canadian stocks, the XIU is one I’d strongly recommend.
