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The tax-free savings account (TFSA) is better than ever now that its annual maximum contribution has increased to $6,000 this year, from $5,500 in 2018.

Accordingly, the lifetime contribution limit rises to $63,500. That’s a sizable chunk of capital in your portfolio.

While the TFSA’s key advantage is tax-free growth and withdrawals, this account is also flexible. Investors can use it for short- or long-term purposes, and they have plenty of investing options, which can help them cope with a challenging, volatile market.

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Calgary portfolio manager Patti Dolan, with Mission Wealth Advisors, Raymond James Ltd., suggests investors concerned about market unpredictability may want to take a middle-of-the-road approach, selecting investments that pay dividends but also have the potential for modest capital growth.

With that in mind, here are five moderate-risk investments you could choose if you have $6,000 to invest in your TFSA today.

Preferred shares

This asset class has taken it on the chin over the past year as the Bank of Canada has raised interest rates. But with rate hikes poised to slow down in 2019, investors may want to give preferred shares a second look, given their high dividend yields and potential for small capital gains, Ms. Dolan says.

She cites Toronto-Dominion Bank Non-Cumulative 5-Year Rate Reset Class A Preferred Shares (TD.PF.B) as a possible choice. Currently yielding about 4.6 per cent, they have the potential to provide an even higher dividend when they reset this summer, she notes.

And if the bank decides not to extend the investment’s life beyond that, its share price at maturity is $25, “so you have the potential of a slight capital gain,” Ms. Dolan adds about the security, which is trading at about $20 a share.

Canadian banks

Investors' love affair with Canadians banks had a falling out in 2018 when the sector collectively fell about 10 per cent, says Lorne Zeiler, portfolio manager with TriDelta Financial in Toronto. Investors may have soured on them, but the big banks are still reporting record earnings, he says. What’s more is their share prices are down from their peaks, offering good value for investors buying today.

The Bank of Nova Scotia looks the most attractive, Mr. Zeiler suggests, “trading at only approximately nine times forward earnings with a nearly 5-per-cent dividend yield.” Yet while Scotiabank – and all the big banks for that matter – offers plenty of upside, more interest rate hikes coupled with deepening economic malaise could hurt the sector’s bottom line.

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That said, the banks are well capitalized and should easily withstand negative economic conditions while maintaining “strong cash flows that translate into high, growing dividend yields,” he says.

Telecoms

Like the banking sector, Canada’s telecom industry is also dominated by big fish. The sector’s larger players, BCE Inc. and Telus Corp., have steady revenue that translates into strong dividends with yields north of 4 per cent annually. The one exception is Rogers Communications Inc., with a yield of about 2.7 per cent.

That lower payout makes it of interest to investors, argues Tim Regan, chief investment officer with Kingwest & Co. in Toronto. “Basically, I look at it as Rogers is keeping more of its money to grow its business,” and by paying out less cash to investors, the telecom giant can better expand operations, he explains.

What’s more is Rogers does not have a dying telephone landline business like its competitors, and it “has huge exposure to sports teams.” Mr. Regan says the firm’s major stake in Maple Leaf Sports & Entertainment Ltd. as well as ownership of the Toronto Blue Jays and Rogers Centre are increasingly valuable, allowing it to “produce a lot of content” for its media assets, he adds.

A key risk to its profitability is a slowing economy in Ontario, where Rogers does the lion’s share of its business. As well, regulatory changes opening the market to foreign competitors would hurt business. “Maybe one day a government might actually do that, but until then, these companies are pretty good bets,” Mr. Regan says.

Utilities

No matter how deeply the economy slumps or tumultuous markets become, people “still need to switch on the lights and computers,” Ms. Dolan says. That makes utilities a go-to rainy day investment that rewards investors with steady income from dividends and modest capital growth over the long term.

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Among the most interesting companies in this sector is Emera Inc., based in Halifax. Its stock price is down from its high of about $49 a share in 2016. But Emera also pays a dividend of more than 5 per cent. What’s more is the company is shifting to renewables while reducing emissions. “It’s doing the right things” that will make it more competitive, Ms. Dolan notes.

Like other utilities, Emera’s share price can struggle in a rising-interest-rate environment as income investors move to higher yielding alternatives. But “utilities also have the ability to raise their rates” and, in turn, their dividends.

Energy

Few sectors are as banged up as Canada’s oil and gas sector. “The sector was one of the worst performers on the TSX over the past few years,” Mr. Zeiler says. As a result, a number of good companies offer “compelling valuations, particularly as the discount of Western Canadian Select oil to WTI [West Texas Intermediate] has improved dramatically.”

Rather than picking one large company – for instance, Suncor Energy Inc. or Imperial Oil Ltd. – he suggests buying a basket of energy stocks using an exchange-traded fund (ETF) such as the BMO Equal Weight Oil and Gas ETF (ZEO). Investors get equal exposure to large energy producers alongside pipeline companies, which make up 40 per cent of the index. They also earn a 3-per-cent dividend yield with the opportunity for “significant capital gains as the energy market stabilizes,” he says.

The risk, of course, is that energy prices could continue to struggle and companies along with them.

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