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Yahoo
16 hours ago
- Business
- Yahoo
How to Make Your $7,000 TFSA Contribution Work Harder This Year
Written by Chris MacDonald at The Motley Fool Canada The Tax-Free Savings Account (TFSA) investing vehicle is one of the best, and perhaps most under-utilized, tools available to Canadian investors. This account allows Canadian investors to put $7,000 in after-tax dollars to work in an investing account, with the corresponding growth and dividend income provided by the investments in this account eligible to be pulled out tax-free at any point in time. For those planning for retirement, having access to a tax-free chunk of capital when it comes time to retire is a big deal. That goes double for those who plan to work into retirement, and/or those who expect to have a higher tax burden down the line. With the way fiscal spending is trending everywhere, that's a bet many may be willing to make. Here are three tips investors looking to maximize the performance of their TFSAs may want to think about right now. Generally speaking, most financial planners would advise investors to first consider which types of investments they're thinking about including in their TFSA. A very high-growth stock such as Shopify (TSX:SHOP) or Constellation Software (TSX:CSU) that has seen rapid price appreciation in recent years would be disproportionately rewarded by being held in such a fund. That's simply due to the fact that such stocks have continued to compound over time, and that capital appreciation investors would have seen from investing in such stocks early on would have resulted in most of the value of their current holdings being in price appreciation. In a TFSA, this price appreciation is tax-free. That said, putting all of one's TFSA funds in one or two particular stocks is a strategy most financial experts would also be up in arms about. A TFSA does disproportionately benefit investors who want to pick growth stocks that perform well. The key is that such holdings need to perform, and there are no guarantees on this front. Thus, holding a broader basket of diverse growth stocks may be the optimal choice for most passive long-term investors. Whether it's a growth-focused ETF or mutual fund, supplementing single-stock picks is a strategy I'm personally in favour of, and it is a strategy I think most investors should consider. One of the problems with a TFSA (which is similar to a Roth 401(k) in the U.S.) is the relative ease at which investors can pull their capital out of a TFSA when needed. While liquidity is great (and that's a feature of this investment vehicle), in terms of saving for retirement, excessive withdrawals over time from a TFSA can really degrade the long-term value that can come from holding high-quality growth stocks in this account. As such, I think the prudent advice for most investors is to put whatever possible into a TFSA (preferably to the maximum allowed), and let these funds sit there for as long as possible. That's the advice most financial experts would provide, and it's easier said than done. But for those who are patient and willing to let their winners ride, this is the account that makes the most sense to do so. The post How to Make Your $7,000 TFSA Contribution Work Harder This Year appeared first on The Motley Fool Canada. More reading Made in Canada: 5 Homegrown Stocks Ready for the 'Buy Local' Revolution [PREMIUM PICKS] Market Volatility Toolkit Best Canadian Stocks to Buy in 2025 Beginner Investors: 4 Top Canadian Stocks to Buy for 2025 5 Years From Now, You'll Probably Wish You Grabbed These Stocks Subscribe to Motley Fool Canada on YouTube Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy. 2025
Globe and Mail
12-06-2025
- Business
- Globe and Mail
Twenty Canadian mutual funds and ETFs with low ESG risk
Canadian-domiciled mutual funds and exchange-traded funds that exhibit low degrees of environmental, social and governance risk and that have outperformed peers Canadian retail investors continue to give mixed signals on investing sustainably. On one hand, the sustainable mutual fund and ETF market saw net redemptions over 2024, something that hasn't happened since 2019. On the other, industry surveys (such as the Responsible Investment Association's Annual Investor Opinion Survey conducted by Ipsos) continue to point to desire by retail investors to invest sustainably, citing that two-thirds of Canadians are interested in the concept. The disconnect between investor interest and actual investment behaviour might stem from a lack of clarity around the purpose of sustainable investing. While some investors view ESG considerations as a way to align investments with personal values, this perspective can overlook the growing relevance of the considerations to financial performance. Increasingly, factors such as climate risk, corporate governance and social responsibility are being recognized as material to a company's long-term success – and, by extension, to investor returns. As such, evaluating ESG risks should not be seen merely as a values-based choice, but as a prudent step in making informed, forward-looking investment decisions. This opinion largely aligns with that of Canadian Prime Minister Mark Carney. He sees ESG risks as financially material factors that investors must consider to properly assess long-term value and risk. In his book Value(s), he writes that ESG criteria help investors 'identify common factors that assist risk management and value creation but also deliver superior financial returns.' He also asserts that 'fiduciary duty is not a barrier to considering ESG factors – it demands it,' emphasizing that ignoring such risks could breach legal and ethical responsibilities. For Mr. Carney, ESG is not a peripheral concern, but a core component of financial analysis. With all of this in mind, today I use Morningstar Direct to find outperforming mutual funds and ETFs that, based on Morningstar's assessment, exhibit lower degrees of ESG risk when compared to global peers. To do this, I screened for Canadian funds and ETFs (a universe of roughly 4,400 unique investments) for those that: Only the oldest share class of Canadian-domiciled mutual funds and ETFs were considered in the search. The mutual funds ETFs that qualified for today's screen are listed in the table accompanying this article. The table includes tickers, management expense ratios, asset class, category, ratings and returns. Readers are urged to first look at the asset class and category to which each fund belongs, given that ratings are relative to these peer groups. I note importantly that I did not screen on the intent of the fund, only the ESG risk scores. As such, there are funds on the list that don't necessarily align their marketing (or names) with a sustainability tilt. However, the portfolio holdings (according to Morningstar's analysis) reflect lower degrees of ESG risk. This article does not constitute financial advice. Investors are encouraged to conduct their own analysis before buying or selling any of the investments listed here. Ian Tam, CFA, is director of investment research for Morningstar Canada.
