Your TFSA (Tax-Free Savings Account) is a powerful way to supercharge your retirement. Indeed, stock gains free from tax may not seem like much, especially if you’re a younger investor who is only able to contribute less than $6,500.
That said, if you keep contributing year after year, it will be hard to stop your TFSA from snowballing at an increasing rate. When you build a snowman, you start will a small snowball. Eventually, the snowball becomes so massive that even a short push is enough to increase its mass by a considerable amount.
Building TFSA wealth as a new investor need not be scary
New TFSA investors may have snowballs, but give it a decade or two, and those snowballs will grow to be something that could help fast-track you to a comfortable retirement, perhaps far sooner than you’d expect! The key to investing your TFSA for retirement is to stay in your own lane. Don’t feel the need to maximize gains.
Also, don’t bet too much (or anything at all) on the tips you hear around the water cooler. At the end of the day, it’s you who will be held responsible for any losses. As such, you should put in all the due diligence. That goes far beyond just understanding an investment. You need to be able to value it, too. That’s why I’m no fan of cryptocurrencies or hot stocks that have doubled in value over a concise timeframe.
Sure, it feels like you’re missing out on quite a bit by not playing the Game of Greater Fools (based on the Greater Fool Theory, not the Motley Fool). That said, being disciplined and sticking with what you know can keep your retirement on track, helping you steer clear of those horrific setbacks (think bubble bursts or serious crashes).
Remember, it’s not the corrections or bear markets you’ll encounter along the way that can set you back; it’s the irrecoverable losses. Oftentimes, it’s the hot play that accompanies such elevated risks. The good news is you need not show up at the party if you fear the risk of running late. Sometimes, the punch bowl will be taken away as soon as latecomers finally arrive.
Waste Connections: A TFSA holding for the long haul
Instead of buying winners you cannot value (think sky-high price-to-earnings (P/E) ratios or a lack thereof), you may wish to target winners that still look cheap, with the means to keep winning in the near- and distant future. Stocks like Waste Connections (TSX:WCN) are great plays for any TFSA that aims to grow over the decades. The business of waste collection is not pretty. But it’s a necessary business that does not have much in the way of competition when it comes to certain localities.
It’s a dirty job but a pretty profitable one. Waste Connections has a wide moat and the ability to keep inching higher, as it serves communities that really have no other options. With such a wide moat comes tremendous pricing power. Add potential mergers and acquisitions into the cards, and the Waste Connections growth story is tough to pass up. The stock has been a winner in the last five years, up around 79%. I find few reasons for the steady appreciation to halt now.
