By regularly investing in dividend stocks or growth-focused exchange-traded funds (ETFs), you can let your money grow and generate income— all tax-free! Over time, the returns from your investments could potentially rival the earnings from a part-time job, but without the extra hours. It’s like having your money work for you while you enjoy more free time! So, how do you get started?
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Consider an ETF
Investing in a safe ETF is a fantastic way to build a part-time income through your TFSA without the stress of stock-picking. Many ETFs track reliable sectors or indices, like the S&P/TSX 60, which has historically delivered average annual returns of around 7-8%. If you invest $10,000 in a well-diversified ETF with a 7% return, your money could double in about 10 years. All your gains would be tax-free thanks to the TFSA. Over time, the compounding effect can significantly boost your returns, leading to potential yearly payouts that rival part-time earnings.
For example, if you build a portfolio of dividend-focused ETFs with a 4% annual yield, $100,000 invested could generate around $4,000 per year in tax-free income. This translates to an extra $333 a month—equivalent to working 20 hours at $16.50 an hour, but with no time commitment! Reinvesting dividends or adding to your ETF holdings can further grow this income stream, potentially replacing the need for a part-time job altogether.
The JEPI ETF
The JPMorgan Equity Premium Income ETF (TSX) is an excellent choice for anyone looking to generate safe, consistent income within a TFSA. Backed by J.P. Morgan Asset Management, which manages a whopping US$3.3 trillion globally, JEPI focuses on U.S. stocks, particularly those in the S&P 500. It combines high-quality equity investments with an options strategy that generates extra income by selling out-of-the-money call options. This means you get a steady income stream from both dividends and options premiums, making it a solid option for income-focused investors seeking lower volatility.
JEPI is designed to deliver much of the S&P 500’s returns but with less risk, thanks to its built-in downside protection from its covered call strategy. For instance, if you have $100,000 invested, the potential income generated from dividends and options premiums could easily rival what you’d make in a part-time job—without the extra hours! Given its balanced approach between growth and income and the expertise of J.P. Morgan’s team, JEPI could be a powerful tool in transforming your TFSA into a steady source of passive income.
Bottom Line
Let’s say you invest $100,000 into JEPI. If it rises by 12%, your shares could increase significantly. Here’s a snapshot of what that investment could look like without dividends:
| Company | Recent Price | Number of Shares | Portfolio Total |
|---|---|---|---|
| JEPI – now | $25 | 4,000 | $100,000 |
| JEPI – 12% | $27 | 4,000 | $112,000 |
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As you can see, your shares could rise to $12,000 in just a year— and that’s not counting the potential dividends from JEPI ETF. Over time, you could create an investment portfolio that acts like a part-time job—all tax-free in a TFSA!