The TFSA limit for 2025 is $7,000, and that opens up a whole world of investments to create a wealth-building machine from your portfolio. All you need to do is pick the right investments to buy into
Here’s a look at some of the options available to investors contemplating where to point their TFSA funds towards. And yes, you can create a wealth-building machine from within your TFSA by investing in one or more of these superb stocks.
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Invest in REITs
REITs are some of the most underrated investments on the market. They can provide a reliable income stream, are backed by some of the largest names on the market, and can offer defensive appeal.
More importantly, they can provide an avenue for would-be landlords to invest in real estate, reaping all the benefits, but without the mortgage or tenant worries.
RioCan Real Estate (TSX: REI.UN) is a great example to consider for your wealth-building machine. RioCan is one of the largest REITs in Canada, and has a portfolio of retail, commercial and mixed-use residential properties.
Those properties are located primarily in Canada’s major metro markets, where demand remains high.
And like a landlord collecting rent, RioCan pays out a monthly distribution, which currently boasts a yield of 6.6%. This means that even just a $3,500 investment in the REIT will generate an additional share each month from reinvesting that distribution.
How’s that for kicking off your wealth-building machine.
Add a defensive backline
Every portfolio needs a solid defensive line, and for this wealth-building machine, Canadian Utilities (TSX: CU) is a superb pick.
Like the name implies, Canadian Utilities is a utility stock. Utilities generate revenue from providing utility service, which is bound by long-term regulated contracts.
Because of the sheer necessity of the service provided, utilities like Canadian Utilities generate a reliable and recurring revenue stream that leaves room for growth and a dividend.
In the case of Canadian Utilities, that dividend is a quarterly 4.8% yield. Even better, Canadian Utilities has provided annual upticks to that dividend going back an incredible 53 consecutive years.
In other words, Canadian Utilities is a key defensive part of any wealth-building machine in your TFSA. And a $2000 investment is enough to begin generating a few shares each year through reinvestments.
Put your investing on autopilot
Both Canadian Utilities and RioCan offer a recurring, stable dividend that can provide growth over the longer term. This next option for your TFSA turned wealth-building machine will supercharge your income.
That stock to consider is Telus (TSX: T). Telus is one of Canada’s big telecoms, offering a slew of subscriber-based services to customers across the country.
Those services provide some defensive appeal, particularly since the pandemic ended. This is especially true for the wireless and internet connectivity segments, which continue to see strong growth numbers.
That growth in turn provides ample revenue for Telus to invest in various growth initiatives (such as its Digital services segment), while continuing to pay out a very handsome dividend.
As of the time of writing, that dividend offers an insane yield of 7.6%, making it one of the best-paying dividends on the market. This also means that the remaining $1,500 TFSA contribution will generate an income sufficient to generate nearly a half-dozen shares in the first year.
The reason I say first-year is because, like Canadian Utilities, Telus has an established cadence of providing increases to its quarterly dividend. In fact, Telus has bumped its dividend on a semi-annual basis for two decades, and plans to continue that cadence.
Kickstart your TFSA wealth-building machine
The TFSA is an incredible savings vehicle for investors, but the growth from that account is only as good as the investments allocated to it. Fortunately, the stocks mentioned above can provide that growth and a healthy income to fuel it.
You might not retire on the income generated from a first-year $7,000 contribution, but investors will be set up for that growth to continue in subsequent years on autopilot.
In my opinion, one or all of the above investments should be considered core holdings in any well-diversified portfolio.
Buy them, hold them, and watch your future income grow.
