Simple Investment Strategies for your Tax Free Savings Account
Current annual contributions to your TFSA are $5,500.00 for 2013, bringing the total lifetime contributions to a level of $25,500.00 to the end of this year. Over the last five year period, contributions could be made to this type of account and all gains and income were sheltered from the taxman. Initially these accounts were a bit of an oddity and were difficult to deal with because of their size.Over time, TFSA's will become a more integral part of everyone's investment strategy. For investors, they can invest a small nest egg in a sheltered manner and avoid paying tax on any gains recognized or income which is generated from the account. Unfortunately tax losses have no benefit in this portfolio and they cannot be utilized,thus making stock selection critical.
Possible strategies that can be utilized in this type of account may include the following;
1)Keep some of your fixed income investments in this portfolio since interest is taxed at a rate of 100% in a taxable account.
2)Alternatively, you may wish to hold some of your best growth ideas in this portfolio sinca all recognized capital gains will not be taxed.
3)ETF's can be utilized in a portfoliio of this type and with a limited investment, you may still be able to diversify the risk in the portfolio.
4)You may also wish to use a hybrid approach utilizing an ETF encompassing a large index and then complement the portfolio with a few selections of individual stocks with strong fundamentals.
5)Another approach may look at stocks that offer a modest dividend, but also have the potential for some capital gains. Ideally these stocks offer the best of both worlds and offer the benefits of some income and growth.
6)Remember not to exceed the contribution limits, because penalties can apply. Always keep a running total of your historical contributions and any withdrawals.
7)Overall TFSA's are becoming a more robust part of an investment strategy for retail investors.
8)BirchLeaf Investments can develop an appropriate strategy for your TFSA and select the securities for this strategy.
9)Call us for an appointment today. 905-823-2500.
