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Exactly What Is a Self-Directed TFSA? How Do They Work?


A self-directed tax free savings account is an account where the decisions on what you invest in are decided by the investor. While traditional TFSA accounts are widely used in Canada, self-directed TFSA offer unique benefits you may not know of yet. These two investment options are different from each other. Similar to a self-directed RRSP account, a self-directed TFSA gives the investor more control over their investment choices.


What Is a Self-Directed TFSA?


Common TFSAs are an investment account that contains investment products you have chosen or have arranged through a financial institution. Within a self-directed TFSA, you have complete control over the investment decisions for the account and are the one choosing what to invest in ...


What Can You Invest in With a Self-Directed TFSA?

  • Stocks

  • Cash

  • Mutual Funds

  • ETFs

  • Bonds

  • Precious metals such as gold and silver

  • Other investments such as MICS (Featured here at Nest Capital)


Things to Note Before Choosing a Self-Directed TFSA


Before using a self-directed TFSA, it is important to understand this type of investment clearly. By understanding the basics on this account you can utilize its benefits.


Tips to Consider:

  • Understand your risk tolerance.

  • Remember to consider diversification.

  • Plan out your short-term and long-term investment goals.

  • Grasp the fee structure for this account.

  • Remember to make informed decisions, not based on emotions.


Key Advantages of a Self-Directed TFSA


The main advantage above all with this type of investment account is the control you have on what you choose to invest in. It is important to note that with this type of account, the investment choices are on you. Remember to understand what you are investing in to mitigate any potential losses or risks.


Note that not all self directed TFSA’s investments available are the same across institutions. Most TFSAs offered through banks are limited to the standard products such as stocks, mutual funds and exchange traded funds. Other financial institutions such as Trust companies may allow for expanded TFSAs investment options such as investing in pools of mortgages found via Nest Capital Mortgage Investment Corporation.