In my opinion, investing in a Tax-Free Savings Account (TFSA) is essential if you wish to build a significant retirement nest egg. That’s because any gains generated in a TFSA can be withdrawn without having to pay any additional taxes. With that in mind, it’s important to be very prudent about which stocks you choose to hold in a TFSA, because Canadians are given a strict limit on how much they can contribute to one of these accounts.
In this article, I’ll discuss three TFSA stocks you should consider buying today.
This is one of the best stocks available
I believe Constellation Software (TSX:CSU) is one of the best stocks to hold in your TFSA. In fact, I’m a firm believer that this may be a no-brainer stock that every Canadian should consider buying today. If you’re not familiar with Constellation Software, you should note that it’s a tech conglomerate. The company acquires vertical market software (VMS) businesses. Constellation Software also provides the resources necessary to turn those acquisitions into exceptional business units.
Since its initial public offering in 2006, Constellation Software stock has gained more than 14,400%. That would have grown an initial investment of $10,000 into more than $1,000,000. Despite that amazing growth, Constellation Software doesn’t appear to be slowing down whatsoever. Over the past five years, Constellation Software stock has gained nearly 143%. If you’re interested in a stock that could provide your TFSA portfolio with outstanding growth, consider Constellation Software today.
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Consider investing in grocery stocks
I think Metro (TSX:MRU) would be another great company to consider in your TFSA today if you’re aiming to build a large retirement nest egg. This is a large company, operating 975 grocery and 645 drugstore locations across Canada. Grocery companies are intriguing companies to consider in a TFSA because they tend to be very stable businesses. Consumers will continue to frequent these stores regardless of what the economy looks like.
Over the past five years, Metro stock has gained more than 62%. In addition to providing strong capital appreciation, investors should note that Metro is a strong dividend provider. It has managed to increase its dividend distribution in each of the past 26 years, making it a Canadian Dividend Aristocrat.
Stick to large, established companies
At the end of the day, there are so many different directions you can take your TFSA. I believe Canadians should focus on large, established companies. That’s because those types of companies tend to be less volatile than small growth stocks and they should have a significant moat built up against their competitors. An example of such a company would be Telus (TSX:T).
Telus is one of the largest telecom companies in Canada. It operates the largest telecom network, providing coverage to 99% of the Canadian population. Over the past five years, Telus stock has gained more than 7%, dividends excluded. Speaking of which, Telus offers investors a very attractive forward dividend yield of 5.65%. When Telus’s stock appreciation and dividends are considered in combination, investors can note an average annual return of 6.69% over the past five years.
