Yahoo Finance 2 Stocks to Start Saving for a Home in an FHSA
Written by Joey Frenette at The Motley Fool Canada
The FHSA (First Home Savings Account) is an account worth consideration if you’ve never owned a home and are looking to get into the market at some point in the future. For many young investors who’ve been priced out of the hot housing market, the FHSA is an invaluable tool that can help you get on the right track.
With sky-high interest rates and surging home prices, it can be tough to save up for that first down payment. With the FHSA, which is rolling out across Canada’s banks this year, you’ll be able to contribute $8,000 annually to a max of $40,000 (you’d hit that point in five years, assuming you maximize contributions every year).
Now, $40,000 may not seem like much, especially if you’re planning on getting that new home in Vancouver or Toronto. However, if you invest the funds and watch it grow over the next five to 15 years (it’s important to note that the FHSA stays open for 15 years or until you reach 71 years old), your FHSA could grow into a considerable sum.
Your FHSA is a powerful tool that could help you finally get into the housing market in the future
The power of long-term compounding should not be underestimated. I believe that young investors who can contribute the maximum amount can realistically afford that down payment down the road, provided they invest wisely and stay away from excessive trading of what’s “exciting” and “expensive” at any given time.
As for FHSA eligibility, please contact a financial adviser when you decide to look into opening an account.
With an old-fashioned value approach, you use the FHSA to reach your goals of first-time home ownership. In this piece, we’ll just look at two Canadian stocks I’d consider stashing in such an account for the long haul.
Dollarama
Dollarama (TSX:DOL) is a discount retailer that’s done well over the past few years, as consumers looked to save money on everyday goods. Looking ahead, I think Dollarama can keep delivering for investors, as it continues to expand while drawing in big crowds, as inflation and economic headwinds take a toll on our personal balance sheets.
The firm has a fairly predictable and recession-resilient operating cash flow stream and would make a terrific play for any Tax-Free Savings Account (TFSA) or FHSA that aims to grow wealth over the next five to 15 years. The stock trades at just below 30 times trailing price to earnings (P/E). That’s not bad for a steady appreciator.
Bank of Montreal
Bank of Montreal (TSX:BMO) stock has been battered amid the U.S. regional bank crisis, thanks to its sizeable U.S. exposure and its recent acquisition of Bank of the West. Undoubtedly, U.S. exposure looks toxic these days. But for BMO, I think investors are overblowing the situation.
Shares crumbled another 3.3% on Thursday, as another U.S. regional bank went down. At 5.7 times trailing P/E, BMO stock stands out as a wonderful bargain. Once the crisis blows over, I’d look for BMO stock to lead the charger higher again. For now, BMO looks to be unloved, opening the door for brave contrarians who seek juicy dividend yields (it’s at 5% today) at a discount.
The post 2 Stocks to Start Saving for a Home in an FHSA appeared first on The Motley Fool Canada.
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Fool contributor Joey Frenette has positions in Bank Of Montreal. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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