Your Tax-Free Savings Account (TFSA) is one of the best deals Canada has ever offered investors. You can grow money, collect dividends, and build income without handing a cut to the CRA each year. That freedom can also tempt people into sloppy decisions when markets start buckling. The account is powerful, but it doesn’t protect you from your own behaviour.
Group of friends laughing on a roller coaster ride at the amusement park during sunny day.
A big mistake
The biggest mistake TFSA investors make in choppy markets is treating volatility like an emergency. They sell after a scary week, move to cash, and promise themselves they’ll “buy back in” when things feel safe again. The problem is that “safe” usually arrives after prices rebound. The investor locks in the drop and misses the bounce.
This mistake hits harder in a TFSA because the account rewards time, not tinkering. When you jump in and out, you interrupt compounding and risk wasting contribution room if you withdraw and cannot replace the money until the next calendar year. You also turn what should be a calm plan into emotional coin flips. Choppy markets already bring enough stress.
The rough part is that the “right” move in volatility often feels wrong. The market’s best days tend to show up near its worst days. So the instinct to wait for clarity can cost you the returns you wanted the TFSA for. A better approach is to own durable businesses you can hold through noise, and to use a simple rule. Reinvest the dividends, add fresh cash on a set day each month, and rebalance only once or twice a year. That way, the plan runs even when your confidence doesn’t.
RY works
Royal Bank of Canada (TSX: RY) fits that bill as it earns money in more than one way. It runs Canada’s largest banking franchise, and it also has wealth management, insurance, and a capital markets engine that can benefit when trading activity rises. Over the last year, investors watched the bank digest its HSBC Bank Canada acquisition and streamline parts of the combined operation, including reported layoffs tied to integration work. RBC also pointed to cross-selling progress, noting $115 million of cross-sold revenue in 2025 and a longer-term synergy target it aims to reach by 2027.
The latest earnings show why the market has kept respecting the stock. In the fourth quarter of fiscal 2025, RBC reported net income of $5.4 billion and diluted earnings per share (EPS) of $3.76, both up 29% year over year, even with a provisions-for-credit-losses ratio of 39 basis points. For the full year ended Oct. 31, 2025, it reported net income of $20.4 billion and diluted EPS of $14.07, up 25%. It then ended the year with a CET1 ratio of 13.5%, which gives it a cushion if credit losses rise.
RBC backed that performance with more cash for shareholders. In December 2025, it announced a dividend increase to $1.64 per share quarterly, payable on or after Feb. 24, 2026. Management also signalled confidence in the outlook by talking about expecting positive operating leverage in 2026. On valuation, it trades near 16.4 times earnings, with a forward dividend yield around 2.8%. That mix can look attractive when markets feel shaky, because you are getting paid to stay put while the business keeps earning. In fact, here’s what a $25,000 could bring in today.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| RY | $231.09 | 108 | $6.56 | $708.48 | Quarterly | $24,957.72 |
Bottom line
So could RBC be a buy for others? If you want a TFSA anchor that can pay you to wait, and you can hold through short-term drama, it can fit well. If you need quick wins, hate bank exposure, or worry that credit losses will surge, you may want a different kind of defensive pick. RBC reports again on Feb. 26, 2026, so check credit trends, loan growth, and expense control before you add more to your TFSA plan. Either way, the lesson stands: in a TFSA, the enemy in choppy markets is not volatility, but the urge to flinch.
