An extra $1,000 per month completely tax free can make a surprisingly large difference in your life. That could cover groceries, utilities, a car payment, property taxes, or simply provide some breathing room during retirement.
For younger investors, it could help reduce dependence on employment income. For retirees, it can supplement Canada Pension Plan (CPP) and Old Age Security (OAS) without increasing taxable income.
That is exactly why the Tax-Free Savings Account (TFSA) is such a powerful investing tool. Once investments inside the account start generating meaningful passive income, every dollar stays yours.
One income-focused investment some Canadians use for this purpose is the Canoe EIT Income Fund (TSX: EIT.UN), a closed-end fund designed around generating high monthly cash flow.
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What is EIT.UN?
EIT.UN is not a traditional exchange-traded fund (ETF). Instead, it is an actively managed closed-end income fund holding a diversified mix of global stocks, with a focus on quality.
The portfolio is currently managed by Robert Taylor, a Chartered Professional Accountant (CPA) and Chartered Financial Analyst (CFA), and holds just over 50 positions.
Right now, the allocation sits around 47% Canadian equities, 41% U.S. equities, roughly 10% cash, and a small international allocation. Sector exposure leans heavily toward financials, energy, and industrial stocks.
One reason the fund has historically generated high income is because it also uses leverage. EIT.UN is allowed to borrow up to 120% of its net asset value (NAV), which can amplify both returns and risks.
That leverage helps boost distributions during favourable market environments, but it also increases volatility and downside risk during weaker markets. The fund also comes with higher costs than a passive index ETF. EIT.UN charges a 1.1% management fee, and borrowing costs tied to leverage can create additional expense drag.
Still, the strategy has historically delivered strong returns. With distributions reinvested, EIT.UN compounded at roughly 18.5% annualized over the past five years, which has beaten the market.
How much do you need to generate $1,000 per month?
EIT.UN currently pays a monthly distribution of $0.10 per share. To generate $1,000 in monthly passive income, you would need:
That works out to 10,000 shares of EIT.UN. Using the May 14 closing price of $17.20 per share, the required investment would be:
So, an investor would need approximately $172,000 invested inside a TFSA to target roughly $1,000 per month in tax-free income.
Of course, investors should understand that distributions are not guaranteed. The payout can fluctuate depending on market conditions, portfolio performance, leverage costs, and management decisions. The share price itself can also move materially over time.
Still, for Canadians looking to turn their TFSA into a passive income engine, EIT.UN remains one of the more aggressive yet reliable monthly income funds available on the Toronto Stock Exchange.
