What’s a Tax-free Savings Account (TFSA)
It’s a government-sponsored investment account
Think of a tax-free savings account (TFSA) as a box. You can pick what to put in that box from a diverse of financial instruments such as ETFs or exchange-traded funds, guaranteed investment certificates or GIC, stocks, bonds, and actual savings accounts
TFSA limit is rising to $6,000 in 2019!
The TFSA dollar limit will be increasing to $6,000 in 2019, up from $5,500 in 2018. With the TFSA limit at $6,000 for next year, the total room available in 2019 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009 is $63,500.
3 ways to maximize your TFSA
1. Open more than one TFSA – You can open up for your Saving account, GICs, Mutual Funds, and even trading account to invest in Stocks and ETFs.
2. Invest within your TFSA – You can buy investments like stocks, bonds, ETFs, mutual funds, and more under the Tax-Free umbrella
I use Questrade, which is an online discount brokerage. They charge very low fees for stock trades, and it’s free to buy ETFs.
3. Build multiple streams of income inside TFSA – To maximize the growth of my TFSA, I invested in Dividend growth stocks and ETFs. You can use bonds and GIC as well to lessen your risk but I like to have 90% of my portfolio in equity. Note; Do not use TFSA for Day trading! I use my Questrade Margin account for it.
How to build a $1-million TFSA
You don’t have to be an investing genius to build a million dollar TFSA. All you need is an online brokerage account and just three exchange-traded funds – which are cousins to mutual funds that trade like a stock. Invest the maximum TFSA amount in this trio of ETFs every year and you end up with more than $1-million in 40 years if you make the projected average annual return of 5.5 percent.
Here’s my ETF strategy
33% – XEI – iShares S&P/TSX Composite High Dividend Index ETF
33% – XDU – iShares Core MSCI US Quality Dividend Index ETF
33% – ZDI – BMO international Dividend ETF
I use Questrade, which is an online discount brokerage. They charge very low fees for stock trades, and it’s free to buy ETFs.
