Maximum TFSA Impact: 3 TSX Stocks to Help Multiply Your Wealth

Millennials and Gen Zers are giving away free money by using their Tax Free Savings Account (TFSA) as a bank savings account. They keep their money there and withdraw it to cover immediate future expenses. You will make the biggest financial mistake if you do the same.

Keep in mind that cash is a valuable asset and hoarding it, even in a TFSA, is like missing out on the opportunity to save taxes when you’re wealthy. You don’t want your 45-year-old self to blame you for wasting the golden age of your life by not taking advantage of the TFSA tax break.

How to Get the Most Out of a TFSA

The TFSA allows your investment income to be withdrawn tax-free. Let’s take two scenarios: Ron and Harry are in their mid-30s and invest $10,000 in their TFSA during the 2021 pandemic. Ron left his money behind while Harry bought Lundin Gold (TSX:LUG) shares. Investors often buy gold in panic.

Five years later, Ron’s $10,000 remains unchanged. In fact, their purchasing power has decreased due to inflation. Meanwhile, Harry’s $10,000 is now $117,046, and the entire amount is tax-free. He can sell some of that amount and invest it in other growth stocks trading near their lows without affecting his contribution room to the TFSA. The contribution limit will only be affected if the amount is withdrawn from the TFSA.

Three TSX Stocks to Multiply Your TFSA Assets

Lundin Gold

Lundin Gold is a buy even at its 52-week high, as the changing geopolitical landscape, rising war tensions and uncertainty about US policy have companies and investors all confident in the value of gold. The very first reason why the US dollar became strong was the high gold reserves. The rush to the petrodollar is making oil prices volatile.

Any material change in the energy landscape will take several years to materialize. During this time, the demand for gold will increase as many countries finance wars with their gold and natural resources. Central banks around the world will accumulate gold for the longer term, as they have done for the past four years. Lundin has increased its gold production and has lower all-in maintenance costs (AISC), giving it room to earn more profits and a higher share price than other gold stocks.

Constellation software stock

If you want to book some profits and invest them in a buy-the-dip opportunity, Constellation software (TSX:CSU) is a perfect TFSA stock. It acquires software companies in business-critical applications that generate annual recurring cash flow from maintenance.

The share price has fallen to a 52-week low due to the management change and slightly higher but manageable debt. A stable source of cash flow amid uncertainty is valuable, and the market has not yet properly valued it. This is a good time to buy CSU stock and hold it for the long term, as the recovery rally itself will grow your investment by 50%. Furthermore, new acquisitions led by new management will strengthen the compound effect and grow the stock to a new high. Until then, hold on tight.

Telus Stock

Telus Corporation (TSX:T) is another TFSA prosperity driver that is trading near its bottom. However, the stock could see a recovery as management has halted dividend growth to channel that cash into reducing debt. It makes no economic sense for Canadian telecom companies to maintain high levels of debt as their return on investment (ROI) from 5G infrastructure has declined due to regulatory changes. Forgiving debt, repurchasing shares and converting those shares into dividend reinvestment (DRIP) will increase share value and reduce equity dilution.

Now is a good time to buy the stock and lock in a 9% yield, even if it means no dividend growth for the next two years. Nine percent is a high premium, and you also get capital growth.