TFSA: How Beginners Can Create a Passive-Income Portfolio

Even beginners can build passive income in a Tax-Free Savings Account (TFSA), as you don’t need perfect timing or a finance degree. You need a simple plan, a few quality holdings, and the patience to let cash payouts and growth stack up tax-free, year after year. So, let’s look at how to get started and where to put it.

Getting started

Start by deciding what “income” means for you. Some people want cash they can spend each month. Others want income that they automatically reinvest to grow faster. Either approach works, but pick one first so you don’t panic-sell the moment a dividend stock dips and the news gets loud. Keep it small at the start. Two or three holdings are enough while you learn. Turn on dividend reinvestment if your broker offers it, so you buy more shares automatically. Make sure you still have a cash cushion for bills, because selling investments to pay for surprises is the fastest way to break compounding.

Next, keep the portfolio boring on purpose. Mix a steady dividend payer with something that can grow earnings over time. Reinvesting matters more than hunting the biggest yield. A sky-high yield often signals stress, while a moderate yield with growth can become a much larger income stream later.

Finally, protect yourself from rookie mistakes. Don’t buy five copies of the same idea, like only banks or only oil. Don’t chase a stock after a huge pop. Add money on a schedule, not on a mood. Use a simple rule, like “buy once a month” or “buy every payday.” Over time, the habit matters more than the headlines. Also, check fees and commissions, as small accounts feel them more, and fees quietly steal future income.

POW

Power Corporation of Canada (TSX:POW) works well for a beginner portfolio as it sits above a set of financial engines that Canadians already use. It owns major stakes in Great-West Lifeco and IGM Financial, plus other investments, and it benefits as those businesses earn, invest, and grow. That relevance feels strong in 2026 because many investors want stability, dividends, and exposure to long-term wealth trends without betting on a single hot theme. The dividend stock has also shown real momentum. POW shares are up about 63% in the last year at writing. That move suggests the market has been re-rating the company as results improved and confidence returned to the broader financial sector. It still won’t behave like a tech rocket, but it does not need to. For a TFSA, steady compounding beats drama.

Earnings give the story teeth. In the third quarter of 2025, Power Corporation reported net earnings from continuing operations of $703 million, or $1.10 per share, and adjusted net earnings from continuing operations of $863 million, or $1.35 per share. It also reported assets under management and advisement of $302.6 billion at September 30, 2025. On valuation, it trades at about 15 times earnings, with a dividend yield at 3.4%. That is a fair price for a business designed to compound, but it is not a free lunch.

If markets stay constructive, fee income and investment results at its key holdings can keep trending higher. If rates drift lower, borrowers may breathe easier, which can help credit trends. The risks are simple. A market pullback can hit earnings, a recession can slow new money coming in, and a sudden crisis can widen the discount investors apply to holding companies. That volatility is normal. A long horizon makes it manageable, especially if you keep reinvesting. And you avoid checking the quote every single day.

Bottom line

POW can help beginners build passive income because it pays you to be patient. You get a dividend you can reinvest inside the TFSA, plus a business model tied to long-term savings and insurance demand. In fact, here’s the dividend you could earn from a $7,000 investment.

Buy it in sensible chunks, keep adding new TFSA room over time, and let compounding do the heavy lifting while you get on with your life.

The post TFSA: How Beginners Can Create a Passive-Income Portfolio appeared first on The Motley Fool Canada.

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More reading

• 1 Canadian Dividend I’d Depend on for a Decade
• 3 Must-Have Blue-Chip Stocks for Canadian Investors
• Start 2026 Strong: 3 Canadian Dividend Stocks Built for Steady Cash Flow
• A Recession-Resistant Dividend Stock for Lifelong TFSA Income
• A Decade From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.