Unlike what its name might suggest, I feel that the Tax-Free Savings Account (TFSA) being used as an investment tool is way better than as a mere savings account. Any contribution you make to a TFSA is with after-tax dollars. This means that any returns on qualifying investments you hold in a TFSA will not incur any taxes for interest, capital gains, dividends, or otherwise. The key is to follow the rules and be disciplined with how you use the account.
The key to creating a successful self-directed TFSA portfolio is to identify the kind of assets you can hold through harsh economic environments, not just investments that deliver stellar growth when the market is already doing well.
A steady, monthly dividend-paying stock can be an excellent way to continue enjoying returns on your investment, even when the market isn’t doing well. Granted, you might feel the impact of lower share prices. However, a well-capitalized and well-run investment can continue lining your account balance with cash while you wait for things to return to normalcy.
Diversification is another key element to creating a successful self-directed portfolio. Today, I will discuss a pick that can tick all the right boxes, especially for those who are unafraid of taking on a slightly higher degree of risk.
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Canoe EIT Income Fund
Canoe EIT Income Fund (TSX:EIT.UN) is a Canadian closed-end fund that trades on the TSX like a stock, but offers investors exposure to a group of income-generating assets from Canada and the U.S. in a one-ticket asset. The $2.69 billion market cap fund manages a diversified portfolio comprising some fixed-income securities but primarily dividend stocks from the U.S. and Canada.
Instead of betting on the cash flows of one company to sustain reliable returns, you can tap into the potential of dozens of income-generating assets in one investment. One thing that I like about the fund, which investors with a higher risk tolerance will appreciate, is the fact that it uses leverage to amplify the returns from its portfolio.
The fund effectively leverages around 20% of the portfolio value to this end, meaning that it invests 120% of its portfolio’s worth by borrowing 20% on top. This tactic works well in terms of increasing the returns compared to what investors would otherwise get by investing in the group of stocks individually. The reason some might not like the leverage is that it is a double-edged sword and potentially amplifies losses.
What is the income like?
As of this writing, Canoe EIT Income Fund trades for $16.96 per unit. The fund pays its investors $0.10 per share each month, translating to a juicy 7.26% dividend yield. The returns from individual stocks and fixed-income assets do not even come close to the kind of returns that this fund can offer.
In June 2025, the fund reported a total of $200 million in income and an increase in net assets attributable to common shareholders of about $0.95 per unit. However, it’s important to remember that many of the positive results came through realized capital gains.
Foolish takeaway
Canoe EIT Income Fund offers a straightforward path to invest in a diversified group of income-generating assets in the form of a single ticker. The leverage amplifies the potential returns and losses, but can be better overall in the long run. I think this exchange-traded fund can be an excellent long-term holding for a self-directed TFSA portfolio.
