How to Find the Best Stocks to Buy for Your TFSA



Written by Daniel Da Costa at The Motley Fool Canada

When Canadians start investing, the focus is always solely on finding the best stocks to buy for their tax-exempt savings accounts (TFSAs). However, it’s just as important to ensure you have a plan and strategy for how you invest your money to take full advantage of the tax-free nature of the TFSA.

And when you consider how powerful compounding can be, and how difficult it is to predict how stocks will perform in the short term, it quickly becomes clear that the best stocks for your TFSA are companies you can hold onto for the long term.

How powerful is compounding?

The power of compounding can be truly amazing, especially when you take a long time frame to grow your money and you grow it at a fast pace.

For example, if you start today with just $5,000 and save an additional $5,000 each year for 30 years and grow your portfolio at a compound annual growth rate (CAGR) of 10% by the end of 30 years, it would be worth over $900,000, with more than $750,000 in revenue.

If you keep going another 10 years, 40 years total, your portfolio would be worth a whopping $2.4 million, with over $2.2 million of that coming from your earnings.

Therefore, it’s crucial to find the best stocks to buy that can give you those solid returns, buy them for the long term, and give yourself as long as possible to earn that capital.

And if you’re looking for quality stocks to buy for your TFSA today, particularly stocks that have years of growth potential ahead of them, then here’s one of the best.

One of the best stocks to buy for your TFSA today

Because we aim to steadily expand our portfolio each year, we need to look for stocks that can steadily expand their operations, but also for safe stocks that won’t lose a ton of value in adverse market conditions.

That’s why it’s one of the best stocks to buy now and hold for years Dollarama (TSX:DOL). Dollarama is one of the best stocks to buy for your TFSA, not necessarily because of the products it sells, but because it offers consumers the convenience of buying so many essential commodities at discounted prices.

So it’s not surprising that a stock like Dollarama rallies during recessions or periods of high inflation like the one we’re experiencing today.

However, Dollarama has also proven that even as the economy grows, it can continue to attract customers who are price conscious and want the best bang for their buck thanks to its impressive merchandising.

Additionally, with a dominant position and well-known brand in the discount retail space, Dollarama continues to have years of growth potential, making it one of the best stocks to buy for your TFSA.

In the last 10 years, sales have increased by 170% and net profit by over 280%. As such, it’s not surprising that investors have seen total returns of just under 700%, or a CAGR of more than 23%, over the past decade.

So if you’re looking for some of the best stocks to buy for your TFSA, Dollarama can protect your capital during turbulent times and should continue to grow at an exceptional pace over the long term.

The post Compounding: How to Find the Best Stocks to Buy for Your TFSA first appeared on The Motley Fool Germany.

Before you consider Dollarama, here’s what you should hear.

Our market-leading team of analysts just revealed what they think are the 5 best stocks investors can buy in September 2022… and Dollarama wasn’t on the list.

The online investment service they’ve operated for nearly a decade, Motley Fool Stock Advisor Canada, beats the TSX by 21 percentage points. And right now, they think there are 5 better stocks to buy.

See the 5 stocks * Return from 09/14/22

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Stupid contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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