Written by Adam Othman at The Motley Fool Canada
Even after the bubble burst, Canada has one of the most overvalued housing markets in the world. A significant proportion of the potential homebuyers are priced out of the market by investors.
One of the ways the government has tried to remedy the situation is by creating the tax-sheltered First Home Savings Account (FHSA) to try and give an edge to first-time home buyers saving up for their home (at least the down payment).
However, savings alone cannot help many potential homebuyers, especially when the average price of a home is about $686,000 (according to CBC) in Canada. Growing savings with the right stocks is the right approach for most potential homebuyers.
A bank stock
National Bank of Canada (TSX:NA) is a very conservative choice for a growth stock. As one of the Big Six bank stocks in Canada, it benefits from the same strict oversight that characterizes the Canadian banking sector as a whole. It’s the smallest bank of the bunch and the best choice from a capital growth perspective.
The stock has risen over 170% in the last 10 years, and if we add dividends to the mix, it has grown its investors’ capital by about 314% in the last decade. So, if you divert a portion of your FHSA savings to this stock and keep it there for a decade, you may end up with a decent sum that can be used towards your first home’s down payment.
A private lender
goeasy (TSX:GSY) is another compelling option from the financial sector of Canada, though it’s quite different from National Bank. As a non-bank lender that offers personal loans and small home improvement loans to people with weak credit, goeasy serves a completely different market compared to the banks.
A strong business model and catering to a growing market have allowed the company to expand its national presence. The stock has mostly followed the pattern of goeasy’s organic growth, although the pattern has shifted in the last couple of years, and the company can still be considered in the midst of a correction.
However, despite a hard slump, its returns for the last 10 years (including the dividends) have been exceptional at 1,300%.
If the company can repeat the performance of its last decade, you can give a significant boost to the amount you are saving (and growing) for your first home’s down payment.
A tech stock
When you are looking for growth, Canadian tech stocks can offer some incredible choices, like Descartes Systems Group (TSX:DSG). It’s not among the giant, large-cap tech companies, but it’s still counted among the leaders of its particular niche — the overlap of tech and logistics. It has accumulated a wide range of tools and services into one intelligent platform.
The most compelling characteristics of its performance are the consistency of its growth and its resiliency. It is among the few tech stocks that haven’t suffered a brutal correction in the last two years. It has grown its investors’ capital by about 880% in the last decade and may repeat the performance in the coming decade.
Even if you can put away a relatively modest amount, say $40,000, in your FHSA and invest it in these three stocks, they might help you grow it to a sizable sum, assuming you keep them long enough. The larger the amount you can put down for your first home, the smaller your mortgage payments may be, considering all other variables remain the same (interest rate, loan amount, etc.).
The post 3 Stocks to Put in Your FHSA and Save for Your First Home appeared first on The Motley Fool Canada.
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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Descartes Systems Group. The Motley Fool has a disclosure policy.