Investing in your Tax-Free Savings Account (TFSA) is one of the best savings vehicles available for long-term investors. This is because both withdrawals and gains are tax-free. And investors that find the right mix of investments to buy in a TFSA today can make those retirement dreams come true tomorrow.
Here are two great options to consider for your TFSA right now.
Generate income like a landlord – but without the tenants
Establishing a rental income stream remains one of the best long-term ways to make your retirement dreams come true. Unfortunately, reaching that goal has become significantly more difficult over the past few years.
Rising interest rates, high inflation, and soaring downpayment requirements have pushed buying a rental property (or even a home) out of reach for many. Fortunately, an alternative option exists through RioCan Real Estate (TSX:REI.UN).
RioCan is one of the largest REITs in Canada. The company boasts over 190 properties located primarily in Canada’s metro areas. Those properties are mostly retail, but the REIT is shifting that composition towards mixed-use properties. And that’s where investors can make their retirement dreams come true.
Specifically, RioCan is investing in building mixed-use properties that comprise residential properties situated atop several floors of retail. This diversifies the REITs portfolio outside of retail-only properties and provides a recurring and growing source of revenue.
For prospective investors contemplating a rental property, a REIT provides a lower investment and risk option to buying a property. And perhaps best of all, RioCan provides a monthly distribution, much like a landlord.
As of the time of writing, that payout works out to an appetizing 5.57%. This means that investors with $30,000 to allocate to RioCan can expect to generate an income of over $135.
Prospective investors should keep two points in mind.
First, that’s a significantly lower investment than a typical downpayment. But that also comes without a mortgage, finding tenants, and upkeep of the property.
Second, investors who aren’t ready to draw on that income can reinvest it, allowing it to grow tax-free in your TFSA until needed.
Canada’s big banks always make interesting picks
I would be remiss if I didn’t mention at least one of Canada’s big banks as a way to make your retirement dreams come true. Canada’s big banks offer stable growth, a growing dividend, and a reliable business model backed by a mature domestic market.
And the bank for investors to consider now is Bank of Montreal (TSX:BMO). BMO is the oldest of the big banks, with nearly two centuries of uninterrupted dividend payouts. Today that yield works out to a respectable 4.95%, making it a superb buy-and-forget option for your TFSA.
BMO also boasts significant growth potential. Earlier this year, the bank completed the acquisition of California-based Bank of the West. The deal greatly expanded BMO’s presence in the U.S. to 32 state markets, adding hundreds of branches and billions in deposits and loans.
Despite that juicy yield and long-term growth potential, the bank still trades down nearly 4% year to date. This makes it an option to grab now at a discount for your TFSA and hold it until needed.
Make your retirement dreams come true
No investment is without risk, and that includes both stocks mentioned above. Thankfully, both stocks offer some defensive appeal as well as growth opportunities that will appeal to long-term investors.
And it’s that long-term timeline that investors should keep in mind with both BMO and RioCan. Both stocks boast a juicy dividend that will continue to pay out over the longer term.
In my opinion, one or both stocks should be core holdings as part of a larger, well-diversified portfolio.
Buy them now and watch them grow your income for decades.
