Are you wondering how to use your Tax-Free Savings Account (TFSA) contribution room in 2025?
If you are, then you have several options available to you. Stocks, bonds, Guaranteed Investment Certificates (GICs) and index funds are all good uses of TFSA contribution room in 2025.
With that being said, not all assets are created equal. On the contrary, asset classes are unique and different from one another. So, you need to invest your TFSA in asset classes that suit your risk/return profile. In this article, I will explore three types of assets I’m buying to use my TFSA contribution room in 2025.
Fixed incomes
Fixed incomes are assets that pay a rate of interest that doesn’t change. Technically, some fixed incomes (e.g., step-up bonds) pay rising rates of interest, but even then, the interest rate rises at a fixed and predetermined rate.
Fixed-income investments include GICs, bonds, and bond ETFs. GICs are bank instruments that pay a fixed rate of interest, usually at maturity. The government insures your first $100,000 worth of GIC investments. Bonds are fixed incomes offered by governments and corporations. They aren’t insured by the government, though treasury bonds are backed by the Bank of Canada. Finally, bond ETFs are bond portfolios that trade on the stock market.
GICs are the fixed-income assets that I hold in the greatest quantity. About 50% of my investment portfolio is in GICs. I invested $5,000 into GICs last month. I believe that was a good use of my TFSA contribution room in 2025.
Stocks
Stocks are little pieces of companies. They are the asset class most widely covered by the news media and the one that most people think about when they hear the word “investing.” Stocks can make good use of your TFSA contribution room in 2025.
One Canadian stock I’ve been buying this year is Brookfield Corp (TSX:BN). It is a financial stock I have held for many years now, which I added to at the start of the year. The company underlying this stock is a diversified financial conglomerate active in insurance, asset management, real estate, and more. It has steadily grown its distributable earnings (DE) over the years. It trades at about 20 times DE, or a 20 “adjusted price-to-earnings (P/E) ratio,” which is fairly sensible for shares in a company that has as much growth potential as this one does. Finally, BN trades at a small discount to its net asset value (market value of assets minus market value of debt).
ETFs
Exchange-traded funds (ETFs) are pooled investment vehicles similar to mutual funds and hedge funds that differ from those funds by virtue of the fact that they trade on the stock market.
ETFs have many benefits. Chief among them are liquidity, diversification, and often very low fees. One ETF I added to my portfolio this year was Kraneshares CSI China Internet ETF (NYSE:KWEB). This is an ETF of Chinese internet stocks. Chinese stocks — especially Chinese tech stocks — are much cheaper than their Western counterparts this year. I decided to buy KWEB after I saw that China’s government was stimulating the economy while the U.S. went in more of an “austerity” direction via the Department of Government Efficiency (DOGE). China has been outperforming the U.S. and Canada this year, so my buy might have been a wise one.
Whether KWEB is a good fit for you depends on your individual circumstances. What’s undeniable is that ETFs, in general, are good assets for your TFSA contribution room in 2025.
