9 of the Best Ways to Invest Money in Canada | Finder Canada (2024)

The last several years have been volatile for investors, who have dealt with COVID-19, rapidly rising inflation, fears of a recession and geopolitical tensions. All this might have you wondering how to invest money in Canada.

Worse still, the nation is experiencing 30-year highs in inflation, so your purchasing power might drop steeply if you don’t invest. This is even after the Bank of Canada lifted the prime rate to boost savings.

To help you can find the best way to invest money in Canada, we’ve put together a list of time-honoured financial vehicles based on rate of return, liquidity, time horizon and required knowledge or technical skills.

9 of the best ways to invest money in Canada in 2024

1. Stocks
2. Robo-advisors
3. High interest savings account
4. Index funds
5. Government bonds
6. Micro investment
7. Real estate
8. Cryptocurrencies
9. Forex

1. For those who want to control their portfolio: Stocks

Stocks have the greatest variety of trading options, because you can choose from emerging businesses you think will explode, companies that pay dividends, established businesses in reliable industries and more. It’s easy and often free to open a stock trading account and start investing in stocks.

• Where to invest: Online trading platforms & brokers
• Risk level: Medium to high—varies greatly based on what you invest in
• Liquidity: High
• Minimum: Minimum account deposits range from $0 to hundreds of dollars depending on the platform you use
• Fees: $0-$10 per trade depending on the platform (percentage fees may be more expensive for high value trades)

2. For those who want to be hands-off: Robo-advisors

Robo-advisors trade automatically based on an algorithm and invest your funds on your behalf. All you have to do is set up guidelines such as your risk tolerance and preferred investment types. Then the algorithm will allocate your funds and rebalance your portfolio accordingly. This is great for people who don’t want to dedicate the time and energy to building and maintaining their own portfolio.

• Where to invest: Sign up to a robo-advisor service like Wealthsimple Invest, Questwealth Portfolios or Justwealth
• Risk level: Low, medium or high depending on the strategy you choose
• Liquidity: High
• Minimum: Starting from $0 depending on the robo-advisor
• Fees: Typically less than 1%

3. For those that want to keep it simple: High interest savings account

Like each of these options, high interest savings accounts can be a practical way for Canadians to take advantage of long-term compounding with very little effort. While savings account interest rates in Canada don’t beat inflation, you still earn interest by storing money with a bank, which uses your funds to finance loans. In Canada, the first $100,000 you have in your savings account is protected by the Canada Deposit Insurance Corporation (CDIC).

Often, you can get the highest rates from digital banks and alternative financial institutions. For example, the EQ Bank Personal Account comes with a promotional rate of 4% for 12 months, after which you can earn 2.5% on your deposits. The Neo High Interest Savings Account pays 4% interest on your savings.

• Where to invest: With a bank or alternative online financial institution
• Risk level: Low—the first $100,000 is insured by the CDIC
• Liquidity: High
• Minimum: Starting from $0
• Fees: Varies depending on the institution’s fees

4. For passive long-term investors: Index funds

Index funds offer one of the best risk/reward ratios for long-term investing, meaning these investments offer decent rewards for relatively low risk. That’s because major indices on which index funds are based have consistently gone up for decades.

For example, the has averaged a 10.65% annual return for the past 10 years and has yielded positive annual returns for 20 of the past 30 years. In Canada, the S&P TSX Composite Index has averaged a 4.27% annual return for the past 10 years and a 9.90% annual return for the past 15 years.

If you had invested $10,000 into stocks listed in the S&P TSX Composite 15 years ago, you would have over $41,000 by now, and that’s starting in the wake of the global financial crisis and ending after COVID-19 lockdowns.

• Where to invest: Through a fund manager or online investment platform
• Risk level: Low, medium—depends on which funds you invest in
• Liquidity: High
• Minimum: Usually no investment minimums
• Fees: Typically less than 1%, rarely above 2%

5. For those close to retirement: Government bonds

Investing in Canadian government bonds is one of the safest investments you can make, but you’ll get a return that matches the risk. The chance of the Canadian government not paying its bills are incredibly low, especially for debts in the national currency. As such, most investors see government bonds as safer than stocks. Investors who are trying to preserve their assets, such as those who are closer to retirement, might be most interested in buying bonds.

• Where to buy: Banks and brokers (including online brokers). You can buy (1) bonds or (2) shares of bond ETFs, which are funds that hold a number of bonds.
• Risk level: Low
• Liquidity: High
• Minimum: Can be $1,000 or more if you buy bonds directly, but you can buy shares of bond ETF for less.
• Fees: From $5 to $250 if you buy bonds directly, or from less than 1% up to 2% if you buy shares of bond ETFs.

6. For those who are just starting out: Micro investment

New micro investing apps have entered the market following the wave of investment apps entering the market and increased interest in finance among younger audiences. Micro investing is effectively pooling your money into a portfolio of stocks or exchange-traded funds (ETFs) that are managed for you. You can start with just a few dollars, and some micro-investing apps come with features like rounding up your purchases and investing the difference to grow your portfolio faster.

• Where to buy: Download a micro-investment app
• Risk level: High
• Liquidity: High
• Minimum: Usually low or no investment minimum
• Fees: Usually a monthly subscription or management fee. Transaction fees may also apply, although some micro-investing apps like Moka only charge a flat monthly fee.

7. For those with a larger starting amount: Real estate

Real estate investing can be a way for young Canadians to grow their wealth, although the five- or six-figure deposit can be a major barrier to getting started. But with a range of government schemes to get people invested, property can be an option to grow your wealth. Learn more about real estate investment options here.

• Where to buy: You will need to buy a home
• Risk level: Medium
• Liquidity: Low—although you can borrow using your home equity as collateral
• Minimum: Down payments start at 5% (typically tens of thousands of dollars)
• Fees: Depends on the services you use and the property location. Expect fees for legal services, property inspections, getting a mortgage, moving, renovations, etc.

8. For risk takers: Cryptocurrencies

A relatively new investment option among mainstream investors and institutions, cryptocurrencies are a high-risk, high-reward investment. New coins are always being launched and older coins move in and out of the spotlight. Because of that, the rate of return could be way higher than investing in stocks. But since cryptos aren’t government regulated, you could lose your entire investment.

• Where to buy: Brokers and crypto exchanges
• Risk level: Very high
• Liquidity: High
• Minimum: No investment minimums depending on the exchange you use
• Fees: Starting from 0% depending on the broker and the exchange

9. For the traders: Forex

Forex or foreign exchange is the buying and selling of global currencies. The global forex market is the largest in the world, with a daily trading volume of more than US$6.5 trillion. When it comes to trading forex, you’re trading on the percentage in points, or PIPs, with major currencies usually trading to 4 decimal places. On the downside, these tiny percentage movements along with leverage makes trading forex incredibly risky.

• Where to buy: Brokers (including some online investment platforms)
• Risk level: High
• Liquidity: High
• Minimum: Varies depending on the brokers
• Fees: You’ll face a number of different fees including PIPs and inactivity fees

Bonus: A way to beat inflation

Believe it or not, inflation can be a good time to get in on certain market sectors. Consumer staples, for instance, are typically resistant to volatile periods. This is because regardless of the price, consumers need to buy these items. As such, businesses will simply pass on rising input costs to their customers.

Brands with pricing power usually strong performers during periods of high inflation, but commodities like energy are typically the big winners. One of the major drivers of inflation can be the rising costs of commodities, although this is obviously good for commodity sectors. Besides energy, this sector can include agriculture as well as base and precious metals.

What is an investment asset class?

Once you start thinking about investing, you’ll hear the term “asset class” come up a lot. Simply put, the asset class refers to a group of assets or investments that are similar in nature. It’s important to understand the difference between the main asset classes when building your portfolio as it will affect your investment returns and the level of risk you’re taking on.

What are the main asset classes?

There are five main asset classes.

Equities

Equities include all shares listed on a public exchange, for example shares listed on the TSX or the Nasdaq in the US. These are publicly listed companies and when you buy shares of one, you own a portion of that company. Equities are often considered to be the highest-risk asset class.

Fixed interest

Fixed interest assets like bonds and GICs are those which offer a fixed rate of return. Bonds are essentially a form of loan used by both companies and also governments to raise funds. Investors who lend their money will earn a pre-set, fixed interest rate on it.

Cash

This is the lowest-risk asset class and includes deposits with banks via savings accounts.

Property

This includes real estate investments in residential homes as well as commercial properties like major offices or industrial buildings. Unlisted properties are not bought and sold on an exchange like stocks.

You can also invest in listed real estate via managed funds that invest in a range of properties. Although you do access listed property via an exchange, it’s still considered part of the property asset class, not equities.

Alternative assets

Alternative assets are hard to identify but typically include assets that don’t fit into any of the above asset classes. For example, private investments made into a private company (one that isn’t listed on an exchange) would be classed as an alternative asset. Other example include collectibles like antiques, art or even an extensive stamp collection.

Commodities like gold and precious metals are sometimes classified as alternative asset and sometimes as a separate asset class.

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Defensive vs. growth assets

These five asset classes can be further grouped into either defensive or growth assets. Defensive assets are lower risk and often offer investors some form of guaranteed income, for example interest payments. Growth assets are riskier and typically aim for long-term capital growth rather than short-term income.

While returns are never guaranteed, it’s expected that high-risk growth assets will outperform lower-risk, defensive assets in the long run.

Investing for income vs. capital growth

You could also divide the assets up depending on whether you’re investing for income or capital growth. Income assets are those which provide an ongoing level of income while you hold the asset. Capital growth assets may not provide any income for the short to medium term, but the investor hopes the asset itself will grow in value, so they’ll make a profit when it’s sold. Antiques are one example.

A single asset class can include both income and capital growth assets. Let’s look at stocks as an example. An established blue-chip share like Walmart that regularly yields annual profits and consistently pay dividends to shareholders would be classed as an income asset, as it offers value while you’re holding it.

However, non-dividend stocks in a newly-listed technology startup would be classed as a capital growth asset, as the shareholder buys it hoping it’ll increase in value over a long time.

What is investment risk?

Investment risk is the risk of financial loss. All investments carry some level of investment risk. When you decide to invest your money, it’s never guaranteed that you’ll make a return on that money. In fact, you could even stand to lose the money you initially invested (and sometimes more, if you’re trading products like CFDs).

Diversification between asset classes

To avoid putting all your eggs in one basket, one simple way to reduce your risk is by diversifying your investments across a range of asset classes. This is because each asset class behaves differently. For example, if the property market is doing poorly, it’s possible the stock market could be performing strongly (or vice versa). If you’re only invested in one asset class, and that asset class does poorly, your entire portfolio will suffer.

You don’t need to invest in every asset class, but making sure you’re invested in more than one or two different asset classes will help reduce your risk. The amount you invest in each asset class will also depend on the amount of risk you’re happy to take on.

Let’s say you want to take on a moderate level of risk. You’re happy for some, but not all, of your portfolio to be high-risk. You might decide to invest a third of your money in equities, a third in property and a third in cash. If you were striving for a very low level or risk, you could reduce this to only 10% to 20% of your money in equities and the rest in fixed interest and cash.

Balancing risk and reward

It would be nice if you could earn high returns while taking on little risk, but unfortunately investing doesn’t work that way. Generally, the higher the risk, the higher the potential reward. To earn a return on your investment, you’re going to need to take on a certain level of risk.

It’s fine to exclusively invest in low-risk products like savings accounts, but you won’t get a very big return on your money. On the other hand, investing exclusively in high-risk shares could potentially yield much higher returns, but you’re also taking on a much higher level of risk.

To find the right balance, start by identifying the outcome you’re hoping to achieve with your investments. Try to figure out what success looks like for your portfolio, then work backwards to determine what investments you’ll need to make to get there and how much risk you must take.

Investing for the long term

Another way to reduce your risk is to invest with a long-term mindset. Investments, like stocks, can be very volatile, often rising and falling by a significant amount in the space of a month or less. But if you invest for the long term, say 10, 20 or even 30 years, you won’t be as bothered by short-term market movements.

The dollar cost average strategy

The dollar cost averaging strategy is a way of buying small parcels of the same asset gradually over time, rather than buying it all at once. For example, let’s say you want to invest $20,000 into The Smith Company. Instead of buying $20,000 worth of The Smith Company stock in one hit, you could buy $2,000 worth of stock each month for 10 months.

Doing this means you don’t have to pick a certain price to buy your stock, which reduces the risk of buying stock at an unfavourable price. By purchasing The Smith Company stock in small parcels over a long period of time, the average price of your stock will be closer to its true value.

The downside to this strategy is that you’ll pay more brokerage fees, as you’ll be charged for each trade. For this reason, dollar-cost averaging is more worthwhile when you’re investing large amounts of money.

How to find the right mix of assets for your portfolio

When designing your portfolio, take the following factors into consideration when deciding which asset classes to invest in.

• Your age. The younger you are, the more risk you can afford to take on because you have more time to ride out any market dips.
• Your risk tolerance. Regardless of your age, if risky assets are going to keep you awake at night, it might be best to invest in asset classes that are low risk.
• Your goal (income or growth). Why are you investing? Do you want to earn a regular income stream now, or are you investing for a wealthier future?

Research before you invest

It may go without saying, but one of the main strategies to reducing your investment risk is to do your research. Investing in assets with little thought, or investing in something based on rumours or speculation from others, is a sure-fire way to increase your risk.

Here are a few easy ways to research potential investments:

• Watch the news. Make a habit of reading the financial news in the morning or listening to the market updates on the radio on your way to work. You’ll get updates about the economy and how different asset classes are performing.
• Read the product disclosure statement (PDS). Each investment product will offer a PDS online that’s free for anyone to read. The PDS will outline how the product works and includes all the fees you need to be aware of.
• Read annual reports. If you’re investing in stocks, read the company’s annual reports to get an idea of how the business is performing and what its future plans are.
• Do online research. You can access more comprehensive guides on different aspects of investing via our investing hub.

Investment options for those starting out their journey

It is best to start investing as early as possible. As such, investing when you’re young is one of the best ways to achieve a strong financial return over the long term. Returns compound, which, given enough time, will see your earnings-on-earnings returns increase your balance.

While it can be beneficial to start out now, knowing what to invest in can be tricky. For those starting out, it is best to keep things relatively simple and learn as you go. Investment vehicles like high yield savings accounts, micro investment funds or even index funds might be a way to get started.

There’s no perfect way to start investing, though, and what works for others may not work for you.

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Bottom line

The best way to invest money in Canada depends on factors like your financial goals, risk tolerance, level of personal involvement and time frame. There is no single best way to invest your money, but these 9 investment options (stocks, robo-advisors, high interest savings accounts, index funds, government bonds, micro investing apps, real estate, cryptocurrency and forex) are good places to start when discovering how to invest money in Canada.

FAQs

• Yes, you can start investing with $100. Many brokers and online investment platforms such as Wealthsimple, CIBC Investor's Edge and Interactive Brokers don't have any minimum deposit requirements to open an account. However, some investment types like government bonds and some mutual funds require a minimum initial investment of $500, $1,000 or more.

• Here are some ways to invest $1,000 and make more money. Be aware that all investments comes with risk; you could lose your money. That's why it's important to identify your risk tolerance and investment goals to find the best way to invest money for your situation.

  • Stocks
  • Robo-advisors
  • Index funds
  • Real estate investment trust (REIT)
  • Government bonds

• Government bonds are considered by many to be among the safest investments, given that the Canadian government is unlikely to default on its debts. Other low-risk investment options include money market funds (which hold high-quality government and corporate debt securities) and high interest savings accounts.

  Stock investors looking for the safest investments should keep an eye on sectors representing essential services like consumer staples, healthcare, agriculture and energy.

• You'll often hear the term "underlying asset" in relation to some investment products like exchange traded funds (ETFs) and derivatives like contracts for difference (CFDs). These products all track the value and performance of a particular set of assets, known as the underlying assets, usually without owning that asset.

  For example, ETFs are a type of fund that tracks the performance of a basket of assets, often stocks, belonging to a market index. So an S&P 500 ETF will track the S&P 500 index, which tracks 500 of the largest companies listed on US stock exchanges. If you invest in the ETF, you'll get exposure to these 500 stocks (the underlying assets) without actually directly owning any of those stocks.