When the calendar turned to January, it unlocked an additional $7,000 for Canadians to spend money on their TFSAs. Buyers who select the best allocation for that TFSA contribution can notice substantial development over the long term.
Profiting from your TFSA contribution every year can meaningfully speed up long-term wealth constructing.
First, a observe about TFSAs
All retirement accounts should not constructed the identical. TFSAs provide tax-free development to traders. Even higher, that development additionally consists of any capital features and dividends. This makes the accounts nice picks for buy-and-hold investments.
Extra importantly, it implies that traders who go for low-volatility compounders will achieve the added defensive enchantment that’s usually lacking from extra unstable investments.
For 2026, traders can allocate $7,000 in the direction of their TFSA contribution. That makes the choice of what to spend money on far more vital.
So then, the place ought to traders look to allocate their TFSA contribution in 2026? Listed here are two choices to contemplate.
Choice 1: A defensive compounder
A number of the greatest, most defensive shares in the marketplace are utility shares. Fortis (TSX:FTS) is likely one of 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 enchantment 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 companies present furthers that defensive enchantment.
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 supply annual upticks to its dividend and spend money on giant, multi-year capital enchancment applications.
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 possibility for any 2026 TFSA contribution.
Choice 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 massive financial institution shares are at all times excessive on the record.
Financial institution of Montreal (TSX:BMO) gives traders 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 practically 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 embrace each its home department community in Canada and its rising presence within the U.S. That U.S. presence is the financial institution’s major 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 earnings, BMO gives traders a tasty quarterly dividend. As of the time of writing, that dividend works out to A 3.6% yield. BMO has additionally provided traders a beneficiant annual bump to that dividend going again greater than a decade.
For traders the place to allocate their 2026 TFSA contribution, BMO ought to be excessive up on any shortlist.
The place will you make investments your TFSA contribution?
No inventory is with out threat. And regardless of the broader market returning a whopping 33% final yr, there’s nonetheless loads of market volatility.
Fortuitously, each BMO and Fortis can present that defensive enchantment whereas persevering with to supply stellar, rising dividends.
For my part, one or each ought to be key choices for any 2026 TFSA contribution.
Purchase them, maintain them, and watch your portfolio develop.
