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Everyone loves the thrill of a good race, and small investors are no different. That’s what inspired MoneySense to launch the inaugural Great TFSA Race last year. It was designed as a contest to see who has grown their investments the most since 2009, when Tax-Free Savings Accounts were introduced. Because ev-eryone who was 18 or older at the time had exactly the same amount of contribution room—$31,000—it was a fair fight.

To find our winners, we went in search of investors who made big bets to grow their contributions into much more. How much more? Well, between the two of them, this year’s winning husband and wife team grew their in-vestments into more than $1 million!

Anyone in the country could enter, and of the 60 or so Canadians who did so this year, we selected the six with the biggest balances as of October 31.

If you love gutsy stock plays, you’ll enjoy reading about theTOP SIX WINNERS of this year’s Tax-Free Savings Account contest. Their investment strategies will amaze you—and inspire you, too

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In the pages that follow, our winners happily reveal their strategies and the endgame they’ve planned for their TFSA money.

Some, like Rick and Maureen O’Hanley Doucette of Kelowna, B.C., are aggressive risk-takers who held thousands of shares of only one penny stock for the entire six years. Others, like Nita Sproule of Calgary, are slow and steady investors focused on buying large-cap value stocks.

Just keep in mind that their TFSAs are a small part of their total portfolio—often less than 10%. So they’re comfortable tak-ing big risks with the knowledge that they have safer investments in their RRSPs, com-pany pension plans or non-registered ac-counts. “Still, in many cases, the bigger risk is simply keeping your TFSA money sitting in cash or GICs and forgoing growth, some-thing that 80% of people who contribute to TFSAs do,” says Jason Heath, a certified financial planner in Toronto. That’s why Heath recommends that TFSA investors hold high-growth or income-generating assets to take full advantage of the tax break.

We hope you’ll be inspired by these suc-cess stories. But remember that any invest-ment with the potential for huge returns also comes with a lot of risk. Before you try any of these strategies in your own TFSA, do your own research, review your short- and long-term goals and consider talking over your plan with an adviser.

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$516,297$509,784 MAUREEN Rick Doucette // 47 // AND

Maureen O’Hanley Doucette // 46 // KELOWNA, B.C.INVESTMENT STRATEGY

All-in on one penny stock

When the government introduced TFSAs in 2009, Rick Doucette and his wife Maureen decided to try for big gains in that account. Their opportunity came in 2010 after the couple talked with a close friend who had

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$262,000Shafik Hirani // 43 // CALGARY INVESTMENT STRATEGY

Betting big on unlikely events

Shafik Hirani’s TFSA strategy is unusual and complex, but it allowed him to hit the jackpot. In fact, the senior executive financial adviser at Investors Group Financial Services in Calgary admits that his TFSA has always held speculative investments. “I trade what I call black swan opportunities,” says Shafik.

The term black swan—made famous in a 2007 bestseller by Nassim Nicholas Taleb—refers to a major event in the markets that would have been all but impos-sible to predict. Taleb suggested investors could profit from black swans by mak-ing small wagers that were likely to pay off big. “It involves keeping most of your money ultra-safe, but using just a small portion—say 10%—for speculative bets

whose prices will soar during a market panic,” says Shafik. “I like to keep these bets inside my TFSA, as it’s easy to measure your returns that way.”

In 2012, Shafik bought Yellow Media (TSX: Y), a communications company on the verge of bankruptcy. “I knew it would either go broke or do a consolidation,” says Shafik. “I thought it would consolidate and had an exit strategy ready. I won.” The company’s stock price tripled

in a matter of months, bringing his TFSA total to about $60,000. In early 2013, he invested in Fannie Mae (OTCBB: FNMA), the

beleaguered U.S. mortgage finance company. “I bought Fannie Mae stock for 60 cents and sold it for close

to $6 a share in February 2014, a few months before it crashed back down to $1.50.”

In early October, Shafik turned bearish—he took the $138,000 in his TFSA and essentially shorted the U.S. market. Although you are not

allowed to take short positions in a TFSA, you can use exchange-traded funds designed

to go up when the markets go down. Some of these ETFs even use leverage to magnify your gains or losses. Shafik bought the Direxion Daily S&P 500 Bear

3x Shares (NYSE ARCA: SPXS), which spiked in mid-October. His

TFSA sat at a hefty $262,000 on October 31.

“These are all speculative bets that have absolutely no basis in sound financial planning,” Shafik admits. “It’s gambling and, frankly, I should have zero in my TFSA. But when it comes to investing, I’d rather be lucky than good.”

Turns out the luckiest one of all may be Shafik’s four-year-old son Adrian. “He’s the love of my life and I don’t plan to touch

a penny of this money for myself. It’s all for him,” Shafik says.

been given the task of managing a company on the verge of bankruptcy. “The company was at death’s door, but we felt it would survive,” says Rick, a financial adviser in Kelowna, B.C. “So we decided to buy in.”

Kelso Technologies Inc. (TSX: KLS) was a tiny company that desperately needed cash, but it had great leadership. Rick and Maureen spent time researching the prod-ucts Kelso developed, including new tech-nology and safer products for rail tank cars. “The rail industry hadn’t changed much in over 70 years,” says Maureen, who runs her own communications company while raising the couple’s three young kids. “The industry was due for a regulatory overhaul.”

The couple decided to buy 100,000 shares at 10 cents each. They also bought 50,000 warrants that gave them the right to buy additional shares at 17 cents. (Warrants are similar to stock options: they give an in-vestor the right to buy shares at a prede-termined price for a set period of time.) These warrants proved key to helping the Doucettes build their wealth, both inside the TFSA and out. “When the shares were worth 18 cents we transferred $5,000

worth into our TFSAs and paid the tax on the capital gains,” says Maureen, whose

TFSA today holds only Kelso stock. As the stock continued to climb, Rick and Maureen transferred as many

shares as they could into their TFSAs.The 2013 rail disaster in Lac-Mégan-

tic reinforced the need for Kelso’s prod-ucts, and 2014 brought a further boost to the stock price when it was listed on the NYSE MKT (a U.S. exchange for small-cap stocks).

By October 31, 2014, Kelso shares were trading at just under $6.53 per share. Rick has 79,100 shares in his TFSA while Maureen has 78,100, so their account bal-ances were $516,297 and $509,784, respec-tively. The couple firmly believes the com-pany will eventually be bought out and they’re determined to hold on to all of their shares until then. “We believe Kelso has the potential to climb to $25 a share,” says Rick. “We’re patient and will wait.”

In three years, the couple plans to di-versify their TFSAs and switch to income-producing stocks and mutual funds, while keeping an eye out for other high-growth opportunities. In the longer term, they have big dreams for their TFSA money. “We ul-timately plan to transfer a portion of the money we get from the sale of our Kelso shares to a charitable foundation that we’ll manage ourselves,” says Maureen. “That’s what we’re really looking forward to now.” ➤

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Philippe Bergeron-Bélanger has a big goal for his TFSA: he wants to reach $1 million by 2020. The accountant and master of finance student at the University of Sherbrooke came late to the game, opening his TFSA in June 2013 with an initial investment of just $12,000. On the recommenda-tion of a friend, he bought a small mining exploration

company called Nevado Resources Corp. (TSX Venture: VDO). “That was a mistake,” he says. “I bought first and did my re-search later. I soon realized the company had no expectations for revenue or profits any time soon. So I sold it a month later

for about the same price. That’s one of my strongest traits—I don’t waste time praying for losing stocks to go up.”

Philippe then used all his TFSA contribution room to bring the account up to $26,000 and started investing in nano-caps—stocks

with less than $50 million in market capitalization. “That is my playground,” he says. “I believe certain nano-caps are way undervalued given their growth prospects. Institutions can’t buy them because they are tiny and illiquid, but after the stock doubles or triples, it will pop

up on the screens of institutional investors and money will flow in and drive the stock price even higher.”

Before buying anything, Philippe ensures a company’s growth is sustainable, that it

has a good product or much-needed ser-vice, and solid management. “And I

always talk to the CEO before buying the stock.” Nano-caps are often

ignored by analysts, so investors have to rely on their own re-search. “I work hard to find op-

portunities that could reward me with a 500% to 1,000% return over the next three to five years,” he says. “Maybe you’ll find only two or three a year, but when you

do find them, I believe you should concen-trate your money in them.”

In July 2013 he put $6,000 into the phar-maceutical company BioSyent (TSX Venture: RX) at $1.53 a share and he sold them for $9.42 this past September—a 510% return in roughly 14 months. He also invested $6,000 in XPEL Technologies Corp. (TSX Venture:

DAP.U), which makes automotive paint and other products. He bought shares at 46 cents in 2013 and last summer bought more at $1.73. XPEL is now selling for more than $3.

Philippe insists he’s not an active trader: when he finds a good opportunity, he takes a position and waits. And who can argue with the results? “I’m sure a lot of other people have higher balances than me, but I think I managed to build my TFSA fairly quickly and don’t intend to stop now.”

INVESTING

$86,300Milan Gonda // 26 // EDMONTONINVESTMENT STRATEGY

Concentrates on one stock at a time

If there’s one thing you can say about Milan Gonda it’s that he doesn’t invest in anything he doesn’t understand. But when he finds a stock he likes, he’s all-

$88,062Nita Sproule // 43 // CALGARYINVESTMENT STRATEGY

Large-cap value opportunities

Nita Sproule, a 43-year-old stay-at-home mom and part-time IT worker in Calgary, remembers the 2008–09 collapse of the stock market like it was yesterday. “I

saw value everywhere after the meltdown,” says Nita. “That’s when I started looking for value stocks.” Her first was AltaGas Ltd., (TSX: ALA), a natural gas, power and utility company. She bought 350 shares at $15: they were worth over $45 at press time. “I still have those in my account.”

In 2010, Nita bought AutoCanada (TSX: ACQ), a company that invests in car dealer-ships across the country. It was a MoneySense Top 200 pick, and Nita bought 1,200 shares at $5 each. She sold 800 at $22 in May 2013 for a 400% gain. The company was trading at $59 a share as we went to press. “In hind-sight, I should have held on to all the shares and sold everything at its high of $90 this past June. But on the bright side, I still own 400 shares that are now almost 12 times higher than the price I bought them at.”

Nita owns six other stocks as well, in-cluding Canadian Oil Sands (TSX: COS) and Encana (TSX: ECA). Her most recent purchase was Teck Resources (TSX: TCK.B). “I’m generally a value investor, but I can be swayed over to growth,” says Nita. “At my core, I’m a buy-and-hold gal and look for long-term value.”

That’s the opposite of her husband Ian’s approach. “He’s always looking for that home run with his penny stocks, and I have about four times more in my TFSA now than he does,” says Nita, who hopes to use her TFSA money to build the couple’s dream house one day. “So I hope his TFSA catches up with mine soon. I’ll get my new house all that much quicker.”

TOTALTFSA $100,021

Philippe Bergeron-Bélanger // 27 // MONTREALINVESTMENT STRATEGY

Looks for high-growth nano-caps

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in. “I’m highly concentrated in my stock buying, seldom owning more than one stock at a time,” says the aerial sensor operator in Edmonton.

In fact, Milan has owned just three stocks in his TFSA. He analyzes stocks both fun-damentally and technically, and when he finds something he likes, he moves in. “Then I hold for at least 12 months and keep add-ing to my holding.”

Milan’s first stock purchase was Canadian National Railway (TSX: CNR) in 2010. He bought more in 2011 and 2012, and sold all his shares in May of 2013 at $101—more than doubling his money. That same day, he bought Magna International (TSX: MG) at $62 a share. Milan sold his shares last March at $105 each for a 70% increase, bringing his TFSA to $60,000.

“I want to fully understand why I’m buying a stock,” says Milan. “I’m not inter-ested in gambling. I want to invest.” Since then, Milan has held only one stock—Home Capital Group (TSX: HCG), a mortgage lend-ing company. He loves its management team and believes the company has stayed under the radar. Milan “tiptoed into it” at about $28 last spring and continued buying more shares over the next couple of months. The stock recently traded at about $50. “My TFSA touched $100,000 twice in the fall, but the stock has been volatile lately,” says Milan. “I believe it’s one of the best buys on the TSX right now. You know what they say: third time’s a charm.”

$70,474Jin Won Choi // 32 // LONDON, ONT.INVESTMENT STRATEGY

Flexible and opportunistic

You may remember Jin Won Choi, a software developer with a Ph.D in mathematics, from our TFSA contest winners a year ago. Jin came in fifth in 2013

with a TFSA total of $50,876. And even though he now has $20,000 more than last year his ranking has slipped to sixth. “This year the stock markets were much more volatile and I had to do some creative things to boost my returns.”

Although Jin has invested in blue-chip and small-cap stocks, he’s had the most success with micro-caps—those with a mar-ket capitalization of $50 to $300 million. But he changed his strategy in 2014. Believ-ing that the bull run of the last five years was due for a correction, Jin bought put options—contracts that allow the holder to sell a specified amount of stock at a set price within a specified period. (Buyers of put options believe the underlying stock will drop in price.) Jin bought put options on several holdings, including iShares S&P/TSX 60 Index Fund (TSX: XIU), which tracks large-cap Canadian stocks, as well as on a couple of banks and energy stocks. “A lot of people don’t know that you can hold put options in your TFSA but you can,” says

Jin, now the father of a three-month old daughter. “Holding put options is an insur-ance policy, but fires don’t always happen. In my case, I lost money on the options themselves, but I was able to mitigate my losses in other areas of my portfolio.”

Over the years, Jin has found great op-portunities in large-cap stocks, including buying General Electric (NYSE: GE) for $5 and Bank of America (NYSE: BAC) for $3 in 2009. Then he focused on retail stocks, mainly because he saw the sector struggling, and growing income inequality wasn’t help-ing. “I just asked myself, ‘What do I want?’” says Jin. “I’m a busy guy who wants good food but doesn’t have the time to cook.” So he bought shares in Tim Hortons (TSX: THI) at an average price of $43 throughout 2013 and early 2014, and sold them all last August for $60, just before the Burger King merger jacked up the share price to $86 later that month.

Jin continues to own Calgary-based Per-petual Energy (TSX: PMT), and although natural gas prices have dropped, the com-pany continues to hold plenty of valuable land and several gas plants, he explains. “I bought shares at $1 last year and after the stock price touched $2 in July, it’s fallen back to $1.39, so it’s still up 39% from where I bought it.”

Jin’s ultimate goal has remained the same: to reach $1 million in his TFSA by 2033. “But who’s to say I should stop there? Maybe I’ll have $10 million by 2040.” M

// 1 // Whatever amount you withdraw from a TFSA is added to your contribution room in the following calendar year. It doesn’t matter whether the withdrawn amount is just your original contribution or the interest, dividends or capital gains your investments earned. And just as capital gains are not taxable in a TFSA, capital losses are not deductible.

// 2 // Interest, dividends and capital gains in your TFSA are not considered income, even when you withdraw the money. That means federal income-tested benefits and credits such as Old Age Security, the Guaranteed Income Supple-ment and the Canada Child Tax Benefit will not be reduced as a result of investment growth inside your TFSA.

// 3 // Interest on money borrowed to invest inside a TFSA is not tax-deductible.// 4 // Accidental overcontribu-tions to a TFSA are subject to a penalty of 1% for each month the overcontribution remains in the account. Deliberate overcontributions are subject to a penalty tax of 100% of income or gains from the overcontribution.// 5 // You can’t claim the tax credit on Canadian dividends if the stock producing those dividends is held within a TFSA. If you have run out of contribu-tion room in your RRSP and TFSA, it may be best to hold your Canadian dividend stocks in a regular, non-registered account. With foreign stocks, there is no dividend tax credit, but you have foreign withhold-

ing taxes to consider. In a non-registered account, you can recover at least part of the withholding tax by way of the foreign tax credit. Also keep in mind that while the U.S. does not withhold tax on dividends paid into an RRSP or RRIF, that favourable treatment doesn’t apply to dividends paid into a TFSA.// 6 // The management fees paid by a TFSA account holder will not be counted as part of your contribution, but they will also not be tax deductible for income tax purposes.// 7 // You can open a TFSA for a child when he or she turns 18. But beware: “If you gift money to your child for a TFSA contribution, that money becomes the child’s,” says Jason Heath, a Toronto planner.

7 THINGSYOU DIDN’T KNOW ABOUT TFSAsTax-free Savings Accounts are relatively simple to understand and use, but they do have some quirks that can be confusing. Pay special attention to these rules when you make your TFSA contribution and you’ll be cruising toward higher investment gains in no time.