Tesla electric cars are stationed in a storage area in the Zeebrugge port, northern Belgium on June 21, 2024. (Photo by JOHN THYS / AFP) (Photo by JOHN THYS/AFP via Getty Images)JOHN THYS/Getty Images
This is TFSA Trouncers, a series that profiles Canadian investors who’ve accomplished incredible feats with their tax-free savings accounts. If you have grown your TFSA to half a million dollars or more, drop us an e-mail at dakeith@globeandmail.com, or fill out this form. You may choose to be anonymous, but we do require an e-mail address and we may request a screengrab of your portfolio for fact-checking purposes. We’ll also be profiling those who haven’t been so lucky with their TFSA.
James, 65 and now retired from his job as an engineer, opened his TFSA in 2009. The ascent to $1-million began soon after with the purchase of Apple Inc. AAPL-Q stock, which took flight as the iPhone gained in popularity and put the internet in the pockets of more than a billion people around the world.
The Apple shares were then sold about five years ago to buy shares in Tesla Inc. TSLA-Q The timing was again fortuitous for James: sales of Tesla’s electric vehicles accelerated soon after and drove the shares in his TFSA to a peak of $1.7-million before reversing to the current $1-million.
If James cashes out his $1-million, it will be tax-free. He will also have contribution room in a subsequent year to invest $1-million. (On the other hand, losses incurred in a TFSA reduce contribution room, and can’t be used to offset capital gains in taxable accounts.)
James and his wife have other investments currently worth more than $2.3-million in registered retirement savings plans, non-registered accounts and other TFSAs – all managed by an investment adviser at RBC Dominion Securities. James also has some pension income, his wife has a teacher’s pension, and the couple own a paid-off $2-million waterfront home.
Although having the good fortune to grow a TFSA to $1-million is rare enough, James did it without contributing the maximum allowed each year since the government launched TFSAs in 2009 (which by 2024 added up to $95,000). It was a smaller amount because he was also making contributions to the TFSAs managed by the investment adviser.
Having his TFSA deposit appreciate so much made the windfall feel like “free money.” This rendered it less stressful to decide that he could continue to manage the large holding in his TFSA “sandbox” rather than pass it over to the adviser.
“The Tesla shares were purchased when I bought a Tesla car,” James disclosed. He had done some research and the driving experience reinforced the view that EVs were the future. “I found the EVs were just so much better than a gas car. They drove faster, required less maintenance and were fun to drive.”
Ever the engineer, James enjoys watching YouTube videos and listening to podcasts about technologies related to Tesla and other fields such as AI, batteries and solar cells. This tends to give him more of a focus on the long sweeps of technological change than on the short-term ups and downs in stock prices.
His research has identified several of Tesla’s commercial opportunities. Of note is the growth potential in autonomous vehicles, especially robotaxis. And Tesla’s battery technology appears poised to become a significant provider of power to the energy grid at peak times.
The slide in James’s Tesla shares to $1-million from $1.7-million is the kind of volatility that causes many investors to panic and bail. But James remains steadfast: “If you truly believe in what you are investing in, that’s what keeps you on course. EV is the future, just like cars were in the horse-and-buggy era.”
What an expert says
We asked Matt Ardrey, CFP, R.F.P. FMA, CIM, portfolio manager and senior financial planner at TriDelta Private Wealth, for his thoughts on James’s TFSA:
“James has made some great stock choices in his TFSA, first with Apple and then with Tesla. This not only reflects choosing a great name, but it also reflects some very fortuitous timing. This is likely a very common theme when seeing investors with supercharged TFSA balances.
The recent volatility in Tesla is a good reminder about how risky this strategy can be. James suffered a $700,000 loss in value (-41 per cent). This is the kind of volatility an investor must be willing to endure when taking on this type of strategy.
Outside of the TFSA, James and his wife have a diversified managed portfolio of $2.3-million. It is great to know that his strategy for the TFSA is not his basis for the remainder of his retirement funding. They also own a home worth $2-million that is debt-free. This gives them a solid base in retirement regardless of what happens with his TFSA.
James may want to consider how much of his “free money” he wants to play with in his “sandbox.” The value of his TFSA represents 30 per cent of his investment assets. This is a material amount of their wealth. He should consider moving a portion of it over to his managed portfolio, while still allowing him to enjoy investing on his own with the amount remaining.
Finally, it would be prudent to have some retirement planning done to see how much of a loss in the value of this portion of his portfolio he can take before it impacts his retirement plans.”
Some details may be changed to protect the privacy of the person profiled.
More from this series:
Larry MacDonald is a regular contributor to the Globe & Mail and author of a new book, The Shopify Story: How a Startup Rocketed to E-commerce Giant.