How to Build a $1M TFSA Portfolio in 7 Years


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A monthly investment of $1,000 in your Tax-Exempt Savings Account (TFSA) can add up to $1 million in seven years if your portfolio achieves an average return of 10%. But getting that 10% average return is a challenge. The recent US banking crisis has once again highlighted the importance of a portfolio that is diversified across different sectors and asset classes.

While some sectors could bring you 30%, 50%, or even 100% returns in the short term, they could also take away those returns if gains aren’t booked on time. The past three years in the stock market show that buying the dip isn’t enough. To build a $1 million TFSA portfolio in seven years, you need to do more.

Year investment Investment return @ 10% total quantity
2023 $12,000 $12,000.0
2024 $12,000 $1,200.0 $25,200.0
2025 $12,000 $2,520.0 $39,720.0
2026 $12,000 $3,972.0 $55,692.0
2027 $12,000 $5,569.2 $73,261.2
2028 $12,000 $7,326.1 $92,587.3
2029 $12,000 $9,258.73 $1,13,846.1
How do you build a $1M TFSA portfolio with a 10% average annual return?

How to build a $1M TFSA portfolio

The volatile stock market is going through the worst recession since 2008 Composite TSX Index 6.5% drop in less than 10 days. US banks failed to keep pace with rising interest rates and falling tech stocks, prompting a sell-off in global bank stocks. The liquidity crisis put pressure on oil stocks and they plummeted. All sectors dependent on economic growth suffered a slump. Even the robust stocks fell victim to the market exit of investors.

In fear lies the opportunity of value investing. Now is the time to buy into value stocks and book a 30%, 50%, or 100% gain on a recovery rally. However, remember to book profits during bull cycles and lock in the 10% average return. Let’s see how.

A stock to buy in your TFSA during the market crash

A recession affects the overall market and forces some companies to revise their forecasts. In times like these, those with less debt and lower overheads thrive. The current market crash has created an opportunity to buy bombardier (TSX:BBD.B) shares in your TFSA. The business jet maker is resilient to a recession as its customer base is unaffected by the recession.

The company has already repaid its 2023 and 2024 debt and is gradually reducing its 2025 debt term. That two-year buffer can help the jetmaker weather a recession and deal with order delays. However, the market turmoil has sent Bombardier stock down more than 16% in less than 10 days. A deeper dive is imminent. I expect the stock to fall 30-40%.

A good strategy would be to buy a small amount of Bombardier stock during the downturn and lower your overall stock cost. After the dip, the stock could gain momentum as it delivers its order book. Bombardier stock could soar 30-50% in a recovery rally.

Just as you buy shares in tranches, you can also sell tranches, with the first tranche selling for a 30% yield and the next for a 50% yield. You can use the past returns of Dividend Aristocrats, which are less volatile, as a guide, not a guarantee, to achieve a 5-8% return in all market conditions.

A growth stock you can buy with investment earnings

v. Chr (TSX:BCE) is a Dividend Aristocrat worth investing its capital gains from Bombardier. That’s because BCE has an average dividend yield of 5% and it’s growing at a compound annual rate of 5%. The telecom company is resilient to a recession as it has locked in a weighted average cost of public debt at about 2.8%. And ~85% is fixed rate debt, reducing the impact of rising interest rates on earnings. In addition, the company’s infrastructure is not significantly affected by real estate prices. And demand for telecom services is recession-proof.

Final Thoughts

Diversify your portfolio with growth stocks and book profits on time. Some stocks can give you a 30% return, while others can give you 10%. Keep booking a 10% yield and secure it with less volatile dividend stocks. Diversification can spread your risk and ensure a minimum return every year.

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