When it comes to investing, there’s no doubt that the Tax-Free Savings Account (TFSA) is one of the most powerful investing tools Canadians have at their disposal. Yet despite the incredible potential the TFSA offers, many investors still struggle to find the best Canadian stocks to buy and hold in their TFSAs.
The biggest advantage of the TFSA is that every dollar of growth inside the account earned from owning Canadian stocks is completely tax-free. That means dividends, capital gains, and reinvested income all compound without taxes slowing your progress down. That tax-free nature can make an enormous difference over the long haul, and the longer you stay invested, the more that growth compounds.
Because of that tax-free compounding, the stocks you choose to hold in your TFSA matter even more than they do in a regular account.
For example, you do not want to waste your limited TFSA contribution room on short-term trades or low-quality businesses. The best way to take advantage of the TFSA is by finding the highest-quality Canadian stocks to buy and hold that can grow steadily for decades, either through rising earnings, growing dividends, or ideally both.
So, with that in mind, if you’ve got cash in your TFSA you’re looking to put to work, here are some of the very best Canadian stocks to buy and hold forever inside a TFSA.
Growth stocks are some of the best investments Canadian investors can buy in their TFSAs
There’s no question that high-quality growth stocks are some of the best investments Canadians can buy in their TFSA, both because of the tax-free nature of the account and the long-term compounding potential they provide.
Not only can you reduce your tax bill considerably by owning these stocks in your TFSA, but when you give them years to compound without taxes eating away at any of your gains, the returns can be astronomical.
That’s why one of the very best stocks to own in your TFSA is Dollarama (TSX:DOL).
Dollarama is one of the most reliable growth stocks in Canada. In fact, even during economic slowdowns, Dollarama continues to perform well as consumers increasingly turn to Dollarama as they look to stretch their budgets.
In fact, in just the last decade alone, Dollarama stock has earned investors a total return of more than 720%. Therefore, given both its incredible growth potential and ultra-defensive business model, it’s easily one of the best Canadian stocks to buy and hold in a TFSA.
In addition to Dollarama, two more top growth stocks are Aritzia (TSX:ATZ) and Brookfield Corporation (TSX:BN).
Aritzia is one of the fastest-growing consumer discretionary stocks in Canada. In fact, in just the last half-decade, Aritzia has earned investors a total return of 387%.
What sets Aritzia apart is its vertically integrated operations combined with its marketing and ecommerce strategy, which has allowed its business to expand rapidly, especially across the United States.
Brookfield, however, is one of the most reliable Canadian stocks you can buy and hold in your TFSA. For example, the stock offers investors exposure to a diversified collection of global assets, including infrastructure, real estate, renewable power, and private equity. So, it’s not just a high-quality growth stock; it’s one of the most dependable businesses you can own.
Dividend stocks can play an important role in your TFSA
In addition to growth stocks, high-quality dividend stocks can also be some of the best investments that Canadian investors buy and hold in their TFSA because they’re consistently generating tax-free income that can be reinvested immediately to accelerate your portfolio’s compounding.
For example, Emera (TSX:EMA) is an ideal investment for your TFSA because it’s a high-quality utility stock with predictable cash flow and a strong history of dividend growth.
Its essential operations provide stability and predictability, while its long-term investments continuously support steady earnings and dividend growth over the long haul.
Meanwhile, Granite REIT (TSX:GRT.UN) is another top Canadian stock to buy in your TFSA thanks to its portfolio of high-quality industrial and logistics properties.
So, not only does Granite consistently generate cash flow, which supports its 4.1% dividend yield, but it’s also growing its earnings consistently, making it the perfect Canadian stock to buy in your TFSA and hold for years to come.
