The TFSA is one of the best wealth-building tools available to Canadians. It allows for contributions and dividends to compound tax-free, which makes having a TFSA investment strategy an important part of any retirement portfolio.
That also means that picking the right investments is key to the growth of the portfolio over a longer period.
Fortunately, there’s no shortage of great investments on the market right now that can help accomplish that goal. Here’s a look at three of them and how they fit into any TFSA investment strategy.
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Keep the portfolio focused on long-term growth
The first investment for the portfolio is iShares Core MSCI All Country World ex Canada Index ETF (TSX:XAW.TO). The ETF provides international exposure, making it the main growth engine of this portfolio and a way to diversify outside of Canada.
The ETF is a fund of funds and includes holdings from across multiple sectors of the economy, including technology, financial services, industrials, healthcare, and consumer defensive stocks.
The main focus of the fund is long-term growth, and the ETF has delivered over 60% gains over the trailing five-year period.
In terms of a distribution, the fund offers a semi-annual distribution that, as of the time of writing, provides a yield of 1.2%.
Add XBB for bond exposure and retirement income
The next option to include in our TFSA investment strategy is the iShares Core Canadian Universe Bond Market Index ETF (TSX: XBB).
This ETF provides some income to the TFSA portfolio, while also providing some diversification. Specifically, the fund provides exposure to the Canadian bond market.
This makes it an option for investors looking to generate income from their portfolio. The fund also gives the portfolio a different asset class to consider over equities.
As of the time of writing, XBB offers a monthly distribution and carries a yield of 3.5%.
Consider a big bank stock
Rounding out the three investments for the TFSA investment strategy is one of Canada’s big bank stocks. In this case, that bank stock to consider is Toronto-Dominion Bank (TSX: TD).
TD Bank is the second largest of Canada’s big banks, with operations across Canada and along the east coast of the U.S. These operations include both consumer and wholesale banking units.
While TD’s Canadian base provides a strong foundation with reliable revenue generation, the bank’s U.S. segment is focused on growth. TD’s presence in the U.S. stretches from Maine to Florida and has more branches than its Canadian sibling.
Turning to income, TD has paid dividends for well over a century. As of the time of writing, TD offers a quarterly dividend that pays out a yield of 2.6%.
A TFSA investment strategy that keeps growing
No investment is without risk, and that includes the trio of options mentioned above. Fortunately, each of the three picks offers something different in terms of market focus, segment and even income or growth.
The trio isn’t going to provide a TFSA with the highest yield, but it can provide a diversified mix of investments that can provide growth and income.
This makes them ideal candidates to include in any larger, well-diversified portfolio.
