A Tax-Free Savings Account (TFSA) is a versatile investment account that offers a wide range of investment options. Here are some of the types of investments you can hold in a TFSA:
Cash or near Cash: TFSAs can hold cash or near cash instruments, including savings accounts and guaranteed investment certificates (GICs). While cash may not offer high returns, it can be a low-risk option for those who prioritize safety over growth.
Stocks: TFSAs can hold stocks and other equity investments, such as mutual funds and exchange-traded funds (ETFs). These investments offer the potential for higher returns, but they also come with higher risks.
Bonds: TFSAs can hold bonds, including government and corporate bonds, as well as bond funds. These investments offer lower returns than stocks, but they also come with lower risks.
Real estate investment trusts (REITs): TFSAs can hold REITs, which are a type of investment that allows you to invest in real estate without owning property directly. REITs can offer stable income and potential for capital appreciation.
Options and Warrants: TFSAs can hold options, which are financial instruments that allow you to bet on the future price of an asset. These investments can be highly speculative and are generally not recommended for novice investors. Warrants and options you wish to purchase within a registered plan such as an RRSP or TFSA must meet eligibility requirements established by the Canada Revenue Agency (CRA) to be considered a qualified investment.
Foreign investments: TFSAs can hold foreign investments, including stocks, bonds, and mutual funds, that are traded on recognized stock exchanges.
It’s important to note that while TFSAs offer a lot of investment options, there are some restrictions on what you can invest in. For example, investments in businesses that you control, investments in non-qualified investments, and investments in foreign property that are not traded on a recognized stock exchange are not allowed in a TFSA. Additionally, it’s important to be mindful of your contribution room and avoid overcontributing to your TFSA. Always consult with a financial advisor or tax professional before making investment decisions to ensure they align with your individual financial goals and risk tolerance.