Financial Insights That Matter
Written by Amy Legate-Wolfe at The Motley Fool Canada
Turning your Tax-Free Savings Account (TFSA) into a million-dollar portfolio might sound like a dream. Many Canadians have actually achieved that dream by following a few key strategies. These TFSA millionaires don’t rely on luck but use a combination of disciplined investing, smart stock choices, and the power of compound growth to build wealth. Let’s look at a few tricks of the trade.
One of the biggest secrets of TFSA millionaires is maximizing contributions every single year. Since the TFSA was introduced in 2009, contribution room has steadily grown, and those who consistently invest the full amount have a major advantage. A great example of a stock that rewards long-term investors is Royal Bank of Canada (TSX:RY).
RBC has been a cornerstone of many TFSA success stories thanks to its strong dividend growth and steady performance. In its most recent quarter, RBC reported a 17.7% increase in net income, reaching $4.44 billion, driven by strength in personal banking and wealth management. With a 3.23% dividend yield and a history of consistent payouts, RBC remains a solid choice for a TFSA aiming for long-term growth and income.
Another important strategy is focusing on growth stocks early in your investing journey. TFSA millionaires don’t settle for low returns in their early years. They seek out companies with strong revenue growth and reinvest their gains. Constellation Software (TSX:CSU) is a perfect example of a stock that has turned many early investors into TFSA millionaires.
The company specializes in acquiring niche software businesses and has consistently delivered high returns. With a market cap of over $104 billion and a 19.5% year-over-year revenue growth, Constellation continues to be a dominant force in the software industry. While it trades at a high valuation, its ability to generate long-term returns has made it a favourite among growth-focused investors.
As portfolios grow, TFSA millionaires often shift some of their focus to dividend stocks that provide reliable, tax-free income. Enbridge (TSX:ENB) is one of the top choices for this approach. As one of North America’s largest energy infrastructure companies, Enbridge offers a 5.95% dividend yield.
Its latest earnings report showed strong revenue growth, up 51.2% year over year, reflecting increased energy demand and infrastructure expansions. Despite some concerns about debt levels, Enbridge remains a favourite for long-term dividend investors who want both stability and growth in their TFSA.
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