Create $482.88 in Annual Tax-Free Cash With Just 1 Risk-Free Stock

All you need is a TFSA, cash you can afford to invest, and this one stock to provide yourself with risk-free passive income for life!

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It might not seem possible, but there are actually methods to get into the stock market that are relatively risk free. And we need that right now. Canadians need cash but don’t have enough on hand to make a real dent in their savings. This is why we’re going to go over one method to achieve this.

Only invest what you can afford

Before we even get to the stock in question, let’s cut to the chase. No investor should be investing more than they can afford. That means you’re not going to invest $1,000 or even $1 if it means you’re going to start putting everything on your credit card.

This would put you into debt, and debt has interest rates. And if you’re not aware (though I doubt it), interest rates are quite high — high and holding steady until at least April.

So, make sure that what you put aside is what you can afford. And by that I also mean what you can afford on a regular basis. There are two benefits to this. First, you won’t worry about pushing yourself into debt, of course. Second, it means you can start putting aside that cash every month through automated contributions! That way, you invest as if it’s a bill payment, and it is — towards your future.

Make it tax free

Then another point before you start investing is to make sure you have a Tax-Free Savings Account (TFSA). The TFSA is the best way if you’re looking to create monthly passive income, because you can take it out at any time — all of it … every single penny.

That’s huge. Let’s say you decide to save towards retirement. You’ve worked hard, and you have major savings goals to achieve. However, life happens, and suddenly, you need to take out a huge chunk of those savings.

It’s not ideal, but it happens. You can be penalized for doing this with a Registered Retirement Savings Plan (RRSP), but with a TFSA, you aren’t! What’s more, you can also save for multiple goals — goals that have different deadlines. So, make sure you have a TFSA on hand for your investment strategy.

A risk-free choice

Finally, let’s get to it. If you’re new to investing and want to invest just a bit of cash, the easiest and least risky option is to invest in an exchange-traded fund (ETF). These are like creating an entire portfolio with the click of a button. And then they’re managed by professionals from there.

A great option I would consider is iShares Canadian Financial Monthly Income ETF (TSX:FIE). FIE provides you with monthly dividends currently with a yield of 6.98%. It invests in the biggest names among Dividend Aristocrats, but you can get those dividends monthly instead of quarterly! Then use that cash to reinvest.

So, let’s say you’re able to reach the contribution limit of $7,000. Here is how much you could create in just dividends alone by investing that into a risk-free option such as FIE ETF.


There you have it. You could create $482.88 in annual passive income from this ETF! And that’s without including returns. So, get to investing and earn some tax-free cash.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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