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Here's how to activate TFSA for a $ 1,000 / month-paying tax-free income stream

Your TFSA is an invaluable tool that can do incredible things that are unchanging to most investors who are not fully trained on the vehicle and how it stacks against other registered investment vehicles, such as RRSP.

Put simply, TFSA is one of the best ways for Canadians to grow their wealth. Revenues within a TFSA are not only otouchable by the taxpayer (except in very rare cases), but they may experience enhanced effects of long-term tax-free composition, which in the long run gives a ton of difference in relation to composition subject to taxation.

And above all, unlike RRSP, there are not so many strings that are a huge plus for younger investors who value convenience and flexibility over long-term commitments that can be severely penalized at some point in the road.

Composition of itself is a powerful effect over long distance, but with taxation taken from the equation, the effects can only be described as profound. And while RRSP is right for some people, given their unique circumstances, I believe that TFSA is the most robust one-size-fits-all solution for most investors.

While it is a common goal to maximize wealth creation within TFSA, many retirees or retirees wonder how their TFSA can become a passive income stream that can take home the bacon after they have decided to hang up skates in the workforce. Although a TFSA "tax-free" effect may seem less impressive in the near to medium term, it only becomes clear that the "tax-free" effect gives a world of difference.

Consider Inovalis REIT (TSX: INO.UN), a small European based REIT with a sustainable payout and a massive 8.23% distribution return. Security is, under most investors' radar, one of my top income streams candidates, not only because of the high returns, but because of the better-than-expected growth profile of confidence, allowing confidence to continue raising distribution on a fairly consistent basis.

If you are an investor who has been able to contribute to your TFSAs every year, while using the proceeds to invest in stocks, you could have accumulated enough money to create an income stream that could increase your monthly income by about $ 1000 without even achieving The.

Even if you invest in + 8% return securities, it may seem like a risky endeavor, especially if you want to leave the labor force earlier than expected, it is important to realize that with the rising interest rate environment, the ROI has increased and there are now many high quality securities like Inovalis Out there that can not only maintain such a high payout but can continue to increase it on an annual basis.

A month ago, I had highlighted the fact that Inovalis was due to a large low-risk sprint. As a relatively small REIT, Inovalis has a growth advantage over its larger peers. With Inovali's higher level of agility and its competent management team, REIT can effectively become a low-risk wax game and a high-income game at the same time.

Of course, there are many other super high returns with significant capital gains potential, but the odds are that you will manage a company with plenty of "luggage" that could introduce a higher level of risk to an income investor's portfolio.

In fact, Inovalis is a rare breed of security, and if you are looking to build a great tax-free income stream, I would strongly urge you to consider Inovalis as one of its highest elements.

Durable takeaway

A tax-free income stream of $ 1,000 per month may be far-fetched on the surface, but if you have already accumulated a TFSA triple-figure portfolio, you already have the opportunity to grant such a raise. In addition, with securities such as Inovalis, your income stream may rise to get an increase, possibly every year ahead – something that just isn't possible with most jobs out there that experience wage developments that are in line with inflation.

While Inovalis is not a single income stream store, it should definitely be seen as a core business for those who value returns, long-term growth and stability.

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Fool contributor Joey Frenette has no position in any of the mentioned shares. Inovalis is a recommendation of Stock Advisor Canada.

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