Canadian investors trying to make some extra cash have quite a number of items at their disposal. Yet above all, perhaps the most important item is the Tax-Free Savings Account (TFSA). Since its introduction in 2009, the TFSA has put aside year after year of contribution room for a total of $95,000 for those who were 18 at its inception!
Investing can be the best way to use the newly added $7,000 in contribution room from your TFSA. After all, this is a savings account and one that doesn’t even add interest. So, if you’re going to put it in the TFSA in the first place, the only true benefit is if you’re planning to invest and create even more savings.
But if you’re a nervous investor, I get it — especially in this market. So, let’s come up with a bulletproof strategy to create monthly passive income in your TFSA.
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Fixed income
The first step to creating passive income should be to consider some investments that create fixed income. Right now, there are some of the best interest rates that Canadians can pick up! Consider Guaranteed Investment Certificates (GIC).
A GIC will provide you with a fixed rate for a fixed period. If you lock up a 5% interest rate for five years, this means you’ll be able to receive 5% interest each year of those five years! This can be a great way to create more income that you can count on and that can grow substantially the longer you hold it. It’s also far less risky than some other investments.
ETFs
Another less risky way to invest is to put your cash into exchange-traded funds (ETF) that provide monthly passive income. While the other cash is growing in your GIC for a later date, perhaps for the next year, you can look forward to cash coming out from an ETF far more often.
What’s more, ETFs are like buying an entire portfolio with the click of a button. In fact, you can buy an entire index! One to consider is iShares S&P/TSX Canadian Dividend Aristocrats Index ETF Common Class (TSX:CDZ). This ETF invests in the top dividend companies on the TSX, so it is like buying the best of the best when it comes to dividend stocks. What’s more, it offers a dividend yield of 3.95% as of writing, dishing out passive income on a monthly basis.
Dividend-paying stocks
Finally, you’ll also want to consider some dividend-paying stocks if you’re looking for strong monthly income. And if you’re looking for just over the next year, you’re going to want to find companies that are already doing quite well so that passive income comes from returns as well.
One to consider in this case would be a real estate investment trust (REIT) in the right sector. For me, that sector would be industrial properties. This continues to be an area that is in high demand and unlikely to shrink any time soon, which is why it’s both a strong short- and long-term investment for those wanting returns.
If you want a great option, I would consider Granite REIT (TSX:GRT.UN). It holds a dividend yield of 4.37%, dishes it out monthly and has seen shares climb.
Bottom line
All in all, with these three investments, you’ll have a bulletproof monthly passive-income portfolio that will remain completely tax-free!
