It’s TFSA (Tax-Free Savings Account) top-up season, and for the many Canadian investors who are wondering where to put the latest sum ($7,000 again for this year) to work, there is a wide range of solid options as the TSX Index looks to follow up on an outstanding 2025 with more of the same in 2026. Undoubtedly, it’s just unrealistic to expect another market boom like the one we experienced last year. But that doesn’t mean decent results are off the table, especially as the driving forces behind the great TSX Index run continue to hum along.
At the same time, though, as the valuations rise, so do potential downside risks.
Notably, the gold and silver scene has been booming of late and could be at risk of something a bit more vicious than a correction (perhaps a severe bear market) should the tides suddenly turn, and investors suddenly feel a bit better about the macro picture.
The profit-taking risk in some of the overheated corners of the market is real. And for investors who are worried about chasing names at close to the top, I do think that being a pickier stock picker is a good way to go.
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Are investors overly bullish in 2026?
While I’m certainly not bearish on Canadian stocks or the broader TSX Index for 2026, I think that investors should always be ready for a correction to roll through. And while valuations certainly aren’t obscene quite yet, I think that it makes sense to insist on better discounts, even if they’re harder to come by, as the stakes look to grow a bit higher.
It’s times like these, when momentum is heated, and bearish events are overlooked (not even 100% tariff threats have been able to derail the great TSX Index rally) when it can pay to be just a bit more cautious, conservative, and defensively focused. Sure, the so-called “TACO” (Trump Always Chickens Out) trade might be gaining again.
But I think that ignoring potential risks is always a bad idea. Instead of trading on Trump tariffs or geopolitical events, I think investors would be far better served looking for undervalued companies and buying shares in them for the next seven to eight years, rather than trying to get in and out of a stock based on news events. Unless you’re a seasoned trader with an appetite for losing money, perhaps investing, rather than trading, is the way to go, especially in an era where trading is seen as more exciting and attractive to market newcomers.
Fortis is a great defensive dividend payer
So, what are the best Canadian stocks to consider with a TFSA? Personally, I think Fortis (TSX:FTS) is a great defensive pick to buy at a time when market risks may be underestimated. Ignoring market-wide risks may have paid off in 2025, but things could turn, and investors will need to be ready to sell, especially if markets overshoot, setting the stage for the return of a bear market moment.
With a nice 3.48% dividend yield, a boring but highly predictable growth plan for the coming years, and less choppiness than the TSX, perhaps playing defence with new TFSA cash could be a smart move. Of course, no stock, not even Fortis, is guaranteed to walk away unscathed from a market correction or something a bit worse. But I would bet on FTS shares for relative outperformance once the tides finally do come in and fear picks up.
