Investment

Young Investors: How to Turn a $6000 TFSA Investment Into $42000 – The Motley Fool Canada

Published

4 years ago

April 22, 2020

Young investors want to know which top dividend stocks might be the best picks to start a Tax-Free Savings Account (TFSA) retirement portfolio today.

TFSA investing

The TFSA contribution limit increased by $6,000 in 2020. Investors now have as much as $69,500 in TFSA contribution room. This is large enough to build a decent portfolio of top stocks that could generate substantial returns over the next two or three decades.

Millennials in particular might find the TFSA a better investment vehicle compared to the RRSP. And people in their late 20s and 30s will see earnings increase as their careers progress. Saving RRSP contribution space for later year makes sense, as the contributions can be used to reduce taxable income that might be at a higher marginal tax rate.

In addition, the TFSA provides more flexibility. Ideally, retirement investments are left to grow for decades. However, moments arrive in life when we might need to tap the funds for an emergency. TFSA withdrawals can be made at any time without a tax penalty. RRSP withdrawals are subject to withholding taxes.

Best stocks to buy

A popular strategy involves buying top-quality dividend stocks and using the distributions to acquire additional shares. Companies with strong track records of dividend growth deserve to be on your radar. In the current environment, it also makes sense to search for business that provide essential services.

Let’s take a look at one top Canadian dividend stock that appears oversold today and has delivered strong returns for long-term investors.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) trades near $53.50 at the time of writing and provides a 6.75% dividend yield. The stock traded above $74 in February, so there is decent upside potential on an economic recovery.

The company made big bets in recent years on the Pacific Alliance countries that include Mexico, Peru, Chile, and Colombia. The combined market is home to more than 225 million people. Banking penetration remains below 50% and Bank of Nova Scotia sees strong potential for growth as the middle class expands.

Risks

The pandemic will put pressure on these economies due to heavy reliance on strong commodity markets. Oil and copper prices, for example, are under pressure amid the current global economic downturn.

Bank of Nova Scotia gets about 30% of adjusted net income from the international operations, so investors should expect rough results in the next two or three quarters.

At home, people are having trouble paying their loans. The Canadian government is putting aid measures in place to keep businesses alive and help unemployed Canadians pay their bills during the lockdowns.

In addition, Canada is buying up to $150 billion in mortgages from the Canadian banks to provide liquidity for ongoing lending. A prolonged shutdown or a second wave of the outbreak would be negative for the Canadian banks.

Opportunity

As long as the economy starts to open up again in the back half of 2020, Bank of Nova Scotia should see a strong rebound in 2021. The current share price reflects the anticipated damage over the next few months.

Long-term investors have done well with the stock. A $6,000 investment in Bank of Nova Scotia 20 years ago would be worth about $42,000 today with the dividends reinvested — even after accounting for the crash in the past eight weeks.

The bottom line

The International Monetary Fund predicts a strong global recovery in 2021 once the pandemic runs its course.

Buying top stocks during a correction takes courage, and more volatility should be expected. However, history suggests the long-term rewards should outweigh the near-term risk.

The Motley Fool recommends BANK OF NOVA SCOTIA. Fool contributor Andrew Walker has no position in any stock mentioned.

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

Published

1 week ago

September 6, 2024

Anne Joseph

TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX composite up more than 150 points, U.S. stock markets also higher

Published

3 weeks ago

August 29, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.

The S&P/TSX composite index was up 171.41 points at 23,298.39.

In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.

The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.

The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.

The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.

This report by The Canadian Press was first published Aug. 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Investment

Crypto Market Bloodbath Amid Broader Economic Concerns

Published

1 month ago

August 5, 2024

Harry Miller

The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.

The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.

Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.

The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.

Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.

Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.

Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.

Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.

The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.