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Putting a little extra money into your savings account every month may be a good idea to have a financial cushion to fall back on. But unless you earn a significant income, it can be difficult to build up a large amount of money in a relatively short amount of time using this tactic. 

That’s why investing is so attractive to many Canadians. But what are the best investments in Canada and how do you choose the right ones to make your money work hard for you and build wealth over time?

Best Types Of Investments In Canada

The following are the best types of investments for Canadian investors.

Stocks

Perhaps the most commonly-known investment vehicles are stocks. When you buy a stock, you’re essentially purchasing a share in the company that issues the stock. When the stock increases in value, so does your investment. 

Stocks offer a way for investors to realize sizable returns over the long run. However, they are usually riskier investment vehicles as a result because of their inherent volatility and vulnerability to losing a lot of value in a short amount of time. Generally speaking, the higher the risk, the higher the potential for massive gains. 

Stock investing is good for both short- and long-term investing, depending on what your goal is. You can day-trade stocks for quick gains, or hold onto your stocks for a more long-term wealth-building strategy. 

ETFs And Mutual Funds

An exchange-traded fund (ETF) is a type of security that measures an index, sector, or another asset, and can be bought or sold on a stock exchange like a regular stock. You can use ETFs to track the price of an individual commodity or a more diverse group of securities. 

They are called exchange-traded funds because they are traded on an exchange. Like stocks, the price of ETF shares will fluctuate throughout the trading day. 

ETFs are ideal for investors who don’t want to gamble too much with their investment, but still want to be open to the possibility of realizing decent gains. They’re also ideal for those who wish to take a more passive investment approach, as they basically allow investors to purchase an entire stock market at a low cost.

Mutual Funds

A mutual fund is a collection of different investments, like stocks or bonds, in one fund. This type of investment vehicle allows you to invest in several companies or bonds at one time without having to purchase individual stocks separately. In this way, you’re essentially diversifying your investment dollars rather than putting all your eggs in one basket. Because of this, the risk level is relatively low. 

Unlike ETFs, mutual funds only trade once a day after the market closes. As such, they are not as liquid as ETFs. 

Mutual funds are managed by professional money managers, so they’re ideal for conservative investors with not much appetite for risk who prefer a passive investment that does not require much oversight on their part. 

Check out our list of popular Canadian index funds

Real Estate

Real estate has long been an effective way to build wealth over time. Properties generally increase in value over time, despite the odd blip here and there, so investing in a property can allow you to build equity over time and earn a sizable profit if you eventually sell at some point. 

There are a few ways to invest in real estate, such as renting to collect monthly income, or fixing and flipping for a quicker profit. 

However, while real estate investing might be a very lucrative way to invest, it has certain barriers of entry. For starters, you typically need a fair amount of money upfront as a down payment. There are also many fees that come along with owning real estate, including utilities, property taxes, home insurance, and so on. 

Further, real estate investing also requires a lot of time and effort on your part to maintain the property, manage tenants (if applicable), or oversee improvements in the case of a fix-and-flip. Real estate is also not a liquid investment because there is a lot involved in the sale process. 

Another option you may consider is REITs, or real estate investment trusts, which are companies that sell shares in their own real estate investments. This is a great way to not only reduce your risk by diversifying your investment in many properties, but it can also be a more passive investment approach, as you are entrusting a professional to manage the investment. 

Bonds

Bonds are loans made to corporations or governments. When you buy a bond, you are essentially lending to one of these organizations that are looking to raise money by borrowing from investors for a certain amount of time. In exchange, the issuer promises to pay the investor a certain interest rate over the life of the bond and pay back the principal when it matures. In this way, individual bonds are actually pieces of a larger loan.

Conservative investors like bonds because they offer a predictable income stream and can help reduce exposure to more volatile stocks.

GICs

A guaranteed investment certificate (GIC) works somewhat like a savings account in which you deposit your friends into the account and allow it to earn interest while it sits there. Unlike a traditional savings account, however, you cannot just withdraw the money whenever you want without being subject to an early withdrawal penalty. GICs are meant to stay put in the account for a specific amount of time until they mature, during which time they collect interest, which is how you make money,

GICs are a conservative type of investment vehicle, so they’re ideal for investors who don’t want to be exposed to too much risk. But because of their security compared to other types of investments, the earnings potential is not as great. 

High-Interest Savings Accounts

A high-interest savings account is a type of account that pays out a higher interest rate compared to a conventional savings account. These accounts are meant to allow money to sit for long periods of time while collecting interest, as opposed to chequing accounts which are designed to have funds deposited and withdrawn on a regular basis. 

There’s no risk involved with these accounts, so the money-making capabilities are not that great. That said, these types of accounts are great for novice investors who just want to park their funds and collect a bit of interest without having to manage their money and do much homework on the companies they are buying shares of.  

Ready to start? Here’s our list of the best high-interest savings accounts in Canada.

Best Investment Platforms

Qtrade Direct Investing™

Qtrade

Qtrade is an online brokerage platform that was founded in 2000 and headquartered in Vancouver, BC. It provides Canadians better control over their investments through its easy-to-use interface and investment tools for better decision-making.

Qtrade offers a variety of account types including registered and non-registered accounts such as margins, TFSAs, RESPs, RRSPs, and cash accounts. Through it, you can purchase stocks, ETFs, GICs, options, bonds, and other securities.

Qtrade also offers competitive prices and depending on your membership status, you can benefit further from lower pricing. Users can also take advantage of Qtrades tools:

  • Investment reports
  • View multiple portfolios
  • Screen stocks and other securities before investing
  • Use stop-loss, stop-limit, and trailing-stop orders

Wealthsimple Trade

wealthsimple crypto

Wealthsimple Trade is an online trading platform for self-directed investors. Users can buy and sell various securities including stocks and ETFs on Canadian and US exchanges. With no commission fees and no account minimums, it’s no wonder that 2 million people rely on the Wealthsimple app for their investment needs. 

Like Qtrade, you can start investing using a TFSA, RRSP or a personal taxable account. While it is free to open a Basic Wealthsimple Trade account, you could upgrade to a “plus” account for extra options to manage your account. This includes no FX fees on US trades and instant deposits (up to $5,000) for access to fast cash for your investments. 

Wealthsimple Trade members will also be able to take advantage of: 

  • Fractional shares
  • Price alerts
  • Real-time prices

CI Direct Trading

CI Direct Trading is an online investment platform Canadians can use to access professional investments. They believe in making investing accessible to everyone, not just the super affluent. You simply need $1,000 to start investing in your future saving goals. Moreover, you’ll have access to their portfolio analytics and research tools to help you make better investment decisions. 

CI Direct Trading also offers 5 different trading programs that are designed to help you make the most of your investments. For example, you can opt for the Self-Directed Dividend Purchase Plan (Self-Directed DPP) program if you want to choose where to invest your dividends. Or you could choose the Dividend Purchase Plan (DDP) and have your dividends automatically reinvested. 

If you open a CI Direct Trading account, you’ll also be able to take advantage of their low fees and advanced features such as: 

  • Price alerts
  • Watchlists
  • Technical Insights application
  • Charting 

Factors To Consider When Investing

Before you choose an investment vehicle, there are a couple of important factors to consider:

Risk Tolerance 

Certain investments are a higher risk than others. But with added risk comes greater potential rewards. You should consider what your appetite for risk is before you choose the type of investment to make. Stocks, for instance, are more of an aggressive type of investment, while mutual funds are more conservative. 

Investing Goal 

Consider how soon you want to see decent returns, the number of gains you want to achieve, and what your short-term cash requirements are. Conservative investing will take much longer to see sizable returns, while more aggressive investing will help you realize returns much sooner. Again, the riskier the investment, the sooner you can see higher gains, while the lower the risk, the smaller your gains will be. 

Ways To Invest

You have a few options when it comes to how you choose to invest:

Financial Advisors 

Traditional financial advisors offer fully customized services and help create investment portfolios that are personally designed for the investors they work with. If you’re a novice investor, you may want to start off with a financial advisor to help you get your feet wet in the world of investing and get sound investment advice.

DIY 

If you’ve got some experience with investing, you may want to take a DIY approach. This can help you save on fees, though you’d be on your own in terms of the decisions you make on where to invest. 

Online Brokers 

Like robo-advisors, you can manage all of your investments from your computer or mobile device. However, if you’re more of a hands-on type of investor, you may prefer to work with an online broker, as they allow self-directed investors to choose, purchase, and trade assets on their own without the help of an investment advisor.

Robo Advisors 

If you’re looking for a hands-off way to invest, then a robo-advisor is a great place to look. Not only do robo-advisors do all the money management for you, but you can also access everything you need online without leaving your home. A robo-advisor is an online platform that provides algorithm-based investment services with little or no human intervention. For this reason, robo-advisors are a much more affordable option than paying an investment manager to handle your investments. 

qtrade banner 150 bonus

Canadian Investment FAQs

Should I invest in a TFSA or an RRSP?

The answer to this question ultimately comes down to your income and your goals. A tax-free savings account (TFSA) allows you to save on taxes because any gains you make in a TFSA will not be subject to capital gains tax since you’ve already paid tax on that money prior to making a contribution.  With a registered retirement savings plan (RRSP), you can invest up to a certain amount of your gross income per year without having to pay income tax on those funds. As such, RRSPs let you defer your taxes while allowing you to save up for retirement. But you’ll have to pay tax on these funds when you withdraw them.

How much risk should I take on?

Again, the answer will depend on your particular situation. Younger investors who have more time to build wealth may have a bigger appetite for risk. Further, investors with sizable capital may have a lot to work with, so losing a little bit of money won’t be devastating.  But if you’re approaching retirement and have a fixed amount of money to play with, you may not want to expose yourself to as much risk. 

Are cryptocurrencies a good investment?

Possibly, but like any other type of investment, it comes with some level of risk. Investing in cryptocurrency often comes with higher risk than other types of investments, so be sure you are comfortable with the risks associated with it before investing.

Final Thoughts

Not only are there a variety of investment vehicles to choose from based on your financial situation and goals, but there are also several ways to help you invest. Be sure to assess your situation and take some time to determine which channel to take. 

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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