TFSA: Here’s How I’d Invest $6,000 if the Market Crashes Again

Air Canada (TSX:AC) is a spec bet that TFSA investors may want to consider if they’re looking to strike a balance in this turbulent market.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you’ve yet to invest this year’s $6,000 Tax-Free Savings Account (TFSA) contribution because of the off-the-charts volatility we’ve experienced because of the coronavirus, you’re not alone. While I’d never advise timing the market, I do think it’s only prudent to have a “Plan B,” with a bit of cash on the sidelines, defensive stocks, hedges, bond proxies, and all the sort, just in case the stock market crashes again.

At this juncture, it seems as though most investors have already bought into a V-shaped economic recovery. Promising vaccine news has made stocks that were the hardest hit by the coronavirus rally with fury this week. While it’s good to be cautiously optimistic while you put money to work in your favourite stocks today, it’s always wise to be prepared, at least in part, for a worst-case scenario to unfold.

The COVID-19 pandemic could potentially drag on into 2021 and beyond. And given the likelihood of a second outbreak that could hit before an effective vaccine is broadly available for distribution, a second market crash, I don’t think, would be out of the ordinary.

How am I investing with my TFSA given the unprecedented amounts of uncertainty?

You’ve probably heard the “barbell approach” being tossed around in the financial media of late. The approach entails balancing your investment across the two extremes: resilient stocks that can hold their own (or even benefit) if things get worse with this pandemic and borderline speculative stocks at ground zero of the coronavirus crisis that will move violently on coronavirus news.

A name like Shopify, which has enjoyed pandemic tailwinds, belongs to the former category, while a name like Air Canada (TSX:AC), which is effectively a play on the arrival of a vaccine, is a play on the latter.

You may already have a barbell-style portfolio without even noticing it. And you should seek to strike a balance of the two extremes, rather than ditching all your most at-risk stocks at a loss and risking missing out on tremendous upside in the event of a timelier-than-expected arrival of a vaccine.

Many TFSA investors are rushing out of names at the “at-risk” extreme of the barbell, because the line between investment and speculation has been blurred with such names as Air Canada. Such a hard-hit stock could be a potential multi-bagger if a coronavirus vaccine were to arrive sooner rather than later, though, making the at-risk name worthy of a spot in an investor’s portfolio, provided that the investor also has a weighting in COVID-19-resilient stocks should the pandemic drag on for another few years.

What stocks would I look to if the market rolls over again?

Air Canada is a play that could sustain further damage if a second wave of coronavirus cases hits us later in the year. The Canadian airline stock has become an all-or-nothing speculation, but it’s a speculation that’s worth taking, especially for those who strike a balance at both ends of the COVID-19 barbell.

Shares of AC are likely going to continue to be turbulent, and should they fall back into single-digit territory, I’d consider nibbling into a position, as the discount to book widens (shares currently trade at 1.04 times book) with a portion of my TFSA. Air Canada is a play on the timely arrival of a vaccine, and should it land before the next coronavirus resurgence hits, there’s no telling how high AC stock could fly.

Should you invest $1,000 in Air Canada right now?

Before you buy stock in Air Canada, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Air Canada wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Stocks for Beginners

A shopper makes purchases from an online store.
Tech Stocks

Buy the Dip on the Return of Recession Stocks?

If a recession comes back, there are some stocks that could fair well afterwards. And this is one of the…

Read more »

Man holds Canadian dollars in differing amounts
Stocks for Beginners

Cash Is King? Think Again During Today’s Market Dip

Sure, cash is great, but during a market dip investors may want to consider using some of the cash to…

Read more »

grow money, wealth build
Stocks for Beginners

How I’d Build a $15,000 Portfolio for Income and Growth With Canadian Value Stocks

Looking for some Canadian value stocks to buy without breaking the bank? Here's a trio to consider buying this month.

Read more »

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Economic Headwinds: Should You Still Consider Buying the Dip?

A market dip might seem like a bumpy road, but it can be far smoother in the future with the…

Read more »

calculate and analyze stock
Stocks for Beginners

Stagflation Survivors: An Investment Strategy for Today’s Market Dip

During the market dip, there are ways to keep yourself safe and settled. So, let's get into them.

Read more »

dividends can compound over time
Stocks for Beginners

Inflation Fighters and the Opportunity to Buy the Dip

Inflation continues to be a struggle, but there are ways to battle during this market dip.

Read more »

trends graph charts data over time
Stocks for Beginners

Recession Stocks Are Back: Time to Buy the Dip This April?

During a recession, it's the best idea to go with stocks that have long-term opportunity ahead -- like these two.

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

Dip Buyers Could Win Big in Today’s Market Dip

If you want to buy the dip, think long-term. Which is why this TSX stock is a top option.

Read more »