One of many largest benefits of utilizing a Tax-Free Financial savings Account (TFSA) is how easy it makes investing. Usually, you don’t want to fret concerning the tax therapy of your earnings. It doesn’t matter whether or not your returns come from dividends, capital positive aspects, curiosity earnings, and even return of capital.
In case your purpose is to generate a gentle stream of passive earnings, there isn’t any want to regulate for taxes or take into consideration gross versus internet yields. What you see is what you get. So, if you’re aiming for one thing like $500 a month in tax-free earnings, how would you go about it?
One choice that makes the maths particularly simple is the Canoe EIT Earnings Fund (TSX: EIT.UN), because of its fastened month-to-month distribution of $0.10 per share.
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What’s Canoe EIT Earnings Fund?
EIT.UN is just not an exchange-traded fund (ETF). It’s a closed-end fund. Meaning it doesn’t constantly subject or redeem shares like an ETF. As a substitute, it has a set pool of capital, and shares commerce available on the market primarily based on provide and demand.
Due to this construction, the fund can commerce at both a premium or a reduction to its internet asset worth (NAV). As of April 6, 2026, the fund trades at $16.63 per unit, which is a slight low cost to its NAV of $16.87.
The portfolio itself is actively managed by Rob Taylor. It holds a concentrated mixture of roughly 50% Canadian equities and 50% U.S. equities, with a concentrate on giant, established corporations.
Presently, the fund holds 56 shares with a mean market capitalization of about $128 billion and trades at a price-to-earnings ratio of 21.6 occasions.
One other vital characteristic is leverage. The fund can borrow as much as 20% of its NAV to reinforce returns and earnings. Whereas this may increase distributions, it additionally will increase danger throughout market downturns.
As for prices the fund costs a 1.1% administration price, which is excessive, however typical for an actively managed technique. With distributions reinvested internet of charges however earlier than taxes, EIT.UN has returned an annualized 14.5% over the trailing 10-year interval.
How a lot do you’ll want to make investments to get $500 a month?
Bear in mind, EIT.UN pays a set month-to-month distribution of $0.10 per unit.
To generate $500 monthly, you merely divide your goal earnings by the month-to-month payout: $500 ÷ $0.10 = 5,000 items
Now multiply that by the present unit worth of $16.63: 5,000 × $16.63 = $83,150
So, you would want to speculate roughly $83,150 in EIT.UN to generate $500 monthly in tax-free earnings inside a TFSA.
Bear in mind, distributions are usually not assured. Whereas the fund has an extended monitor document, a bear market may lead to a lower, and your principal can fluctuate up or down. TFSA earnings is totally tax-free, making it simpler to plan round fastened month-to-month money movement targets.
