The make-up of your Tax-Free Savings Account portfolio really depends on what your objectives are. If you’re using your TFSA to build an emergency fund your choice of securities will be far different from those you might select for an account that’s meant to eventually be used to buy a new car.
As a result, I was reluctant to create a model TFSA portfolio because each person’s objectives will be different. However, after several requests, I finally succumbed and in March 2012 I set up a portfolio for my Internet Wealth Builder newsletter with the primary goal of maximizing the tax savings potential of TFSAs. I used exchange-traded funds (ETFs) exclusively with the idea of achieving appropriate global diversification at minimal cost. All the ETFs are equity-based; there is no fixed-income component in this portfolio. This makes it higher risk and therefore only suitable for investors who are comfortable with that and have a long time horizon. This is definitely not a model to use if you are saving for retirement, a child’s future education, or a major purchase to be made within five years.