Top Investments to Fill Your TFSA Contribution Room in 2025

Here’s a basket of top investments to consider for your TFSA in 2025 from low risk to high risk.

Kay Ng

Author Bio

Kay graduated from the University of British Columbia with a Bachelor of Science in Computer Science and furthered her studies in financial markets, finance, and financial accounting. She began investing in dividend stocks in 2008, turning an early interest into a lasting passion. Over the years, Kay has refined her investment approach to focus on high-quality businesses, using fundamental analysis and valuation to identify long-term investment opportunities. Her investment research and articles have been featured in The Motley Fool, Sure Dividend, and Seeking Alpha. Outside of investing, Kay enjoys playing the piano, from popular songs learned by ear to challenging classical compositions. Her favourites include Fantaisie-Impromptu by Frédéric Chopin and La Campanella by Franz Liszt.

Education

Bachelor of Science (BSc) in Computer Science, University of British Columbia
Further studies in financial markets, finance, and financial accounting

Areas of Expertise

Dividend stocks, fundamental analysis, company valuation, quality investing, long-term investing, business fundamentals, and identifying investment opportunities in high-quality companies.

Social Media Profiles

Favorite Investment Quotes

“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett

Published February 11, 2025 3:30 pm EST

We’re still early in 2025. And Canadian investors have a golden opportunity to maximize their Tax-Free Savings Account (TFSA) contribution room and harness the power of tax-free growth. Whether you’re a conservative investor or someone looking to capitalize on market opportunities, there are various investment strategies to consider depending on your risk tolerance and financial goals.

chart reflected in eyeglass lenses — Source: Getty Images

Low-risk options for conservative investors

For those with a low-risk tolerance or a short-term investment horizon, Guaranteed Investment Certificates (GICs) remain a reliable option to grow your TFSA savings. While GICs typically offer modest returns, they provide the peace of mind of guaranteed principal and interest. The best one-year GIC rates are currently around 3.7%.

For example, if you’ve been eligible for a TFSA since its inception in 2009 and have never contributed, you’d have a whopping $102,000 in contribution room. Placing that full amount into a GIC at 3.7% would generate $3,774 in annual interest — tax-free.

Moderate risk: Market-linked GICs for growth with protection

If you’re willing to take on a bit more risk while still seeking some level of safety, market-linked GICs could be an appealing option. These products offer the potential for higher returns by tying their growth to stock market performance but with the added benefit of principal protection.

For example, if the stock market were to experience a 10% return over the next year, a market-linked GIC could provide returns of around 7% while still ensuring your principal is protected. It’s an ideal option for those who want to tap into market growth without the risk of losing their initial investment.

High-risk, high-reward: Stock and bond funds

For investors with a higher risk tolerance and a long-term outlook, a diversified stock and bond fund could be a great fit for your TFSA. One highly recommended option is iShares Core Balanced ETF Portfolio (TSX: XBAL). This exchange-traded fund (ETF) offers a balanced 60/40 mix of equities and fixed income with diversification across asset classes and regions.

With a management expense ratio of just 0.20%, XBAL offers investors an efficient and cost-effective way to achieve balanced growth. Over the last decade, it has delivered an average annual return of about 6%. Its recent cash distribution yield was 4.3%. For long-term investors, dollar-cost averaging into XBAL can help mitigate market fluctuations while providing steady, tax-free growth within their TFSAs.

Invest in U.S. giants without currency risk

If you have confidence in your stock-picking abilities, your TFSA can also house individual stocks, including large-cap U.S. stocks. The Neo Exchange allows Canadian investors to choose from a basket of U.S. stocks in Canadian dollars, eliminating the need to navigate the complexities of foreign exchange rates.

Stocks like Apple, AbbVie, Airbnb, and Advanced Micro Devices offer robust growth potential and can be excellent additions to your TFSA portfolio — especially for investors looking to target U.S. equities without the risks associated with currency conversion.

Dividend stocks: Steady returns from Canada’s top companies

For investors who appreciate regular income, dividend stocks are an attractive choice for their TFSA. Dividend-paying stocks not only provide consistent returns but also indicate that the company is profitable and committed to rewarding shareholders.

Canadian banks such as Royal Bank of Canada and National Bank of Canada are prime candidates for dividend-focused investors. These companies have a long history of paying reliable dividends, making them solid picks, especially when their stock prices are temporarily down during market corrections.

The Foolish investor takeaway

By diversifying your TFSA portfolio across these different investment types, you can optimize your tax-free savings in 2025 — whether you’re seeking safety, growth, or income. Each investment type comes with its own level of risk and reward, so carefully assess your goals and risk tolerance before making decisions.