Category Archives: Terms

How to Get to a $100,000 TFSA

There are many ways to get to a $100,000 Tax-Free Savings Account (TFSA). The way I’m about to discuss is a simple method with below-average risk, which should help you avoid common TFSA mistakes.

Before I get to what to invest in your TFSA, here’s the general idea.

The gist of our strategy to get to a $100,000 TFSA

Firstly, the TFSA is a savings tool before it’s an investment tool. So, you’ve got to put money in regularly to get your TFSA growing.

Secondly, because we can’t use capital losses to offset capital gains in TFSAs, we’re going to take reduced risk in the account. Specifically, we aim to buy quality stocks that have durable profitability — but only when they’re trading at fair or better valuations.

Thirdly, we want to hold largely proven dividend-growth stocks that offer decent dividend yields of 3-5% (at least initially). This is because we’re pretty late in a bull market (more than 10 years in since the low of the last market crash).

The defensive stance will give us a positive return from decent dividends even in a market downturn. The extra capital from the dividends can be reinvested for more shares at such a time.

Fourthly, we’re aiming for long-term returns of 10% per year, which is very reasonable for blue-chip dividend-growth stocks that offer yields in the range of 3-5%.

The Best 3 Places To Look For Safe Dividend Income

If history gives a hint about the future, it indicates that companies in certain industries tend to generate stable earnings or cash flows that lead to stable dividends.

If we choose the quality companies from these industries, we can then build a diversified portfolio that generates a secure, growing income stream. Below, I list some possibilities.

Utilities: A Must-Own Sector

Earnings generated by utilities are relatively stable because people need to use electricity, gas, and water, etc. no matter if the economy is doing well or not.

One utility that came out strongly from the last recession was Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP). Since 2009 it has been a five-bagger.

Brookfield Infrastructure is a rock solid utility, which owns and operates a global, quality portfolio of infrastructure assets, including toll roads, railroads, ports, pipelines, and telecom towers.

Its trusted management, Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM), employs value investing and actively recycles mature assets for higher returns. Because management owns 30% of the partnership, retail unitholders can expect the management to be unitholder-friendly.

Indeed, Brookfield Infrastructure has increased its distribution every year since 2009. Going forward, it gives the guidance to grow its distribution by 5-9% per year. Currently, it offers a yield of 4.5% to start.

1 Thing You Must Do Before Investing in Stocks Using a TFSA or RRSP

invest for retirement

Everyone talks about the benefits of investing in tax free savings accounts (TFSAs) and registered retirement savings plans (RRSPs). That is, you can invest tax free in TFSAs and invest tax deferred in RRSPs.

However, people seldom talk about the dangers of investing in TFSAs or RRSPs. If you experience any losses in those accounts, it’ll be very hard to recuperate the losses.

On the other hand, if you experience losses in a non-registered account, you can use them to offset capital gains, which makes it more worthwhile to realize losses in non-registered accounts. Read More

Passive Income Earner

Work hard. Spend less. Invest smart.