Your age matters more than you might think when it comes to investing. That’s because your time horizon, which is how long you plan to keep your money invested before needing it, helps determine how much risk you can realistically take on.
When you’re younger, you have time on your side to recover from downturns, so you can afford to prioritize growth. As you get older, your risk tolerance typically declines, and you begin to shift toward income generation and capital preservation.
Fortunately, there are exchange-traded funds (ETFs) that do this work for you. They’re called asset allocation ETFs, and they automatically split your investment across Canadian, U.S., and international stocks and bonds based on a target mix. They’re simple, diversified, and cost-effective. Each of the Vanguard options below comes with a low 0.24% management expense ratio (MER).
Here’s how I’d invest a $7,000 TFSA contribution based on your age bracket and financial situation.
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Age 18–30: 100% Equity
If you’re in your 20s or even early 30s, you likely have no immediate plans to withdraw from your TFSA. Your biggest financial priorities might be student debt, saving for a home, or building wealth over time.
Retirement is decades away. That means you have the longest time horizon and can afford to stomach short-term volatility in exchange for higher long-term returns.
For this group, I like the Vanguard All-Equity ETF Portfolio (TSX: VEQT). It holds nearly 100% stocks split across Canadian, U.S., and international markets, including emerging markets. It’s fully growth-oriented, which is exactly what you want at this stage.
No need to mess around with single stocks or multiple funds – VEQT gives you all the equity exposure you need in one ticker.
Age 31–50: 80/20 Split
Once you’re in your 30s or 40s, your situation tends to shift. You may have a mortgage, kids, and more financial obligations, which can make you less tolerant of wild swings in your portfolio.
At the same time, you still want to grow your investments, because retirement is likely 15–30 years away. A good middle ground here is the Vanguard Growth ETF Portfolio (TSX: VGRO), which targets an 80% stock/20% bond mix.
You still get the benefits of equity growth, but with some cushion from bonds to reduce downside risk during market corrections. It’s ideal for investors who want long-term upside without going all-in on risk.
Age 51+: 60/40 Split
As you approach retirement or begin drawing income, preserving capital becomes just as important as generating growth. You can’t afford major drawdowns that could set you back years. Your goal now is steady returns, reduced volatility, and reliable income.
The Vanguard Balanced ETF Portfolio (TSX: VBAL) fits that profile. It holds 60% stocks and 40% bonds, providing a smoother ride while still offering moderate growth potential.
VBAL is perfect for anyone within 10–15 years of retirement who wants peace of mind and simplicity from their TFSA. The 60/40 strategy has been used for decades, and aside from years like 2022, continues to hold up well today.
