If you’re a Canadian investor, you’re likely already aware of the Tax-Free Savings Account (TFSA). This is the best choice by far if you’re looking to create passive income tax-free for life. Yet today, I’m going to help prepare you for the new year. After all, a further $7,000 is looking to be added to the contribution limit. So, if you’re ready to pounce, here is exactly what I would do to make killer passive income for 2024.
Contribute consistently
Now, first off, we don’t want to make the same mistakes we made back in 2020 and beyond, right? Of course. So, that means don’t be putting all your eggs in one basket. Sure, that’s easy enough. However, that also means investing on a consistent and stable basis.
What do I mean by this? Treat your investment contributions like bill payments. That will mean creating a budget and sticking to it! That way, for each and every paycheque, you should be able to come up with a pre-determined amount that can be contributed automatically to your TFSA.
By doing this, you can create more and more cash that can be ready and waiting for you to invest. That, of course, leads us to the next part. Where on earth should you invest?
Think long term
I could go over the potential growth stocks that could rise in the next year. I could also go over the passive-income stocks that trade with the highest yields out there. But again, we’re looking at consistency, not huge fluctuations. So, because of that, I want investors to start thinking long term.
Again, this means going back to that budget and meeting with a financial advisor. The advisor will help you come up with what your long-term goals can look like, with numbers stuck to them. Once you have those goals, this will help you identify where you might want to consider investing.
For me, if you’re looking to set it and forget it, consider exchange-traded funds (ETF). That way, you have a team or portfolio managers looking after it for you! And don’t worry; you can still achieve a high monthly passive income, tax free — especially if you consider a great passive-income ETF like iShares Canadian Financial Monthly Income ETF (TSX: FIE).
Making that money
The reason I really like FIE ETF is the focus on the Canadian financial market. While a global market or even a United States market can see more growth, Canadian financial institutions tend to be more stable. Moreover, it has a balanced portfolio of about 69% stocks and 10% bonds, providing you with fixed income as well.
The ETF invests in all the Big Six banks, which are down right now. However, it also invests in finance management companies such as insurance institutions and asset managers. This provides a well-rounded approach and a lucrative one at that. Shares are up 7.23% in the last year, with a whopping 7.97% dividend yield.
Bottom line
Another bonus? Even if you invested in every one of these other holdings, you wouldn’t receive monthly income, as they provide it on a quarterly basis. So, you can look forward to cash flow coming in from the best and the biggest each and every month. Now, let’s see what that $7,000 TFSA room could get you, both from dividends and returning to 52-week highs.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| FIE – now | $6.60 | 1,061 | $0.48 | $509.28 | monthly | $7,000 |
| FIE – highs | $7.25 | 1,061 | $0.48 | $509.28 | monthly | $7,692.25 |
In a short time, you could have returns of $692.25 and $509.28 in dividends. That comes to a total of $1,201.53 in passive income, or $100.13 each month — all tax free!
