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This is TFSA Trouncers, a series that profiles how Canadian investors have been investing their tax-free savings accounts. Whether you’ve been successful in growing your TFSA balance or not, we’d like to hear from you. Please fill out this form to contribute. You may choose to be anonymous, but we do require an e-mail address and may request a screengrab of your portfolio for fact-checking purposes.
Now in her mid-70s and living on the outskirts of Toronto, FrizzyLizzy retired years ago from a career in nursing. She tended to patients, managed teams of junior nurses and taught students at university. A salt of the earth type; one who contributes so much.
FrizzyLizzy (her chosen alias for this article) has also contributed to her tax-free savings account since 2009. Every year, she put in the maximum amount, for a total of $109,000. Her TFSA is now worth more than $750,000.
Outside of her TFSA, she has more than two dozen stocks diversified across a registered retirement income fund and other accounts, two mortgage-free properties (home and cottage), a stake in a manufacturing company and royalty income from oil and gas wells.
The growth of the TFSA has been impressive, but FrizzyLizzy is no swing for the fences risk-taker. She didn’t put all her chips on one or two stocks, like some other Trouncers have done. There were six to 10 stocks held at any one time in her TFSA over the years.
Ex-finance professional’s momentum approach guides his TFSA to an impressive sum
It was one particular stock that did most of the heavy lifting in taking her TFSA to its current heights. The uptrend in its price was so strong and prolonged that it carried the rest of the TFSA portfolio along with it.
What then is this one amazing stock? “It’s my Apple holdings that have driven the value of this portfolio so high,” she discloses. Then she adds: “Yay Apple!,” with a hearty cheer.
Mind you, some scary reversals did occur in the share price. Such corrections in stocks frighten many investors out of their positions, leaving them to regale friends and family about the big score they nearly had. Wasn’t she ever unnerved and tempted to sell?
“No, I was never worried,” FrizzyLizzy replies. “I buy good stocks and hang onto them. It helps that I get to review my portfolio with my broker quarterly. I have an excellent broker.”
The Apple Inc. AAPL-Q smartphone was launched in 2007 to great fanfare. FrizzyLizzy and her broker could see there was considerable consumer value in having a multi-functional computer in one’s pocket. And it would be hard for rivals to overcome Apple’s lead in making this complex product.
This septuagenarian’s TFSA has gone off the rails
She first bought Apple shares in her Canadian-dollar TFSA in early 2010, followed by a tranche in the first quarter of 2011 and another tranche in the first quarter of 2012. As summer was ending in 2013, the combined holdings were moved over to her U.S.-dollar TFSA.
This transfer added a sizable currency gain to her position over the ensuing years. The Apple shares in her Canadian-dollar account were bought when the loonie was trading at its historic highs of parity with the U.S. dollar. After the transfer to the U.S.-dollar TFSA, the greenback had a long appreciation and a U.S. dollar could buy $1.32 Canadian by 2016. It has ranged between $1.25 to $1.40 since.
Apple’s stock was split 7-for-1 in 2014 and 4-for-1 in 2020, increasing the number of her shares by 28 times. She sold off nearly US$50,000 worth in the summer of 2020 and another US$12,500 in the fall of 2024. This was for rebalancing purposes since the Apple position had become quite large relative to the other stocks.
In 2012, Apple started paying a dividend and has raised it every year since. The amount is now US$0.26 per share, for an annual yield of just under 0.5 per cent. Not much to get excited about. But the payout ratio is only 13 per cent of earnings, so the dividend and its growth is very sustainable, if not primed for a move to higher yields over the long term.
Let’s raise another hearty cheer of “Yay Apple!”
What an expert says
Dan Hallett (CFA, CFP), vice president of research for HighView Financial Group, provides his thoughts on FrizzyLizzy’s TFSA.
Generally speaking, most people are ill-suited to buying individual stocks because their analysis tends to be superficial. There’s a winner here and there – those are often the stories that are told in gatherings or online, but most see mediocre results or worse.
But Lizzy did a lot of things correctly. Prioritizing regular contributions to her TFSA (and presumably other long-term investment accounts) was key, so kudos to Lizzy for being a diligent saver. She invested in stocks for growth when so many let TFSA contributions languish in savings accounts paying paltry interest rates.
Again, most people cannot handle the stock market’s wild up-and-down swings in market value (let alone investing in a private business). She seems to have good awareness of her risk tolerance since, as she said, she never panicked when stock prices fell. And that is key to the next thing Lizzy did right, which is to hold on during the sometimes dramatic declines in stock prices and letting her winners ride.
My only quibble is the characterization of the risk taken to achieve her impressive results. While Lizzy may not view it as risky, having all of your investments in 20 to 30 stocks is not for the faint of heart. Even that level of diversification can give investors a very bumpy ride. There is always some luck involved in amassing a large TFSA, but Lizzy deserves a lot of credit for her conviction and nerves of steel.
Larry MacDonald is author of The Shopify Story and blogs at Shopify’s Journey