Creating a million-dollar income through a Tax-Free Savings Account (TFSA) in Canada is achievable. No, seriously! In fact, assuming the maximum annual contribution limit of $7,000 as of 2024 and investing in a diversified portfolio that achieves an average annual return of 8%, it would take approximately 30 years to grow a TFSA to over $1 million, which is why investing is a prime way to shorten that time frame.
Get into high-yielding ETFs
Turning your TFSA into a cool $1 million might seem like a daunting task, but with high-yield exchange-traded funds (ETF) on the TSX, you’ve got a pretty solid roadmap to get there. These ETFs, which bundle together a collection of dividend-paying stocks, can provide you with a steady stream of income that gets reinvested, allowing your investments to grow over time.
Now, the beauty of these high-yield ETFs is that they let you tap into a variety of top-performing Canadian companies without the hassle of picking individual stocks. Think of it as spreading the risk across a basket of goodies instead of putting all your eggs in one basket. Plus, the dividends these ETFs offer can be quite attractive, helping you stack those coins faster and making your million-dollar dream a little more tangible with each passing year.
Finally, the tax-free nature of the TFSA is the cherry on top. All those dividends and capital gains grow and accumulate without Uncle Sam (or, rather, Uncle Trudeau) taking a cut. This means that every dollar earned through your high-yield ETF stays in your pocket. Thus bringing you closer to that seven-figure goal. So, if you’re in it for the long haul, high-yield ETFs could be the secret sauce that spices up your investment portfolio and propels you toward that million-dollar milestone. But which do you choose?
Very good with VDY
If you’re dreaming of turning your TFSA into a million-dollar powerhouse, Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY) ETF might just be your perfect partner in crime. With a yield of 4.56%, this high-dividend ETF lets your money work hard while you kick back. Its strong performance this year, boasting an 8.45% year-to-date daily total return, shows that it knows how to grow your wealth steadily. Plus, it holds a price-to-earnings ratio of 11.35, making VDY all about value.
The numbers don’t lie. VDY is backed by $2.76 billion in net assets, so you know it’s solid and here to stay. One of the best parts? VDY’s inception date goes back to 2012, meaning it’s been tried and tested through various market conditions. With a beta of 0.94, it’s slightly less volatile than the overall market, giving you a smoother ride while still aiming for that million-dollar goal. And did I mention the expense ratio is practically non-existent at 0.22%? More of your money stays right where it should. That’s in your TFSA, compounding and growing toward that million-dollar milestone.
So, while that million-dollar portfolio seems like a daunting task, it just became a whole lot clearer with VDY ETF, especially given you can buy it and continue to see it compound for decades to come without lifting a finger.
