TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you’re seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio for long-term income!

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Tax time is upon us, and that means trying to find some way of saving cash for yourself instead of paying it all to the Canada Revenue Agency (CRA). Luckily, there is an insanely easy way to create passive income that the CRA can’t touch. And that’s through the use of the Tax Free Savings Account (TFSA).

The details

If you’re new to investing in Canada, I’ll give you a quick overview. The TFSA came on the scene in 2009, and each year has provided Canadians with contribution room. This has now added up to $95,000 if you were at least 18 in 2009!

The TFSA was actually designed to help retirees create passive income in retirement. However, this has expanded far beyond to allow all Canadians to invest without the fear of taxation. So whether your goals are saving for a home, retirement, or just a vacation or emergency fund, the TFSA can help.

Which is why if you’re trying to save and earn passive income, you should certainly consider opening a TFSA right away. You can create passive income without the fear of taxation on earnings that you would worry about with a broker. Now, what should you consider investing in?

A passive income portfolio

If you’re looking to create a passive income portfolio, there are still ways to create a diversified TFSA that gives you passive income. Not just through dividends, but also through returns. First and foremost, I would consider a guaranteed investment certificate (GIC). Today’s rates shouldn’t be ignored, and this can create a strong base for fixed passive income for years in the future.

From there, I would consider a mixture of dividend paying stocks, real estate investment trusts (REIT), and exchange traded funds (ETF) for income. But I wouldn’t stop there. Instead, I would take the passive income that you create from these investments and reinvest right back into your TFSA investments. This creates even more passive income, which is how to create an enormous amount!

An example

Let’s say you have $30,000 you want to invest into a GIC, ETF, and dividend-paying stock. You get a 5% rate on the GIC for the next year. You then invest in an ETF that looks beyond Canada, one such as the Vanguard FTSE Global All Cap Ex Canada Index ETF Unit (TSX:VXC) for diversified passive income.

Then, you add a dividend-paying stock like Granite REIT (TSX:GRT.UN) for growth from investments in industrial properties, as well as monthly dividend income. Here is what that might look like in the next year based on average growth over the last decade. VXC currently has a 10-year compound annual growth rate (CAGR) of 8.7%, and Granite of about 6.7%.


In total, with dividends, you’ve now created a portfolio worth $32,340.55! That’s passive income totalling $2,340.55 in just a year. So imagine what this diversified passive income portfolio can do for you in the years to come.

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 positions in the Vanguard FTSE Global All Cap Ex Canada Index ETF. The Motley Fool recommends Granite Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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