The Tax-Free Savings Account (TFSA) is one of the best registered investment accounts in Canada. Unfortunately, many Canadians are not maximizing its utility. In fact, many Canadians get trapped by the big banks offering “high-interest” TFSA savings accounts.
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Don’t waste your TFSA on a “high-interest savings account”
Generally, these accounts offer a promotional interest rate for a limited period. The rate then drastically drops afterward. Certainly, interest gets the highest rate of tax of any type of return. The TFSA saves you from paying that.
However, these accounts benefit the banks more than they do you. It keeps their deposits safe in a very low interest-bearing account. They can use that capital to then reinvest into higher interest-bearing investments (like mortgages).
Given that the TFSA protects your investments completely from any tax consequence. You actually want to put your best-performing potential investments in that account.
If you are smart, your TFSA could save you thousands of dollars in tax
You might save a couple hundred dollars of tax on interest over your lifetime by keeping it in a TFSA savings account. However, if you own stocks that could grow 10-fold, 20-fold or 50-fold inside your TFSA, you might be saving thousands, even tens of thousands of dollars of tax over a lifetime.
If you want to build some substantial wealth, you are better off taking some higher risk in stocks for a higher, potentially life-changing reward. If you are wondering what kind of stocks to put in a TFSA, here are a couple to consider.
An up-and-coming software compounder
Topicus.com (TSXV:TOI) is a little brother to the $100 billion software conglomerate Constellation Software. Constellation has delivered a 2,150% return in the past 10 years and a 36,856% total return since inception. You don’t want to pay any tax on those types of returns.
Topicus has a similar strategy as Constellation. It is consolidating niche software companies into its fold. It has a unique focus on Europe. Europe is fragmented by country, language, government, and regulations.
As a result, there are thousands of software companies that cater to very specific purposes. That provides plenty of acquisition opportunities for Topicus. The company has already been very opportunistic in 2025. It has recently announced several strategic and substantial investments.
If it can continue to mimic Constellation, Topicus could do very well for patient shareholders. It would be an ideal stock to hold for decades inside your TFSA.
An industrial stock that has been an excellent capital compounder
While it is much smaller, with a market cap of $2.5 billion, TerraVest Industries (TSX:TVK) has already created substantial value for shareholders. Its stock is up 961% in the past five years and 2,748% in the past 10 years.
This company is a bit unusual. It does not operate in any exciting industries. It operates a mix of boring industrial companies that include tank and trailer manufacturing, boiler distribution, and energy services.
Its core competence is in how it allocates capital. It buys cheap businesses, optimizes them to yield tonnes of cash, and then reinvests into more businesses.
As you can see, its playbook has been very successful and likely to be repeated in the future. If you trust its management team, this is a stock you can hold for a very long time in a TFSA. It may still be in the very early innings of its growth plan.
