Wealth that Grows Tax-Free
This guide explains how to get started in investing in the stock market in the safest & cheapest way possible, and how to use Canadian tax-sheltered accounts to buy halal assets that grow over time. If you find this guide useful, please share it with your friends and keep us in your dua'a.
Tax-Sheltered Accounts: TFSA and RRSP
To "buy stocks", first you need to open an investing account. Start with a tax-sheltered account, then you put assets inside it. TFSA and RRSP are powerful Canadian government programs that let you grow your wealth tax-free.
TFSA
Tax-Free SavingsYou pay tax on your salary, put what's left into the TFSA, and never pay tax again on the growth or withdrawals.
You invest $1,000. It grows to $5,000. You take the $5,000 out. You pay $0 in tax.
RRSP
Registered RetirementMoney you put in reduces your taxable income today. The government gives you a tax refund now, but you pay tax when you withdraw it at retirement.
If you earn $70,000/yr (approx. 30% tax bracket) and contribute $5,000 to your RRSP, you will receive a tax refund of ~$1,500 when you file your taxes.
Important: The RRSP deadline is the end of February!
This is the best time to get started—contributing now allows you to claim a refund immediately when you file your upcoming tax return.
âť“ Account FAQ
My work offers RRSP matching. Is this enough?
Matching is "free money," so you should always take it! However, it may not be enough to max your contribution room. More importantly, you must check if the investment options are halal. Many workplace programs only offer standard interest-based or non-compliant funds.
What happens when I withdraw?
- • TFSA: Withdraw anytime. No tax, no penalties. You get the contribution room back the next calendar year.
- • RRSP: The amount you withdraw is added to your income for that year and taxed at your current rate.
Can I only withdraw RRSP at retirement?
No, you can withdraw anytime. However, it is most common at retirement because your income (and tax bracket) is usually much lower then. If you withdraw while working a high-paying job, you will lose a large chunk of that withdrawal to taxes.
What to hold: Stocks vs. ETFs
Inside your TFSA or RRSP, you can hold individual stocks, gold, or ETFs. Why ETFs are better: An ETF (Exchange Traded Fund) is a single ticker that contains hundreds of stocks. This is "diversification," and it is the safest way to grow wealth.
⚠️ The Problem
Standard ETFs like the S&P 500 (SPY) or VTSAX contain interest-based banks, gambling companies, and alcohol producers. These are not shariah compliant.
What makes a stock Halal?
1. Business Screening
The company cannot make its money from: Interest (Banks), Alcohol, Tobacco, Gambling, Adult Entertainment, or Pork Products.
2. Financial Screening
The company must not have excessive debt. Generally, debt must be less than 33% of the company's total market value.
HISTORICAL GROWTH (%)
Comparing the growth of $100 invested over time. Past performances don't indicate future results.
Popular Halal ETFs Compared:
View Detailed ETF Comparison Guide →How to Get Started (The DIY Method)
You don't need a financial advisor to get started!
Wealthsimple Account
Download the Wealthsimple app. Open a self-directed investing account. It's the easiest and most common DIY investing platform in Canada.
No affiliation with WS
[IMPORTANT] CRA Room
Check your MyCRA account to see your contribution limits. Over-contributing leads to 1%/month penalties.
Transfer Funds
Link your bank and move your initial deposit. It usually takes 1-3 business days to clear.
Buy a Halal ETF
Search for ticker symbols like SPUS and place a "Market Buy" order.
Turn on Auto-Invest
The secret to wealth is consistency. Set up a $50 or $100/month recurring buy and forget about it.
Other Registered Accounts: FHSA and RESP
Once you've mastered TFSA and RRSP, these specialized accounts can help you with specific life goals like buying your first home or saving for your children's education.
FHSA
First Home SavingsThe ultimate account: Tax-deductible like an RRSP AND tax-free withdrawals like a TFSA (if used for a home).
You contribute $8,000. You get a tax refund today. In 5 years, it grows to $12,000. You withdraw it all tax-free for your downpayment.
RESP
Education SavingsSave for your kids' post-secondary education. The government actually gives you money to help.
You put in $2,500 for the year. The government adds a $500 grant (CESG) for free into the account instantly.
âť“ FHSA & RESP FAQ
What if I don't buy a home with my FHSA?
You can transfer the funds to your RRSP without using up any RRSP room! If you simply withdraw it as cash, it becomes taxable income, just like an RRSP withdrawal.
What happens if my child doesn't go to university?
You can get your original contributions back tax-free. However, the government grants (CESG) must be returned to the government, and you'll pay tax on any investment growth.
Are there age limits?
FHSA: Must be 18-71 and a first-time home buyer. RESP: You can contribute for up to 31 years after opening, but grants usually stop after the child turns 17.
Common Myths
"It's too risky."
While individual stocks are risky, the broad market has historically gone up significantly over any 15-year period. Diversification is your shield.
"I'll wait for a crash to buy."
Waiting for a crash usually means missing out on years of growth. "Time in the market" is better than "timing the market."
The Wealth Projection
The graph shows how your wealth grows when you leave it alone for 20 years. Compounded gains are slow at first, then accelerate.
Assumptions: 8% annual return, monthly compounding, consistent deposits. Market returns fluctuate and are not guaranteed.
Future Work
This guide is a living document. Here are topics we plan to cover in future updates:
đź“š Additional Accounts
Coverage of FHSA (First Home Savings Account), RESP (Registered Education Savings Plan), and guidance on halal mortgages.
đź’° Zakat on Stocks
Understanding how to calculate and pay zakat on your investment portfolio and stock holdings.
đź’ˇ Tips & Tricks
Advanced strategies like Norbert's Gambit for currency conversion and other cost-saving techniques.
đź“– Additional Resources
Curated list of books, YouTube channels, and educational materials for continued learning.
đź’¬ Community Discussion
Plans to establish a Telegram channel or forum for questions, discussions, and community support.