INVESTMENT OPTIONS WITHIN A TFSA

Investing with a TFSA

The Tax-Free Savings Account, or the TFSA, is a great way to save money while saving on your taxes. But it’s also a valuable investment tool that gives you access to a complete range of investment options from stocks and bonds to funds and certificates. The TFSA is similar to the RRSP in the types of investments you can make. Used wisely, it can help you reach your financial goals through a combination of tax-free savings and investments.

Savings

With the TFSA, you can always keep your money in its namesake and enjoy high-interest savings gains safely and with accessible liquidity anytime you need it through tax-free withdrawals.

Guaranteed Investment Certificate (GIC)

The GIC offers the same no-risk benefits as a savings account but typically has higher interest returns — due to the fact that you cannot withdraw your money until a pre-determined time period. Think of the GIC as a loan to the bank, because unlike a savings account, you cannot withdraw your GIC whenever you want. Instead, the money will be used by investors with the guarantee to pay it back in full including interest at a predetermined time.

Low-Risk TFSA Options

 Bonds

A bond is a standard low-risk investment that allows you to invest in the government or in corporations at minimal risk. Bonds and GICs have a lot in common, namely in interest rates, short-term, mid-term and long-term options. But with bonds, you don’t have to wait until maturity to access your funds and can trade on the market at any time. But because they are traded, bond value can decrease over time, thus the element of risk.

Segregated Funds

Segregated funds are a unique type of fund you can only get from insurance companies. Features typically include insurance on your funds in the case of maturity or death and certain reset privileges. These types of funds generally come with higher management fees compared to mutual funds.

Riskier TFSA Investments

Mutual Funds

Mutual funds are professionally-managed investment pools that offer more exposure to the stock market without the need to manage your investments individually. They can range from low-risk to high-risk with low-to-high returns on as many as 7000 mutual funds to choose from across all market sectors. You can select conservative or aggressive mutual funds or a mix of both depending on your risk tolerance and risk capacity.

Exchange Traded Fund (ETF)

 ETFs are similar to mutual funds in the way that they are a collective portfolio of stocks that do not need to be managed individually. But unlike mutual funds, ETFs can be traded openly on the market during the day just like stocks. Think of it as a do-it-yourself mutual fund approach that gives you more freedom and flexibility to invest in indexes and benchmarks at reduced management fees. 

 Stocks

Stocks are individual portions or ‘shares’ of company ownership and you can buy them through your TFSA. Stocks range from conservative to aggressive investments and typically carry higher risk compared to mutual funds and ETFs as your exposure becomes concentrated to specific companies as opposed to indexes. You can of course have a diverse portfolio of stock types thus limiting your exposure, while also including bonds, mutual funds, ETFs and other investment types for complete diversification.

Get in touch to learn all about investing with a TFSA and how it can help you achieve your personal savings and investment goals.