TFSA Investors: TFSA Losses Are Forever — Be Mindful of a Possible 2020 Recession

The threat of Canada entering a recession in 2020 exists. However, low-risk assets like the BCE stock and Toronto Dominion stock can prevent TFSA users from incurring permanent losses.

| More on:
Economic Turbulence

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Owning a tax-exempt investment account like the Tax-Free Savings Account (TFSA) is not a ticket to taking unnecessary risks. Based on a December 2019 Bloomberg News survey conducted by the Nanos Research Group, results show that more than 50% of Canadians believe that a recession is “somewhat likely” in 2020.

Should Canada veer toward a recession, you shouldn’t place bad apples in your investment basket. TFSA losses are non-recoverable and permanent. It is possible to see your TFSA balance to be lower than the allowed increases due to investment mistakes.

Hence, avoid the risk of losing the tax-free perks and instead load up your TFSA with crash-proof stocks like BCE (TSX:BCE)(NYSE:BCE) and Toronto Dominion Bank (TSX:TD)(NYSE:TD).

Solid safeguard

If safety and protection from a recession is your top priority, telecom giant BCE is one of the most trusted investment options. Aside from the lucrative dividend, the business of this $56.35 billion telecommunications and media company will not suffer in case of an economic downturn.

The company has been paying dividends for decades, and the demand for its products and services is ever-increasing. BCE’s wireless service, in particular, is growing not only because of popularity. It has become a  24/7 necessity for Canadians. BCE generates massive revenue from this vital communication need.

BCE has also built a media empire across Canada through its radio and TV stations. Its TV and sports networks draw the biggest audience while the radio segment has millions of listeners. This big telecom also owns stakes in two valuable professional sports franchises (Maple Leafs and Montreal Canadiens).

With proven income generators in its telecom and media empires, BCE can sustain paying a 5.02% dividend for decades to come.

Anchor holding

Toronto Dominion will occasionally experience short-term price fluctuations. However, it doesn’t mean that temporary pullbacks will discourage investors from investing in the stock. The second-largest bank in Canada is a no-brainer buy for TFSA investors.

This $132.6 billion banking institution should be able to endure a recession that comes its way. TD has solid fundamentals and an enviable 163-year dividend track record. The 3.96% dividend it pays today (or higher in the future) could be your lifelong passive income.

TD’s domestic business segments contribute the most to the bottom line, although U.S. branches outnumber the Canadian branches. Similarly, the recent organizational change opens a new opportunity for the bank to evolve, build, and grow.

Matt Boss, former credit and unsecured business head of TD, will now lead the consumer product team in keeping pace with the fintech craze while boosting lending activities.

Expect TD to prioritize enriching customer experience, incorporate new technology, and drive growth across each of the consumer product portfolios.


TFSA users can end up holding the bag by investing in speculative assets or selling at a loss. With low-risk stocks such as BCE and TD, however, you’re on the safe side and recession-ready.

The odds of incurring TFSA losses are lower, but the chances of earning more are exceedingly higher.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

More on Dividend Stocks

A close up image of Canadian $20 Dollar bills
Dividend Stocks

3 Top Dividend Stocks to Buy Under $20

Given their stable cash flows and high dividend yields, these three under-$20 stocks could boost your passive income.

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Dividend Stocks to Buy During Recession to Lock In a 6% Yield

Make the most of the recession with dividend investing. You can buy stocks for a discount and lock in higher…

Read more »

Dividend Stocks

Put TFSA Cash to Work: Earn a Tax-Free Yield of at Least 5%

By investing your TFSA cash in these stocks, you can earn a reliable and high yield of more than 5%.

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Dividend Stocks That Are Dirt Cheap Right Now

These dividend stocks remain dirt cheap for investors to consider picking up, with plenty of room for growth in essential…

Read more »

grow dividends
Dividend Stocks

Economists: 100% Chance of a Super Rate Hike in 9 Days

The worries of homebuyers and homeowners will compound further if the Bank of Canada pushes through a super rate hike…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

RRSP Wealth: 2 Top TSX Dividend Stocks to Buy for Total Returns

These TSX dividend stocks look cheap right now and offer RRSP investors at shot at attractive total returns.

Read more »

Dividend Stocks

This Stable, Undervalued REIT Offers Some of the Highest Passive Income

If you want stable passive income that sets you up for long-term growth, this is the top REIT to consider…

Read more »

Happy retirement
Dividend Stocks

Happy Retirement: Do 1 Thing 1st, Then Go All Out on Your TFSA

Canadians using their TFSAs to save for the future need only one foolproof plan to ensure a happy retirement.

Read more »