If I were starting fresh with $7,000 in my Tax-Free Savings Account (TFSA), my investment strategy would focus on two priorities: preserving my capital and growing it steadily over time. Striking the right balance between safety and opportunity is key to building wealth without taking on excessive risk.
Starting with capital preservation
To begin, I’d allocate a portion of the $7,000 to guaranteed investment certificates (GICs). These products are among the safest places to park your cash. They protect your principal and offer guaranteed interest — currently around 3.5% for a one-year term.
While that may not sound exciting, it provides a dependable foundation. A GIC creates peace of mind and liquidity, which is especially important in volatile markets or when you’re new to investing. You could stash, say, $2,000 in a GIC to ensure a cushion against market dips while still leaving room to grow the rest of your capital.
Entering the market strategically
Next, for the growth portion, I’d turn to diversified, market-tracking exchange-traded funds (ETFs) like iShares S&P/TSX 60 Index ETF or SPDR S&P 500 ETF. Over the past decade, these ETFs have returned around 9.1% and 12.8% annually, respectively — significantly higher than GICs.
However, investing the full $5,000 in one lump sum risks buying at a market high. To avoid poor timing, I’d use dollar-cost averaging, investing $1,000 per month over five months. This method smooths out purchase prices, reducing the risk of short-term volatility and market timing mistakes.
Targeted stock picks for additional growth
For those comfortable with a bit more risk, selectively buying individual stocks can add upside. One example is Brookfield Asset Management (TSX:BAM), a leading global alternative asset manager.
Earlier this year, BAM’s share price dropped nearly 30% — a temporary dip that created a buying opportunity. Investors who bought during the decline, even after a 20% drop (instead of the full 30% decline), would have seen gains of around 20% as the stock recovered. This illustrates an important point: you don’t have to time the bottom perfectly to benefit from market corrections — just look for quality companies trading at attractive valuations.
BAM manages over US$1 trillion in assets, spanning infrastructure, real estate, renewable power, credit, and private equity. Its asset-light, fee-based model generates stable income from long-term institutional clients like pension funds and sovereign wealth funds. This means strong margins, scalable growth, and predictable cash flow.
The company’s management expects 15-20% annual dividend growth and recently hiked its payout by over 15%. For investors seeking resilient growth and income, BAM presents a compelling opportunity — particularly when bought on dips.
The Foolish investor takeaway: Building a balanced TFSA portfolio
To summarize, here’s how I’d break down the $7,000:
- $2,000 in GICs for security and stable returns
- $3,000 in diversified ETFs using dollar-cost averaging for market exposure
- $2,000 in high-quality stocks like BAM for targeted growth
This approach gives you a solid base for capital preservation while leaving room to grow your portfolio with proven assets. It’s not about chasing fast gains — it’s about building a TFSA that lasts, which includes fully contributing to your TFSA every year to invest consistently.
