The Tax-Free Savings Account (TFSA) will keep the annual contribution level at $6,000 in 2022. That brings the cumulative contribution in a TFSA to $81,500. That is a sizable pool for Canadian investors, especially considering the kind of growth we have seen over the past decade. Today, I want to look at three TFSA strategies worth considering for the next year.
Prepare for rising interest rates and stash defensive stocks
Canada’s inflation rate has reached an 18-year high in October of 4.7%. The Bank of Canada (BoC) has taken notice, and there is major pressure to provide relief to consumers as the economy recovers. Oddsmakers expect several rate hikes in 2022. TFSA investors should prepare accordingly.
Defensive stocks provide consistent dividends and stable earnings no matter the state of the overall market. Grocery retailers have proven very resilient, even in the early stages of the pandemic. Investors can also look to essential services like utilities or telecoms.
Bet on growth in a highly liquid market
On the other hand, TFSA investors may want to ride the tiger that is this bull market. The emergence of yet another COVID-19 variant could give central banks pause, even as inflation rises. Betting against the market has been a bad move since the early 2010s. Unless central bank policy changes dramatically, TFSA investors should be confident in a growth-oriented approach.
Go for the balanced approach
Unlike in politics, you can comfortably ride the fence as an investor. That means targeting dependable dividend stocks and more risky growth assets in your TFSA going forward.
