By Adam Othman at The Motley Fool Canada
Calling the Tax-Free Savings Account (TFSA) a savings account feels more than unfair for the account type that the government introduced in 2009. The account is great for parking your money and letting it make you more through interest income without incurring taxes. However, it has the potential to do so much more for you.
The TFSA is one of the most powerful wealth-building tools available to Canadians. Those eligible for one and not having it are wasting so much potential. Canadians using it solely to hold cash are almost just as guilty. Each dollar of growth inside this registered account is free from taxes because you contribute to it using after-tax dollars.
The TFSA isn’t limited to cash. You can use the account to hold other assets like Guaranteed Income Certificates (GICs), if you’re into fixed-income options. My favorite way to use the TFSA is to allocate some space to hold high-quality growth stocks due to a significantly greater potential for returns than with fixed-income assets or interest income.
The best stocks to hold in a TFSA share the common trait of being well-positioned to grow for years, potentially decades. The right growth stocks can turn the most modest contributions into far more meaningful amounts in the long run. Today, I will discuss a TSX tech stock that fits the bill perfectly for an ideal TFSA holding.
Shopify
Shopify Inc. (TSX:SHOP) is a $215.7 billion market-capitalization giant in the Canadian tech space, particularly the e-commerce industry. As of this writing, the stock is down by 34.7% from its 52-week high. Despite the recent pullback suggesting danger for investors, I think Shopify warrants a place in any self-directed TFSA portfolio geared for long-term wealth growth.
Major industry player
Placing Shopify in the Canadian e-commerce space doesn’t do it justice. The company offers a platform that lets merchants of all sizes create an online presence, wherever they are in the world. It helps with everything from building their stores, managing inventory, processing payments, fulfilling orders, and selling across multiple channels. The company’s payment platform lets merchants accept and process payments without involving third parties.
It has become massively popular among merchants, providing a significant boost to the booming e-commerce industry worldwide. The company even has 14% e-commerce market share within the US, second only to the global giant Amazon. Securing that portion of the market share despite competing with Amazon says a lot about the demand for Shopify’s platform and the value it offers to end-consumers and retailers.
Foolish takeaway
The e-commerce space currently accounts for less than a fifth of total retail sales worldwide, but the number has been growing significantly over the years. With the rise of Artificial Intelligence (AI) integration, particularly with agentic AI, the growth of e-commerce might accelerate further.
Shopify has already captured the initial buzz surrounding agentic AI in the e-commerce space and is well-positioned to continue benefitting from it. In turn, the company’s investors are also set to leverage potentially outstanding growth in the coming years. If you still have unused contribution room in your TFSA, I would advise considering leaving some of it to hold Shopify stock in your portfolio.
The post Where I’d Put My $7,000 TFSA Contribution If I Were Starting Fresh This Year appeared first on The Motley Fool Canada.
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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.
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