A Smart Way to Use Your TFSA to Effectively Double Your Contribution 

“Investing and stocks have never been my thing,” reflects Laureen, an investor coming from a branding job. She has been an invaluable asset to her company. Her clients loved her ideas as she gave justice to the product. A millennial who made a successful career in a big firm is now looking to start investing. She did make contributions to a Tax-Free Savings Account (TFSA) but rarely invested them in growth stocks.

Is investing in a TFSA really that difficult?

Most professionals realize later in life – while they are good at what they do, and have contacts, skill, and passion, what they lack is time and financial flexibility. Time is money. Staying invested and giving your money and business time to grow is a luxury only a few can afford. Buying time for your venture means paying the bills without revenue, funding the initial failures so you can succeed later.

Being the brain behind big brands, Laureen understood consumers’ behavior, the value of quality, and consistency. A brand built on poor-quality products is like a house of cards. The same logic applies to stock. Any stock price rising without any backing of revenue is all hype and no foundation.

Laureen realized her biggest mistake was not using her TFSA’s full potential. A TFSA is where she can invest in companies that trade publicly on the stock exchange.

Compounding is equivalent to word-of-mouth publicity, which can attract loyal and recurring sales without any marketing. Similarly, reinvesting a recurring cash flow compounds your money. Instead of cashing out every dividend payout, reinvest it to get a new promising stock.

The initial three years are tough, but once the brand picks up, it automatically attracts the right customers. In investing as well, the initial three years may not give you significant returns. It is possible that your portfolio may also turn red. But that is your learning curve, understanding what not to do. Gradually, you get the hang of the stocks that match your vibe, and that is when investments start compounding.

Laureen stopped looking at investments as ratios and complex formulas. She looked at the company’s management, products or services, and customers’ response to crack the investing code.

A smart way to use your TFSA to double your contribution

Look at the TFSA from Laureen’s branding lens and understand a smart way to double your contribution. Your TFSA limit is $7,000 in 2026, and you have the liberty to invest in the most promising stocks as long as they trade on the TSX, NYSE, Nasdaq, and other such renowned stock exchanges.

With a limited branding budget, you have to focus on efficiency. You can invest in high-growth stocks like Ballard Power Systems (TSX:BLDP), which has a hydrogen fuel cell that can reduce dependence on petrol and diesel. With oil prices touching the roof, countries are looking for energy alternatives, even if they are expensive. At least, it will resolve the most pressing issue of energy security.

Thus, it comes as no surprise that Ballard Power Systems’ stock jumped 35% in May. It’s more than two decades of research, and a technology already hitting the roads. It could be a game-changer in the next few years with wider adoption. Artificial Intelligence is already too hyped, but the hydrogen fuel cell is the underdog.

You can invest in Ballard Power Systems through a TFSA and give it time to grow. There will be hiccups as the company has not yet made profits, but has hired a professional management team to work on profitability. While the company focuses on research and product improvement, the chief financial officer and chief operating officer focus on improving the bottom line.

Laureen can use Ballard Power Systems’ growth cycles and sell a small portion of her holdings whenever their value surges 100%. The stock has already doubled between March and May. A $7,000 investment is now $14,000. Laureen can sell $7,000 worth of BLDP shares and invest in Shopify, another growth stock. She effectively doubled her TFSA contribution by choosing a high-growth stock, timely profit booking, and reinvesting profits in a more stable growth stock.

The post A Smart Way to Use Your TFSA to Effectively Double Your Contribution  appeared first on The Motley Fool Canada.

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More reading

• 3 Canadian Stocks That Look Ready for Whatever Comes Next
• 3 Canadian Stocks to Buy Before the Next Earnings Surprise
• Stocks That Nobody’s Talking About – Until They Explode Higher
• How Investing $50,000 in These 3 Stocks Could Help You Reach $1 Million by Retirement
• How Much Canadians Typically Have in a TFSA by Age 50 

The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy. Fool contributor Puja Tayal has no position in any of the stocks mentioned.