Where to Invest Your TFSA Contribution for Maximum Growth

Canadians can use the Tax-Free Savings Account (TFSA) to achieve both short- and long-term financial goals. Designed to encourage saving and investing, the TFSA offers a key feature: tax-free growth. Your investments compound faster without the drag of taxes as long as you follow the contribution rules.

Still, regardless of your available contribution room, the real driver of maximum growth in a TFSA is choosing the right investments. But which types of investments are best positioned to maximize growth under current market conditions?

A mix of stocks, exchange-traded funds (ETFs), and real estate investment trusts (REITs) in a TFSA can provide diversified exposure and help capture potential growth opportunities.

Anchor holding

Fortis (TSX:FTS) is the undisputed all-weather stock. This top-tier utility stock wears a crown. The $39.9 billion regulated electric and gas utility company is one of only two dividend kings in Canada. Its dividend growth streak stands at 52 years, and management has renewed its commitment to 4% to 6% dividend growth through 2030.

According to David Hutchens, CEO of Fortis, the highly executable five-year capital plan of $28.8 billion will drive long-term rate base growth of 7% and support the annual dividend growth guidance. The regulated growth strategy has likewise supported the evolving needs of its customers in Canada, the U.S., and the Caribbean.

If you invest today, FTS trades at $78.59 per share and pays a 3.2% dividend. The yield is relatively modest compared with that of other dividend titans. However, stability and reliability take precedence, especially in a TFSA and a volatile market.  

Core second-liner

The Vanguard FTSE Canada All Cap Index ETF (TSX: VCN) offers diversification and quarterly cash distributions. This ETF tracks the performance of the broad Canadian equity index, with representations from all 11 primary sectors. The total 205 holdings consist of large-, mid-, and small-cap stocks.

Performance-wise, VCN is up 36.4% from a year ago. At $67.26 per unit, the dividend yield is 2.1%. The wide diversification is an advantage because the ETF can capture overall market growth without concentrated risk. You can make VCN the core second liner to your anchor stock. More importantly, you eliminate the tedious stock selection process and mitigate the TSX’s potential underperformance.

Strong fundamentals

First Capital (TSX:FCR.UN) is a sound choice for TFSA investors, given the strong fundamentals of its grocery-anchored property portfolio as well as the impressive financial results in 2025. At $21.21 per share, current investors enjoy a plus-13% year-to-date gain on top of the generous 4.3% dividend and monthly payout.

This $4.5 billion REIT boasts a core portfolio of grocery-anchored, open-air shopping centres located primarily in urban and top-tier neighbourhoods with high population densities. As of year-end 2025, the occupancy rate is a high 97.1%.      

In 2025, net income attributable to unitholders rose 419.2% year-over-year to $1.1 billion, to include the remeasurement of deferred income taxes in the fourth quarter. First Capital’s high-quality grocery-anchored portfolio remains resilient, producing strong cash collections amid geopolitical tensions and changing global trade policies. 

Ideal allocation

Spreading your $7,000 TFSA contribution for 2026 across a mix of Fortis, Vanguard FTSE Canada All Cap ETF, and First Capital REIT creates a well-rounded portfolio. This balance of growth and stability can help navigate heightened market volatility while taking full advantage of the TFSA’s tax-free growth feature.

The post Where to Invest Your TFSA Contribution for Maximum Growth appeared first on The Motley Fool Canada.

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More reading

• How a TFSA Can Generate $4,360 in Annual Tax-Free Passive Income
• My 3 Favourite TSX Stocks to Buy Right This Moment
• Got $21,000 Just Sitting in a TFSA? This Dividend Stock Is Worth a Look
• Stock Market Sell-Off: 3 Stocks I’m Still Buying Now
• Market Turbulence Ahead? Take Shelter With 2 Handpicked TSX Stocks

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends First Capital Real Estate Investment Trust and Fortis. The Motley Fool has a disclosure policy.