Compare the Best Investment Options in Canada
Asking your resident financial expert about the best investments in Canada is similar to asking a philosopher about life’s meaning.
There’s no specific answer to the question. Your ideal investment options come down to your current financial situation, age, current state of mind, and family. Unfortunately, those factors only scratch the surface.
Seeking investment advice on how to invest your money, where to spend money, how to save, and what to finance right now is deeply personal.
Get Smarter with Your Investments
You wouldn’t be alone in posing the question, “how does investing work?”
Sure, you could find out through trial and error, purchasing investment products and making decisions without knowing the nuts and bolts.
However, when looking for the best investment options in Canada, you need to educate yourself properly. Otherwise, you won’t have a clue how to invest in stocks, bonds, and other opportunities. This mistake will lead to critical financial blunders that can put a serious dent into your nest egg.
By reading below, you’ll gather foundational knowledge to make informed decisions with the money you invest. From there, you’re far likelier to achieve your financial goals.
Types of Investment Options
If you’re to achieve your financial goals, you’ll need to familiarize yourself with these investment options:
A Registered Retirement Savings Plan (RRSP) is tax-deferred, so your contributed funds are exempted from CRA taxes the year you make your deposit. Then, you’ll strictly be taxed many years later—once you make the withdrawal.
One of the short-term benefits of the RRSP is how it significantly reduces your current-year tax bill, which is highly advantageous if you’re in a higher tax bracket than the average Canadian.
A Tax-Free Savings Account (TFSA) allows you to pick what you put in from multiple financial instruments, such as:
- Stocks and bonds
- Exchange-traded funds
- Guaranteed investment certificates
- Cash savings
With a TFSA, the idea is that you’ve already paid tax on the money put into the account, so you won’t pay anything more when withdrawing the funds.
Guaranteed Investment Certificates (GICs) are risk-averse investments that offer plenty of security with a guaranteed return. These are similar to a savings account because you earn interest on your deposited funds.
However, unlike regular savings accounts, you leave your money in a GIC for a specific time-span. You’re lending the bank money for up to 5 years, receiving the amount you deposited plus the interest at the end of the term. Learn more about GICs.
Usually, however, Exchange Traded Funds include a collection of securities (e.g., stocks and bonds) that regularly track an underlying index.
ETFs are commonly likened to mutual funds but differ in that they are available on exchanges. ETFs are similar to any stock on the exchange in the sense that you can trade for them.
Stocks are also known as equities. They’re securities representing the fractional ownership of a given corporation.
Depending on the amount of a company’s stock you own as a private citizen, you’re entitled to a proportion of its assets and profits. A stock’s unit is called shares.
Furthermore, stocks transactions occur on exchanges—any portfolio manager will tell you that these are the foundation of your investments. Stocks are one of the more volatile forms of investment, so if you’re faint of heart and looking for more risk-averse options, trading stocks on the exchange may not be an option.
Investing in real estate can take several forms. Owning your own home is a real estate investment. It can be highly lucrative if you pay off your mortgage in a relatively timely manner before selling it well above the price you paid for it. You can also invest in rental properties and become a landlord. Many people are part of real estate investment groups.
Of course, the more volatile approach to real estate investments is buying and renovating homes to sell in the short term.
Here are some of the more technical terms for real estate investing:
- Real estate investment trusts
- Real estate limited partnerships
- Mortgage investment entity
- Syndicated mortgage investments
- Real property
Lastly, putting your money into real estate still far less volatile than stocks.
Alongside robo-advisors and brick-and-mortar brokerage companies handling large clients, online brokerages in Canada have become the preferred low-cost solution for active traders and average investors who prefer to manage their own TFSAs, RRSPs, and RESPs in real time. Take a look at some of the best online brokerages Canada has to offer.
Robo-advisors are digital platforms. They offer financial planning services influenced by algorithms without much human input.
These AI advisors obtain your financial information and future goals through an online survey. Then, it leverages the data to offer the soundest possible advice. The service will even automatically invest your assets.
Investment Advice: FAQ
Have more questions about investing? You’re in luck: we’ve prepped some answers for some of the more popular questions about investing.
What Are Investments?
When you purchase items or financial assets with hopes of earning passive income in the long-run, you’re investing.
Economically, investments boil down to as acquiring a good that you don’t immediately use or consume. Instead, it’s a purchase meant to generate future wealth.
How to Invest Your Money?
“How to invest money” is a loaded question since not everybody investing has the same set of circumstances. However, this multi-tiered framework can get you started on soundly investing in Canada:
- Prioritize your retirement plans.
- Leverage your tax-free savings account.
- Stay away from overly attractive investments.
- Don’t be afraid of going against the grain.
- Diversify (but not too much).
- Try investing in areas where you have a knowledge base.
How Does Investing Work?
The concept of investing works by placing assets into a commodity (e.g., stocks, bonds, real estate) today, hoping that it generates a return in the short term or long term.
Is Now A Good Time to Invest?
It’s always a good time to invest in your long-term wealth. More volatile investments might not be the wise at a given time (e.g., trading stocks every day). In contrast, buying and holding assets over a sustained period will work, no matter the circumstances.
What to Invest in Right Now?
In today’s uncertain climate, your investment strategy should revolve around a risk-appropriate, diversified investment portfolio. A diversified portfolio would include the following:
- Low-cost stock and bond index funds
- Put some savings into a high-interest savings account
- Invest in a GIC because it’s the most secure investment in Canada
What are the Best Investments in Canada?
Given the current flux of the economy, consider investing your money in a GIC for optimal security.