When the calendar turned to January, it unlocked an additional $7,000 for Canadians to spend money on their TFSAs. Traders who select the fitting allocation for that TFSA contribution can understand substantial development over the long term.
Profiting from your TFSA contribution annually can meaningfully speed up long-term wealth constructing.
First, a observe about TFSAs
All retirement accounts are usually not constructed the identical. TFSAs supply tax-free development to buyers. Even higher, that development additionally contains any capital good points and dividends. This makes the accounts nice picks for buy-and-hold investments.
Extra importantly, it implies that buyers who go for low-volatility compounders will achieve the added defensive attraction that’s typically lacking from extra risky investments.
For 2026, buyers can allocate $7,000 in the direction of their TFSA contribution. That makes the choice of what to spend money on rather more necessary.
So then, the place ought to buyers look to allocate their TFSA contribution in 2026? Listed here are two choices to think about.
Possibility 1: A defensive compounder
Among the greatest, most defensive shares in the marketplace are utility shares. Fortis (TSX:FTS) is among the largest utilities in North America. The corporate operates in 10 areas throughout the continent, with services within the U.S., Canada, and the Caribbean.
The defensive attraction of a utility inventory is important. Utilities like Fortis generate a recurring and secure income stream that’s backed by regulated long-term contracts. The sheer necessity that utility providers present furthers that defensive attraction.
That predictable income stream permits Fortis to spend money on development and pay a good-looking quarterly dividend. Extra particularly, it permits the corporate to offer annual upticks to its dividend and spend money on giant, multi-year capital enchancment packages.
As of the time of writing, Fortis gives a yield of three.5% with 51 consecutive years of dividend will increase.
That truth alone makes this a worthy choice for any 2026 TFSA contribution.
Possibility 2: Banking on a long-term monetary engine
When contemplating the very best choices to allocate your 2026 TFSA contribution in the direction of, Canada’s large financial institution shares are at all times excessive on the listing.
Financial institution of Montreal (TSX:BMO) gives buyers a singular mixture of defensive stability, development, and income-earning capabilities.
BMO is the oldest of the massive financial institution shares. The financial institution has been serving Canadians and paying out dividends for almost two centuries with out fail. That’s an unprecedented period of time out there and speaks to the soundness the financial institution gives.
BMO’s operations embody each its home department community in Canada and its rising presence within the U.S. That U.S. presence is the financial institution’s main development driver following its acquisition of Financial institution of the West.
That deal expanded BMO’s presence within the U.S. to 32 state markets, making it one of many largest monetary shares in that market.
Turning to revenue, BMO gives buyers a tasty quarterly dividend. As of the time of writing, that dividend works out to A 3.6% yield. BMO has additionally provided buyers a beneficiant annual bump to that dividend going again greater than a decade.
For buyers taking a look at the place to allocate their 2026 TFSA contribution, BMO must be excessive up on any shortlist.
The place will you make investments your TFSA contribution?
No inventory is with out danger. And regardless of the broader market returning a whopping 33% final 12 months, there’s nonetheless loads of market volatility.
Thankfully, each BMO and Fortis can present that defensive attraction whereas persevering with to supply stellar, rising dividends.
In my view, one or each must be key choices for any 2026 TFSA contribution.
Purchase them, maintain them, and watch your portfolio develop.
