It’s hard to tell what the TFSA of the average 50-year-old Canadian is going to look like. Indeed, the range of potential outcomes varies greatly depending on when the investor got started contributing (have they kept on top of TFSA top-ups every single year since it came to be?), if they’ve played by the rules (no business trading), and, perhaps most importantly, the stocks they’ve invested in as well as the growth strategy they’ve implemented.
Indeed, a TFSA in growth mode would look a lot different from a TFSA built for growth, and it doesn’t matter how old the investor is. As for the average, though, an estimate of fair market value might range greatly, probably in the mid five-figures.
Given the cumulative contribution room is in the six figures, that might come as a surprise. Either way, I do think that making use of unused space is key to success. And while investment strategies might vary greatly, I think the key point is that putting 100% of the contribution room to work can mean the difference between staying stuck in traffic and getting into that retirement fast lane.
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Putting the unused room to work is the big takeaway
For the 50-year-olds who haven’t invested with unused contribution room, there’s still room to make up for lost time, perhaps by jolting that savings rate. In an environment where food inflation is relentless, it feels like one’s wallet can’t catch a break. If you’re short on cash to make a contribution, though, there’s always next year or the year after that, since unused room in your TFSA will be available when you’re ready. Of course, if you can, it’s best to get started sooner rather than later.
For most, a simple TSX ETF can do the trick. For others, who want more income, a specialty income ETF or high-yield dividend stocks can be magnificent, especially since a TFSA allows for tax-free income. Finally, the best use, for young investors in particular, I think, is growth. High-quality growth, though, not speculative hyper-growth with zero consideration paid to the price of admission.
Aritizia fits the bill as a stellar grower
A name like Aritzia (TSX: ATZ) stands out as a great growth business that might be worth stashing away in a TFSA for the long run. The stock gained close to 5% on Wednesday’s big session.
With new highs and considerable earnings momentum, it’s hard not to be willing to pay up a premium multiple for a still-small growth business that has a world of opportunity to expand its reach. Fashion can be a tough business, but Aritzia is a standout that’s found the winning growth formula.
What’s most striking, in my view, is just how large the growth ceiling is for the firm, which remains worth just $17.2 billion. It was only recently a mid-cap, and now, it’s becoming a household name in Canada and perhaps soon will be a name in the U.S. market. All considered, I like the name and would consider it to be a prime TFSA holding for long-term growth investors.
