The Great TFSA Race: 2nd place

2nd place: Shafik, $262,000

He bets big on unlikely events

(Photograph by Ania & Tyler Stalman; Erik Putz)

(Photograph by Ania & Tyler Stalman; Erik Putz)

Shafik Hirani // 43 // Calgary

TFSA: $262,000

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 impossible to predict. Taleb suggested investors could profit from black swans by making 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.

The Great TFSA Race 2015

1st place

Rick & Maureen’s TFSAs: $1M+

2nd place

Shafik’s TFSA: $262,000

3rd place

Philippe’s TFSA: $100,021

4th place

Nita’s TFSA: $88,062

5th place

Milan’s TFSA: $86,300

6th place

Jin’s TFSA: $70,474