Currently you can only contribute $5000 a year to a Tax Free Savings Account (TFSA). However, any capital gains to investments in a TFSA permanently increase the contribution room.
So let's say one year you put $5000 in a TFSA, and it doubles to $10000 because of some clever investment picks. That $10000 is now your investment limit for the year. The money can be completely withdrawn (without tax), and the full $10000 recontribute in the same year, or any year after.
However, if your $5000 TFSA investment dwindles to nothing, then the contribution room is permanently lost.
In conclusion, if $5000 doesn't mean much to you, then go for broke and invest in high-risk but high-gain equities for your TFSA - if you're lucky you might hit it big. If the $5000 is a significant sum of money for you, then you might want to take it easier and invest in something that's lower risk (but still gives a reasonable return).
ING Direct Canada have three mutual funds you can invest in, all eligible for TFSA status. They are (in order of increasing risk)
- Streetwise Balanced Income
- Streetwise Balanced
- Streetwise Balanced Growth
Increasing risk reduces the fraction of bonds, and increase the fraction of equities in the fund. Read the fund prospectuses at http://www.ingdirect.ca/en/save-invest/mutualfunds/learningcentre/prospectus/index.html before you make any investment decisions.
If you're new to ING Direct Canada, then use Orange Key Code 34431191S1 when you open your account at http://www.ingdirect.ca. This will give you a free $25 bonus when you make an initial deposit by cheque of $100.