TFSA Investors: 2 Top TSX Stocks to Buy and Hold Forever

With the market down, now is a great time to buy and hold these top stocks in a TFSA portfolio for the long term.

| More on:

The Tax-Free Savings Account (TFSA) is the absolute perfect place to buy top TSX stocks and hold them forever. When you pay no tax on investment income or gains, you can truly enjoy the power of compounding. No tax means you can keep and reinvest all your returns. A lifetime of compounding those returns can create a small fortune.

The TFSA is a great place to compound stock returns

One key to long-term investing success is to not disrupt the power of compounding. Often, bear markets make investors itchy to do something. That often includes fearfully trading in and out of stocks, often at losses. This can cause investors to sell low and then buy high when the market recovers. Unfortunately, it cancels the effects of compounding.

Don’t interrupt compounding

The great investor Charlie Munger once thoughtfully said, “The first rule of compounding: never interrupt it unnecessarily.” That is why the TFSA is such a great tool. I like to use it as my “coffee can.” I tuck stocks in high-quality businesses into my TFSA. Then I try to do nothing.

Even when the market looks bad, I trust my conviction in those businesses. If they are great businesses, they will deliver the compounding returns for me. I don’t want to interrupt compounding by my emotional behaviour.

A buy-and-hold-forever mindset can not only save you peace of mind, but it can also make you a lot of money. If you are looking for some stocks to tuck away forever in you TFSA, here are two I’d consider today.

Brookfield Infrastructure: A great TFSA stock for income and growth

Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) is an ideal TFSA stock. I like this stock for its combination of safety, income, and growth. Brookfield Infrastructure is one of the largest publicly listed stocks focused on acquiring and operating global infrastructure assets. It operates everything from railroads to pipeline to data centres.

Most of these assets are contracted/regulated, so they earn steady streams of predictable cash flow. They also benefit from inflation due to higher commodity pricing, increased volumes, and inflation-indexed contracts.

BIP has a delivered a 478% total return over the past 10 years. For a diversified utility, that is incredible. Likewise, it has grown its annual dividend rate by over 9% for years.

Today, its stock looks like it is down, but that is because of a recent three-for-two stock split. For a defensive stock with an attractive long-term growth profile, this is an ideal TFSA stock to buy and hold.

FirstService: A solid compounder for the long term

Another great stock for compounding has been FirstService (TSX:FSV)(NASDAQ:FSV). It operates a conglomerate of commercial real estate service businesses. Since 2015, it has delivered a 380% total return to shareholders. This TFSA stock has delivered a 17% compounded annual return.

These services include condo and residential property management, painting services, building restoration, and home inspections. A large majority of its revenues are recurring or economically resilient. Consequently, it can consistently generate very strong free cash flows.

It generally re-invests its cash into new acquisitions. In 2021 alone, it deployed $160 million into 18 different acquisitions. This growth is supplemented by aggressive high single-digit organic growth targets.

Today, this TFSA stock is the cheapest it has been since 2019. With an enterprise value-to-EBITDA ratio of 16 it looks to be fairly valued today. For a solid long-term entry point, now looks like a great time to add FirstService to your forever-hold TFSA portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robin Brown has positions in Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infra Partners LP Units and FirstService Corporation, SV.

More on Stocks for Beginners

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Stocks for Beginners

2 Top TSX Growth Stocks to Stash in a TFSA for Life

These two growth stocks may not be the top in the last month, but in the last few years, they…

Read more »

people relax on mountain ledge
Dividend Stocks

Invest $10,000 in This Dividend Stock for a Potential $4,781.70 in Total Returns

A dividend stock doesn't have to be risky, or without growth. And in the case of this one, the growth…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Turn a $15,000 TFSA Into $171,000

$15,000 may not seem like a lot, but over time that amount can balloon into serious cash.

Read more »

A worker uses a double monitor computer screen in an office.
Stocks for Beginners

Why I’d Buy Fairfax Financial Stock Even at Today’s Prices

Fairfax stock just keeps edging higher. But is it now too expensive, or can investors just look forward to even…

Read more »

Piggy bank in autumn leaves
Dividend Stocks

A 5.6% Dividend Yield? I’ll be Buying This TSX Stock for Decades!

This Big Six Bank offers a large dividend, growth strategy, and stability. In short, it offers it all!

Read more »

Concept of multiple streams of income
Stocks for Beginners

Lock Up This 9.2% Dividend Yield From a Top Royalty Stock

Royalty stocks have a strong advantage when it comes to creating passive income for investors. But this one has the…

Read more »

concept of real estate evaluation
Dividend Stocks

Buy 1,154 Shares of This Top Dividend Stock for $492.54/Month in Passive Income

This dividend stock can pay out top cash every month, sure, but has even more to look forward to.

Read more »