The Tax-Free Savings Account (TFSA) was launched in Canada in January 2009. Since then, it has grown into the most popular registered account in the country. Its flexibility and upside have proven to be popular among investors of all ages. Today, I want to go over three investment strategies that Canadians may want to consider in this account.
The traditional route: Mutual funds
Mutual funds became an immensely popular product among investors in the late 20th and early 21st century. However, the 2007-2008 financial crisis shook up the industry in a big way. Central banks pursued record asset-purchasing programs, which propped up the broader stock market and boosted the performance of hands-off index funds.
These vehicles offer lower management fees in comparison to mutual funds, which are actively managed. This traditional approach is worth considering for investors who feel more comfortable with an experienced fund manager.
The robo-advisor option
Most top Canadian financial institutions now offer a robo-advisor in some form. These digital platforms provide automated, algorithm-driven investment services with very little or no active management. Robo-advisors offer up lower management fees and a passive investing approach.
Switch to a self-directed TFSA
Investors who are well-versed in the market should consider a self-directed TFSA. You can approach this through a brokerage account wherein you will buy and sell stocks, bonds, ETFs, mutual funds, or other assets. Canadians who are willing to take on more risk in their TFSA may opt to go all-out with a growth strategy in their TFSA. Or, they may seek out high-yield dividend stocks to churn out big income. The choice is yours when you go self directed.
