How to invest with a TFSA
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Savings Account in a TFSA
Let's say you're looking for a short-term investment. One that doesn't carry too much risk and you're too busy to monitor your investments. If that's the case, a savings account in your TFSA may work for you. Fairly basic, it works just like a regular savings account. You put cash in, and, over time, it earns interest with a guaranteed rate of return. The big difference is that the interest you earn with your TFSA is tax-free.
GICs in a TFSA
What if you wanted to earn interest at a guaranteed rate while protecting your principal? GICs or Guaranteed Investment Certificates allow you to do exactly that. They can be the ideal investment vehicle if you have a fixed-term savings goal like saving for a down payment. Plus, they generally offer a rate of return that's higher than most high-interest savings accounts. The trade-off is that the money you put in is usually not easily accessible for the length of the term. GIC terms differ and can range from a month up to 5 years. You can choose the length of time that works best for you. You can usually also choose how frequently you receive interest payments. For multi-year GICs, interest paid can be compounded. As you will receive your initial investment back (plus accrued interest) at the end of the term, GICs are generally considered a safe investment. A self-directed TFSA will allow you to hold and manage GICs from different financial institutions in one place.
If you want to play a more active role in investing, a self-directed TFSA can allow you to be strategic. Plus, if you wish to purchase individual stocks and bonds, you must open a self-directed TFSA. Simply put, it can be empowering as it gives you a wider range of investments to choose from.
Open a self-directed TFSA with TD Direct Investing and get more insight into the performance of your portfolio with real-time market data and insightful research reports.