How to Easily Turn a $10,000 TFSA Into $100,000

TFSA and coins

TFSA and coins

Written by Aditya Raghunath at The Motley Fool Canada

The Tax Free Savings Account (TFSA) is a flexible registered account that allows you to grow your wealth over long periods of time. Canadians can contribute to the TFSA and enjoy tax-free gains for life.

The TFSA may hold several qualifying investments, including stocks, mutual funds, exchange-traded funds, and bonds. Any withdrawals in the form of dividends, interest or capital gains from this account are exempt from Canadian Internal Revenue Service taxes.

Multiply your investments by investing in a TFSA

The TFSA was introduced back in 2009 and the cumulative contribution space for this account is $81,500. In 2022, you can contribute up to $6,000 to the TFSA. However, if you were unable to contribute in previous years, the balance will be carried forward to the next year. Because it’s a tax-protected account, the TFSA can significantly reduce your taxes.

Because of the benefits the TFSA offers, you can use it to buy and hold high-quality growth stocks that have the potential to produce outsized gains for investors over the long term.

I have identified two such Canadian growth stocks trading on the TSX.

How to turn a $10,000 TFSA investment into $100,000 by 2030

If you have $10,000 in your TFSA, you can invest the amount in Canadian tech stocks such as Canada Shopify (TSX:SHOP) and magnet forensics (TSX:MAGT). Let’s see why.

An ecommerce leader

Bear markets are scary, and Shopify stock is down a staggering 80% from its all-time high set in 2022. While the Canadian e-commerce company has grown sales at a 53% annual rate for the past three years, its revenue grew a meager 16% in the second quarter (Q2) of 2022.

This massive sales slowdown, coupled with a decline in profit margins, added to a challenging macro environment, has contributed to the sell-off in SHOP stock.

But there are several factors that should propel Shopify stock higher going forward. It remains part of an expanding addressable market and allows it to rapidly grow sales in the future. In addition, Shopify’s operating system is used by more than two million merchants worldwide, allowing them to benefit from a range of additional services such as payment processing, financing, and discounted shipping.

Due to the drop in SHOP stock price, it is now trading as a public company at its lowest price to sales multiple, allowing investors to buy the price drop. Shopify stock is already up 1,000% since its IPO in mid-2015. It’s a Canadian tech stock that went from $10,000 to $100,000 in less than eight years.

A cyber security game

Magnet Forensics, an enterprise-focused cybersecurity company, provides its client base with the tools needed to investigate digital crimes and cyberattacks. It has developed several digital investigative products that collect, analyze and manage evidence from digital sources such as smartphones, computers and more.

Its solutions are already deployed by 4,000 law enforcement, military, government and private sector organizations in more than 100 countries. Approximately 150 of the Fortune 1000 companies are Magnet Forensic customers.

Additionally, the global cybersecurity market is expected to reach US$270 billion in 2026, up from US$173 billion in 2020, allowing for healthy growth for Magnet Forensics in the coming decade.

The foolish end result

Whether it’s Shopify or Magnet Forensics, investors need to identify stocks that are part of a growing addressable market. These companies should be well positioned to disrupt the sector in which they operate. Additionally, stocks with robust balance sheets and expanding profit margins should be fundamentally strong.

Once you identify such companies, buy and hold them in your TFSA for at least a decade to benefit from compound returns.

The article “How to Turn a $10,000 TFSA into $100,000” first appeared on The Motley Fool Canada.

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Stupid contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Magnet Forensics Inc. and Shopify. The Motley Fool has a disclosure policy.


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