Investment

Where to Invest Your $7000 TFSA Contribution

Published

8 months ago

January 17, 2024

Eligible Canadians have new TFSA contribution room of $7,000 this year. Remember also that unused room from previous years is carried forward. Futhermore, withdrawals made in 2023 can be re-contributed back into a Tax-Free Savings Account (TFSA) as soon as the new year starts. And, of course, room from TFSA withdrawals made in other previous years can also be re-contributed anytime.

Here’s where you might invest your TFSA contributions. For investors who want no risk of loss of their money, such as savings they plan to use to buy a car within a year, they can put that money in a guaranteed investment certificate (GIC) to earn interest income.

Earn interest income

Interest income is taxed at your marginal tax rate if earned in non-registered accounts. So, some Canadian investors choose to earn interest income in their TFSAs to shield the income from income taxes.

Currently, the best one-year GIC rate is about 5%. It may be time to lock in some money in GICs if you expect the Bank of Canada to start cutting rates soon. Importantly, traditional GICs guarantee to pay back your principal.

If you have a long-term investment horizon of at least three to five years for your money, you should highly consider buying quality stocks. Check out the Foolish investing philosophy as a guideline for long-term investing. I think Brookfield Infrastructure Partners L.P. (TSX:BIP.UN) is a good dividend stock candidate for long-term TFSA investing.

Buy dividend stocks in your TFSA

Currently, Brookfield Infrastructure Partners offers similar income as one-year GICs. It provides a cash distribution yield of essentially 5% at the recent price. What’s different about BIP is that it has also delivered long-term price appreciation (along with volatility in between). You can play with the graph below to get a sense of its volatility and long-term trend of going up.

Brookfield Infrastructure Partners stock has outperformed the Canadian market and Canadian utility sector in the long run. Over the last decade, the top utility stock delivered annualized returns of about 14.7% per year, turning an initial investment of $10,000 into about $39,460.

BIP.UN, XUT, and XIU 10-Year Total Return Level data by YCharts

It’s true the stock has been beaten down in a higher interest rate environment, though. This could make it a good time to accumulate shares, as there’s a growing demand for infrastructure assets globally. Lots of investments are needed for digitalization and decarbonization. So, BIP is in the right places, as an owner and operator of global infrastructure assets, including utility, transport, midstream, and data infrastructure assets.

BIP’s assets are primarily in the Americas, with 18% in Europe and 14% in the Asia Pacific region. It has utilities that offer regulated transmission and commercial and residential distribution. Additionally, its transport assets include rail, toll roads, and diversified terminals. Its midstream assets transport, store, and process energy.

Importantly, BIP doesn’t simply sit idle on its asset base. Acquiring assets, improving operations, and recycling mature assets and redeploying capital into new investments are a part of its growth plan that targets an attractive long-term 12-15% rate of return. This is probably why it has the ability to drive excellent returns for investors in the long run.

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

Published

6 days ago

September 6, 2024

Anne Joseph

TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX composite up more than 150 points, U.S. stock markets also higher

Published

2 weeks ago

August 29, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.

The S&P/TSX composite index was up 171.41 points at 23,298.39.

In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.

The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.

The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.

The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.

This report by The Canadian Press was first published Aug. 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Investment

Crypto Market Bloodbath Amid Broader Economic Concerns

Published

1 month ago

August 5, 2024

Harry Miller

The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.

The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.

Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.

The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.

Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.

Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.

Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.

Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.

The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.