If you’re buying Canadian stocks in your TFSA, there’s no question that you want to take a long-term approach.
Not only does that strategy align with the tax-free nature of the TFSA, where you buy high-quality businesses, hold them for years, and let compounding do the work, but it’s also what investing gurus like Warren Buffett have been talking about for decades.
For example, one of Buffett’s most famous investing quotes says, “Our favourite holding period is forever.”
That idea of holding stocks forever, or in other words, stocks that you never need to sell, is often misunderstood, though.
Most people take that to mean you just need to be disciplined, hold through volatility, and avoid panic selling no matter what. And while that’s certainly a major part of looking for stocks to buy and hold forever, it’s not really the full picture.
Source: Getty Images
How to think about buying Canadian stocks in your TFSA
The goal of long-term investing isn’t just to force yourself to hold stocks. Instead, it’s to buy the kind of businesses that you never feel the need to sell in the first place.
And that’s a very different way of thinking about investing, because most investors do the opposite. For example, investors will often buy a stock first, then later decide whether they should keep holding it.
They start second-guessing, reacting to headlines, worrying about short-term performance, and constantly re-evaluating their decisions.
And that’s exactly what you want to avoid because if you’re always questioning whether you should sell, you probably didn’t buy the right stock to begin with.
Why the best investors focus on what they buy, not when they sell
There’s no question that successful investing requires staying disciplined, not panic selling, and managing emotions when things get volatile.
However, it’s not the entire story because that line of thinking assumes you’re constantly going to be put in situations where you have to make those decisions.
Instead, you ideally want to avoid that as much as possible.
That’s why the best long-term investors are not looking for stocks that might perform well; they’re looking for businesses they can own for years.
That’s why the best Canadian stocks to buy in your TFSA are businesses that don’t depend on perfect conditions, can perform through different economic cycles and generate consistent cash flow, allowing them to continue growing over time.
That’s how you buy stocks that you never feel the need to sell. Not blindly holding no matter what, but having enough conviction when you make the investment that selling isn’t part of the plan.
It’s only something you consider if the business actually changes.
The types of Canadian stocks that are easiest to hold long term
Once you understand the mindset of what stocks make the best long-term investments and what businesses you’ll ideally never feel the need to sell, it’s clear that many of the top picks share some major characteristics.
For example, the best investments are businesses that are highly predictable, highly defensive, can consistently generate significant cash flow, and have decades of growth potential.
That’s why one of my top holdings is Brookfield Infrastructure Partners (TSX: BIP.UN).
Brookfield owns a global portfolio of essential assets like utilities, pipelines, and data infrastructure that the global economy depends on every day, generating stable cash flow backed by long-term contracts and a proven long-term growth strategy.
Enbridge (TSX: ENB) is another top pick too, since it operates critical energy infrastructure, generates predictable revenue through long-term contracts, and continues to produce strong cash flow year after year.
It’s not dependent on short-term commodity prices the way many people think. It’s a cash cow that pays a sustainable dividend and offers moderate but, more importantly, consistent growth.
It may not always be the best-performing stock in any given year, but over time, it continues to grow and expand its operations, making it a top Canadian stock to buy in your TFSA.
And that’s what matters most because at the end of the day, it’s not about finding stocks that never decline or face challenges. The goal is to find businesses that you trust enough to hold anyway.
Because when you build a TFSA around those kinds of reliable Canadian stocks, that’s what gives you the confidence to stay invested and let compounding do the work.
