How I'd Transform $7,000 Into a Reliable Stream of Passive Income

How I’d Transform $7,000 Into a Reliable Stream of Passive Income

This TSX income fund pays a steady $0.10 per share distribution every month.

Tony Dong, MSc, CETF®

Tony turned a series of 2017 marijuana stock losses into a freelance career advocating for ETF investing. He currently holds a Master’s in Risk Management from Columbia University and is a Certified ETF Advisor (CETF®). Tony is the founder of ETF Portfolio Blueprint (etfportfolioblueprint.com) and the Lead ETF Analyst for ETF Central, a partnership between Trackinsight and the NYSE. His analysis has also been featured in publications like Kiplinger, 24/7 Wall St., U.S. News & World Report, TheStreet, and Benzinga. Tony also provides independent content and marketing consulting services to various Canadian and U.S. ETF issuers. His editorial opinions for The Motley Fool remain independent and objective.

Published May 23, 2025 9:00 pm EDT

Lend me $7,000 and I’ll pay you back $42 a month, forever. And if we’re lucky, that original $7,000 might even grow over time. Sounds like a scam, right? But it’s not. It’s actually something that’s very achievable inside a Tax-Free Savings Account (TFSA) if you pick the right investment.

One fund that fits the bill is the Canoe EIT Income Fund (TSX:EIT.UN). Here’s why it could be a strong candidate for turning a lump sum into steady, tax-free monthly income.

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What is EIT.UN? How does it work?

EIT.UN is a closed-end fund (CEF) that gives you access to a professionally managed portfolio of about 50% U.S. and 50% Canadian stocks. It doesn’t follow a benchmark index. Instead, managers actively pick companies with the goal of generating consistent income and capital appreciation.

Like many CEFs, EIT.UN trades on the exchange, which means its share price can differ from its net asset value (NAV). When it’s priced above NAV, it trades at a premium; when it’s below, it trades at a discount. This difference can offer opportunity depending on when you buy.

EIT.UN also uses light leverage of around 1.2 times to enhance both yield and returns. That means for every $100 of investor capital, the fund controls about $120 worth of investments. This modest borrowing boosts income but also amplifies volatility, so it’s important to understand it’s not risk-free.

Despite that, its long-term track record is solid. Over the last 10 years, if you reinvested all monthly distributions, you would have earned a 10.9% annualized return, an impressive result for an income-focused fund.

How much could a $7,000 investment make?

First, with $7,000 in your TFSA, and EIT.UN trading at $16.43 per share, you could buy approximately: $7,000 ÷ $16.43 ≈ 426 shares.

Each share pays a $0.10 monthly distribution, which has remained steady for more than a decade. That means every month, you’d earn: 426 × $0.10 = $42.60.

Because the TFSA is tax-free, you keep every penny – no income tax, no withholding tax, no paperwork. That’s $511.20 per year in passive income.

And if you choose to reinvest those distributions, you’ll slowly build more shares, which in turn generate more income each month, kicking off a powerful compounding effect over time.