The Tax-Free Financial savings Account (TFSA)—a registered account that lets your investments develop tax-free—simply bought its 2025 contribution restrict announcement: a cool $7,000.

However when you haven’t maxed out your TFSA for 2024 but, don’t wait! This 12 months, you’re additionally eligible to contribute $7,000.

Since TFSA contribution room is proscribed, it’s vital to be strategic. The very last thing you need is to endure a capital loss in your TFSA, as you gained’t have the ability to declare that loss in your taxes like you would in a non-registered account.

That mentioned, it’s okay to take calculated dangers in pursuit of upper returns. Right here’s one distinctive ETF that gives the potential for each excessive development and month-to-month earnings—solely tax-free in your TFSA.

One downside of the TFSA

If you wish to tackle extra danger prudently in your TFSA, selecting single shares won’t be the best choice. As an alternative, contemplate leveraging your investments to doubtlessly amplify returns.

In a non-registered account, this typically entails utilizing margin. For example, when you have $10,000 in a non-registered account, you would borrow a further 25%, providing you with $12,500 of market publicity. This amplifies each your positive aspects and losses, as your returns are based mostly on the bigger quantity you management.

Nevertheless, you’ll be able to’t do that in a TFSA. Brokers don’t supply margin loans for TFSAs, so leveraging immediately inside the account isn’t an choice. Whereas it’s technically attainable to take out an exterior mortgage and fund your TFSA, at this time’s excessive rates of interest make this an impractical alternative for many buyers.

Thankfully, there’s an ETF resolution designed to supply leverage inside your TFSA.

A 1.25x Canadian Banks ETF

Hamilton Enhanced Canadian Financial institution ETF (TSX:HCAL) provides buyers a singular method to acquire elevated publicity to Canada’s banking sector.

It holds an equal-weighted portfolio of Canada’s “Massive Six” banks and applies a modest 25% leverage, or 1.25x, to spice up efficiency.

The technique is easy: make investments a bit extra into high-quality blue-chip shares. Traditionally, this strategy has carried out nicely, given the steadiness and dependable dividends of Canadian banks.

What units HCAL aside is that it doesn’t require a margin account, and it’s totally eligible for a TFSA. Hamilton manages the borrowing on their finish, securing higher institutional charges than particular person buyers.

Leverage amplifies each development and danger, but it surely additionally enhances earnings. At present, HCAL pays a 6.37% annualized distribution yield with month-to-month payouts.