The TFSA is a powerful wealth-building tool. Canadian investors with a focus on long-term growth who contribute to their TFSA annually can amass a massive amount of funds by retirement, or even earlier. In some ways, a TFSA at age 50 can easily be well into six-figure territory.
To be fair, getting that balance in a TFSA at age 50 takes time and patience, as well as the right investments. Time and patience can’t be changed, but investors can pick the right stocks today to begin that journey.
For those investors, here’s a trio of picks to help build that base, establish an income stream, and keep a TFSA at age 50 well-funded and compounding.
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Start with a broad Canadian index
ETFs are great options for any portfolio. Specifically, broad-market ETFs such as the iShares Core S&P/TSX Capped Composite Index ETF (TSX: XIC).
The Core S&P/TSX Index contains a basket of some of the largest, most successful companies on the market under a single ticker. That includes banks, energy companies, utilities, materials, industrials, and even high-growth tech names.
The idea behind the fund is simple. Instead of trying to pick individual winners, the Core S&P/TSX index buys the market. That becomes a core position that caters to growth, income-seekers, and even defensive-minded investors.
In terms of income, the fund offers a yield of 2% as of the time of writing. That’s not the highest yield on the market, and that’s okay. The job of this ETF is not to be an income-first pick but rather provide market-wide diversification.
That’s not to say the income doesn’t help. Investors who allocate $12,000 towards the fund will generate new shares each quarter without additional funding.
The fund has also surged over 30% over the trailing 12-month period.
In short, for investors looking at prepping their TFSA at age 50, the Core S&P/TSX Index is a great foundation buy.
Add Canadian Natural Resources for income and energy exposure
The next pick for investors focused on a TFSA at age 50 is Canadian Natural Resources (TSX: CNQ).
Canadian Natural Resources gives investors exposure to Canada’s lucrative energy sector. The company is one of the major oil and gas producers, known for both its stable operations and attractive quarterly dividend.
The long life and low production costs of Canadian Natural Resources’ assets are the main draw for investors. Those assets are located not only in Canada, but also in the North Sea and offshore Africa.
From an income standpoint, Canadian Natural Resources offers a quarterly dividend with a yield of 3.9%. Using that same $12,000 example above results in an annual income of just under $500.
You can’t retire on that, but you can generate a half-dozen or more new shares each year within a TFSA from reinvestments. And within the TFSA, those new shares continue to compound tax-free.
Prospective investors should also note that Canadian Natural Resources has provided annual increases to that dividend for 26 consecutive years without fail.
For investors looking at boosting their TFSA at age 50, Canadian Natural Resources remains a top buy-and-forget option.
Use Bank of Nova Scotia for financial-sector dividends
It would be nearly impossible to generate a list of investments to bolster a TFSA at age 50 without mentioning one of Canada’s big bank stocks. And Bank of Nova Scotia (TSX: BNS) is one option for investors focused on dividend income.
Scotiabank generates a reliable and recurring revenue stream backed by both its domestic banking segment and a growing international presence. The international segment has shifted in recent years away from more volatile Latin American markets to mature North American markets.
As a result of that growth focus, Scotiabank’s dividend is higher than its big bank peers’. As of the time of writing, Scotiabank offers a yield of 4%.
Scotiabank has provided annual upticks to that dividend for over a decade and has been paying dividends for nearly two centuries.
That fact alone makes Scotiabank a great anchor holding in a TFSA portfolio which will continue compounding over the longer term.
What a TFSA at age 50 should really show
A TFSA at age 50 looks different for each investor. Long-term growth and maintaining annual contributions are key, as are picking the right investments.
The trio above offers a mix of growth, income and some defensive appeal.
In my opinion, one or all of these should be core holdings in any well-diversified portfolio.
