TFSA vs RRSP: Where to put these top 3 TSXV EV battery stocks?

Highlights

• TFSA defers tax benefits to the time of withdrawal, while RRSP has upfront benefits
• In both the options, one can hold stocks trading on a designated exchange like TSX Venture
• The three stocks mentioned here have roles in electric mobility, an area of interest of Elon Musk

Are you planning to save your money to secure your future? That is one crucial step to offset multiple risks that include a job loss, a large-scale economic downturn like the one triggered by the COVID-19 pandemic, and shortfalls during hefty expenses like purchasing a home.

There are many route one can take to invest. These include parking money in fixed return instruments like term deposits with your bank or placing funds in riskier, but sometime better returning, instruments like shares trading on an exchange.

Aside from this, there is also a choice when it comes to where you hold your investments. The two popular options here are Tax-Free Savings Account (TFSA), and Registered Retired Savings Plan (RRSP).

TFSA and RRSP -- The basics

Both these accounts provide you a simple way to hold investments including Guaranteed Investment Certificate (GIC), mutual funds, shares listed on a designated exchange, and ETFs.

There are annual contribution limits to both the accounts, which can be maintained with a banking entity or with a trust, an insurance company or even a credit union. That said, let’s know how these two differ.

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TFSA vs RRSP

More often than not, RRSPs are used to save for retirement, as the name itself suggests. Here, the person is eligible for tax deductions for the contribution made to the account. This can be a healthy way to let your tax become a little lighter.

However, not all RRSP withdrawals are tax-free as there are conditions, which one must be aware of. RRSP dollar limit for 2022 is capped at C$29,210.

TFSA contributions made by the individual cannot be deducted for tax purposes. However, withdrawals are tax-free, as the name itself suggests.

While RRSAs can be maintained from income from specified sources, TFSAs can be maintained by anyone over the age of 18, having a valid SIN. TFSA contribution limit for the ongoing year is C$6,000.

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Now that we have discussed TFSA and RRSA, let’s take a look at the stocks of three companies that supply to the battery-powered electric vehicle (EV) industry, which can be added to these accounts.

American Lithium Corp (TSXV: LI)

The company is into exploration of lithium deposits. It holds interests in Fish Lake Valley, Fish South Property, Colorado Property, and a few other properties.

American Lithium’s net loss in the quarter ending November 30, 2021, was over C$4.8 million. The net loss for the corresponding quarter in 2020 was over C$6.1 million.

The stock, which trades under ticker LI on TSXV is not a dividend paying stock.

Frontier Lithium Inc. (TSXV:FL)

The company is into mining, with interests in PAK Lithium Project, Bolt Pegmatite, and other projects. It also has a position on Ontario’s Electric Avenue.

In the press release late last year, Frontier Lithium Inc. announced the offering of over 6.4 million Flow-Through shares on a bought deal basis to underwriters Canaccord Genuity and BMO Capital Markets.

Frontier Lithium trades under ticker FL, and it is not a dividend paying stock.

Also read: Is Frontier Lithium (TSXV:FL) an EV stock to buy?

Noront Resources Ltd (TSXV:NOT)

The company, which is into mining both base and precious metals, is known to explore metals like nickel and copper that are used in manufacturing EVs.

The McFauld's Lake Project belongs to Noront Resources, and it also has assets in Ontario’s Ring of Fire area.

In Q3 2021, Noront Resources’ net loss was over C$50 million as compared with a net loss of nearly C$2.6 million during the corresponding quarter of 2020.

Like the above two, Noront Resources, which trades under ticker NOT, does not pay dividend.

Bottom line

Savings is almost never a bad move, and the two options discussed here, TFSA and RRSP, have their plus sides each. Either of these can be chosen to hold your investments.

As for the three battery stocks mentioned here, they are known to play a role in the electric mobility sector, which is currently on the rise.

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