TFSA Investors: How to Invest $7,000 in 2026?

The Tax-free Savings Account (TFSA) contribution limit for 2026 is $7,000, bringing the maximum contribution room to $109,000. Eligible Canadian investors can hold a variety of qualified investments in this registered account and generate tax-free returns for life.

So, let’s see how TFSA investors can invest $7,000 in 2026.

Buy and hold diversified ETFs in a TFSA

The primary goal of investing is to generate inflation-beating returns over time. One asset class that has consistently outpaced inflation is equities.

A low-cost way to gain exposure to the stock market is to buy and hold passive managed index funds in the TFSA. Passive investing has gained popularity in the last 20 years, as 80% of fund managers struggle to beat the returns of the underlying index.

It makes sense to allocate around 80% of your TFSA contributions to index funds, such as the iShares Core S&P 500 Index ETF (TSX:XSP). With almost $14 billion in assets under management, the XSP ETF is among the most popular index funds in Canada.

XSP tracks the S&P 500 index, providing you with exposure to some of the largest companies in the world. The XSP ETF was launched in 2010 and has since returned 565% to shareholders in dividend-adjusted gains. It means a $5,000 investment in XSP would be worth close to $33,500 today.

Invest in quality growth stocks

While most of your funds should be allocated to low-cost index funds, those with a higher risk appetite should consider purchasing high-quality growth stocks that trade at a reasonable multiple.

One such TSX stock is Electrovaya (TSX:ELVA), which is valued at a market cap of $327 million. The small-cap Canadian stock is down over 30% from all-time highs and has returned 75% in the past year.

Electrovaya designs, develops, manufactures, and sells lithium-ion batteries, battery management systems, and related products for energy storage, clean electric transportation, and other specialized applications in North America.

Electrovaya is riding a wave of momentum that’s transforming the Canadian battery maker from a niche player into a diversified power storage company. The firm posted its second consecutive quarterly profit in fiscal Q3 with revenue jumping 67% year-over-year to US$17.1 million, while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) hit nearly US$3 million or about 17% of sales.

Strong demand

Electrovaya secured over US$21 million in orders during the quarter, bringing the nine-month total to over US$65 million. Strong demand prompted management to add a second shift at the Mississauga facility in June and begin assembly operations at the new Jamestown plant in May.

Electrovaya is now eyeing the robotics sector, with partnerships established with three major original equipment manufacturers. These warehouse robots require batteries capable of handling multiple daily charging cycles while operating safely indoors around expensive equipment.

The airport ground equipment market represents another opportunity as major airlines are actively working to reduce carbon footprints in ground operations, creating demand for reliable battery systems.

Electrovaya is also developing custom high-voltage systems for Class 8 trucks through a partnership with Australia-based Janus Electric, with first deliveries scheduled for next year.

Analysts tracking the TSX tech stock forecast revenue to increase from US$44.6 million in fiscal 2024 (ended in September) to US$231 million in fiscal 2029. In this period, free cash flow is forecast to increase from US$1 million to US$77 million. If ELVA stock is priced at 10 times forward FCF, it could more than triple over the next three years.

The post TFSA Investors: How to Invest $7,000 in 2026? appeared first on The Motley Fool Canada.

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More reading

• The Best Stocks to Invest $2,000 in Right Now
• TFSA: 2 Top Canadian Stocks to Buy and Hold Forever

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Electrovaya. The Motley Fool has a disclosure policy.