It’s tough to pinpoint just how large one’s TFSA portfolio should be by retirement time. Of course, there’s really no answer that acts as a one-size-fits-all. Ultimately, it depends on your expected lifestyle in retirement, how risk-tolerant you were when you picked stocks or other investments within your TFSA, and a number of other factors that investors should also keep track of.
Any way you look at it, there’s really no specific figure that’s right for everyone. Also, let’s not forget about the other accounts, like the RRSP, FHSA, non-registered account, and more, which will also play a pivotal role in financing a retirement lifestyle. Add pensions and other sources of passive income into the equation, and your TFSA can be as big or as small (perhaps if your RRSP is massive and you’ve got a pension cheque that’ll be coming in every so often in retirement) as you’d like, as long as the rest of the financial picture makes sense.
In short, there is no set rule of thumb for how large one of your accounts, like the TFSA, should be. But given the power of a TFSA, I’d argue it makes sense for investors to try to grow it, compound it, and snowball it to the best of their ability. That means staying on top of the annual contributions! And that means investing the contributions in stocks, the asset class that offers the highest return potential for your dollar.
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Focus on snowballing your TFSA instead!
Of course, savings, bonds, GICs, commercial paper, royalty funds, gold bullion CEFs, specialty income ETFs, and all other sorts of assets could make sense to diversify your TFSA portfolio.
But, at the end of the day, investors should probably consider assets that are better than just cash, even if you’re getting a half-decent interest rate on your deposits. In any case, your TFSA is an incredible investment vehicle. And it can help turn your TFSA into a force that helps you get to that desired retirement date some years sooner. Instead of asking how big it should be, I believe that the right question to ask oneself is: How can I grow my TFSA at a decent rate while accounting for the risk I’ll take on?
Indeed, don’t seek to maximize growth or safety. Try to find the best of both worlds with a risk/reward that allows you to stretch your dollar as far as it can go. Value stocks or low-cost, underheated growth plays could be great additions to the core of a TFSA fund.
Couche-Tard stock looks like a TFSA staple
A name like Alimentation Couche-Tard (TSX: ATD) looks like a stellar addition for the long run. It’s a convenience retailer that has not done much in the past two years, with shares up just over 2%.
Still, the company is looking to find its way under its new CEO, Alex Miller, who hasn’t yet made his big mark on the company. With a strong balance sheet and the optionality to make so many moves across the globe, I view Couche-Tard as less of a lower-growth stalwart and more of a growth-by-acquisition expert that will awaken from its hibernation.
As management looks to make its next move, I think there’s upside as the shares look to finally break out after two years of doing nothing. The next M&A can’t come soon enough, but with a decent multiple and enough cash on the sidelines, I’d say the name’s a long-term hold.
