Building a $35,000 TFSA Portfolio One Step at a Time

This DIY TFSA investment portfolio only requires three low-cost ETFs.

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 June 29, 2025 9:00 am EDT

Despite its name, the Tax-Free Savings Account (TFSA) isn’t really designed to be just a savings account. Parking your money in cash or a high-interest savings product inside it is a complete waste of what this account can offer.

Here’s why: The TFSA is one of the most powerful tools available to Canadian investors. Any capital gains, dividends, or interest earned inside the account are completely tax-free, not just tax-deferred. That means you get to keep every dollar your investments earn, and you don’t have to report it when you file taxes. Plus, all the contribution room you build up over the years can be reclaimed if you ever make a withdrawal.

So, if you’ve managed to stash away $35,000 in your TFSA, it’s time to start treating it like a real investment portfolio. And the easiest way to do that is by using low-cost, diversified exchange-traded funds (ETFs). Here’s a simple combination I like, using three ETFs from BMO Global Asset Management.

Start line on the highway — Source: Getty Images

Start with $20,000 in U.S. Stocks

Begin with broad U.S. equity exposure through BMO S&P 500 Index ETF (TSX:ZSP). It tracks the S&P 500 Index, which includes the 500 largest publicly traded companies in the United States. This ETF charges a very low 0.09% management expense ratio (MER), making it extremely cost-efficient for long-term investors.

And here’s the real kicker: beating the S&P 500 is hard. According to SPIVA data, over 88% of active managers underperformed this benchmark over the past 15 years. That means your best bet is to ride with the index instead of trying to beat it. ZSP lets you do just that.

Add $10,000 in Canadian Stocks

Next, add exposure to your home market with BMO S&P/TSX Capped Composite Index ETF (TSX:ZCN). This ETF has a rock-bottom MER of 0.06%, making it one of the most affordable ways to invest in Canada.

ZCN tracks the S&P/TSX Capped Composite Index, which includes a wide range of Canadian companies from multiple sectors. The “capped” part just means no single company can dominate the index beyond a certain weight, helping keep things diversified. It’s a great way to get exposure to Canada’s largest publicly traded companies, without having to pick and choose individual stocks.

Finish with $5,000 in International Stocks

Round things out with international developed market exposure through BMO MSCI EAFE Index ETF (TSX:ZEA). The MER is slightly higher at 0.22%, but that’s normal when investing outside North America due to higher operational costs.

The ETF tracks the MSCI EAFE Index, which stands for Europe, Australasia, and Far East. That includes countries like the U.K., Germany, France, Japan, and Australia. Adding international stocks helps smooth out regional risk and ensures your portfolio isn’t overexposed to North American markets.

The Foolish Takeaway

This simple three-ETF combination gives you a globally diversified equity portfolio inside your TFSA using just $35,000. You get exposure to thousands of companies across multiple countries and sectors, all at a very low cost, and with no need to monitor or rebalance every week. It’s a smart way to make your TFSA work for you.