Choosing the right exchange-traded funds (ETFs) for a Tax-Free Savings Account (TFSA) can feel like a big decision. Some ETFs stand out. Two powerhouses offer a strong combination of growth and income. Together, each provides a balanced approach that can help grow wealth steadily over decades.
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VGRO
Vanguard Growth ETF Portfolio (TSX: VGRO) is designed for investors who want a mix of growth and stability. The fund holds about 80% equities and 20% fixed income, spreading its reach across Canadian, U.S., and international markets. This mix allows investors to tap into the potential of growth sectors while benefiting from the stability that bonds can offer. VGRO’s balance of stocks and bonds suits it well for a long-term strategy, with the equities driving growth and the bonds adding a layer of security. Even in volatile markets, VGRO’s diversification across multiple regions and sectors helps smooth out the ride.
VGRO has recently performed quite well, delivering a year-to-date return of 19.56% and an impressive one-year return of 27.01% as of November 2024. Its top holdings include major Vanguard ETF. By covering so much of the global market, VGRO offers exposure to some of the most resilient and innovative companies worldwide, balancing sectors like Financial Services, Technology, and Industrials. This variety gives VGRO the resilience to weather market ups and downs and supports steady, long-term growth.
ZDV
Meanwhile, BMO Canadian Dividend ETF (TSX: ZDV) is a solid choice for income-focused investors. This ETF focuses on Canadian dividend-paying stocks, offering steady income potential. ZDV’s approach is all about yield, targeting Canadian companies with a track record of paying and growing dividends. With an impressive year-to-date return of 18.83% and a one-year return of 28.41%, ZDV has shown that it can generate income and growth, making it a valuable component of any income-seeking investor’s portfolio.
ZDV’s top holdings lean heavily into Canada’s financial sector. Its other top assets include prominent names and companies well-known for their reliable dividends. This concentration supports the fund’s primary goal of delivering regular income, but its diversification across multiple sectors helps balance risk.
A perfect match
The appeal of combining VGRO and ZDV in a TFSA lies in their complementary roles. VGRO’s equity-focused strategy supports long-term capital growth, while ZDV’s dividend strategy ensures a steady income. VGRO can fuel the portfolio’s growth, while ZDV adds a stable income stream, which can be particularly appealing for investors who want to enjoy regular payouts without sacrificing growth potential.
Another advantage of holding VGRO and ZDV in a TFSA is tax efficiency. In a TFSA, any growth and dividends earned are tax-free, meaning investors can maximize their returns without worrying about tax implications. This is especially beneficial for long-term growth, as the power of compounding is unhindered by tax deductions, allowing your investment to grow more robustly over the years.
Additionally, both ETFs are managed by reputable institutions. Vanguard is known for its low-cost, well-diversified funds, and BMO has a strong track record in Canadian dividend investing. Having the backing of these trusted names means investors can feel confident that their money is being handled with expertise.
Bottom line
VGRO and ZDV are a dynamic duo for a TFSA. VGRO provides growth potential with its global equity exposure, while ZDV offers income with its Canadian dividend focus. Together, these form a well-rounded portfolio that can support steady, tax-free growth over the long term, making them a perfect match for Canadians looking to build wealth for decades to come.
