TFSA: Where to Invest $6,500 in 2023 (2024)

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If you have yet to use the $6,500 new TFSA contribution room, here are two stocks you can consider adding to your self-directed, tax-advantaged portfolio.

After declining for most of March, the TSXis finally seeing some positive movement going into April 2023. Despite the recent uptick, the S&P/TSX Composite Index is down by almost 10.70% from its 52-week high. A recession might be on the way, but we are arguably not there yet.

There might be a chance that shares will drop further in the coming weeks. If that comes to pass, savvier investors should prepare to use the downturn to their advantage.

If you have yet to allocate the $6,500 contribution room in your Tax-Free Savings Account(TFSA), now is the time to be on your toes. Investing in high-quality stocks when prices are low can be an excellent way to leverage a recession as a stock market investor.

By identifying and investing in stocks likely to post strong recoveries after downturns, you can achieve significant wealth growth through capital gains. Allocating some space in your TFSA to such holdings means enjoying the returns on your investments without incurring capital gains or income tax.

If you are a risk-averse investor seeking investments for your TFSA contribution room, consider keeping these two top Canadian stocks on your radar.

Canadian Utilities

Canadian Utilities (TSX:CU) might be one of the most boring stocks during bull markets. This is the case for all utility stocks. Granted, it does not offer much in terms of capital gains. It also means utility stocks offer more stability during market downturns. Utility companies like Canadian Utilities always have cash coming in, regardless of economic cycles due to the essential nature of their services.

While considered a safe investment, the $10.02 billion market capitalization also declined this year due to rising interest rates. As of this writing, Canadian Utilities stock trades for $37.16 per share. Despite climbing by 5.27% from its March 23 level, the stock is down by 11.39% from its 52-week high.

It is the only Canadian Dividend Aristocrat with a dividend-growth streak longer than 50 years. Due to the cutback in its share prices, you can add it to your portfolio to capture its inflated 4.83% dividend yield.

Toronto-Dominion Bank

Toronto-Dominion Bank (TSX:TD) is a $146.35 billion market capitalization Canadian bank stock. One of the Big Six Canadian banks, TD Bank stock is another mainstay in many Canadian self-directed investment portfolios. Canadian banks have shown time and time again that they are some of the most stable performers. Through several economic crises, the big banks have come out stronger on the other side.

As of this writing, TD Bank stock trades for $80.34 per share. The U.S. banking sector issues triggered a selloff in Canada, and TD Bank stock was among the stocks sold off by many Canadian investors. TD Bank stock is down by 21% from its 52-week high.

While it may decline further if a recession hits, it has a robust enough balance sheet and liquidity to see it through the downturn. At current levels, it also pays its shareholders at a juicy 4.78% annualized dividend yield.

Foolish takeaway

There is no way to determine when the recession will hit. Analysts and economists predicted the onset of a major recession in early 2023. The prediction has now been changed to mid-2023. Regardless of when the next one happens, recessions are a part of the economic cycle. Many investors begin panicking and taking their money out of the market when that happens. Savvier investors take advantage of them.

By investing in stocks well positioned to weather the storm, you can remain invested in the stock market to enjoy outsized returns when the dust settles. Canadian Utilities stock and TD Bank stock are two high-quality assets I will consider adding to my portfolio for this purpose.