Whether you’ve saved over the years, sold an asset, or received a gift, $50,000 is a good chunk of change. Investing it is a good way to make that money grow, but how should you invest your $50K? Read our guide below to learn our top 5 strategies on how and where to invest $50,000 in Canada.
How to build a $50,000 investment portfolio
What should your $50K portfolio look like? It depends on several factors like your age, goals, risk tolerance and timeline.
Your investing goals will likely be more aggressive in your 20s to 30s than they will be in your 50s. If you’re in your 30s and looking to build a portfolio aimed for growth, this is what it may look like:
| Investment type | Percentage |
|---|---|
| GICs and bonds | 5% to 20% |
| Stocks, ETFs and mutual funds | 50% to 75% |
| Peer-to-peer lending, real estate and alternative investments | 0 to 25% |
Before you invest $50,000 in Canada
There are a few financial boxes you should check off before you invest $50,000:
- Build an emergency fund. We recommend keeping 3-6 months of expenses in a high-yield savings account, so it’s available when life throws an unexpected curveball.
- Save for your kid’s education. If you have children, consider setting aside a portion of the $50K to save for post-secondary education in an RESP.
- Pay off debt. It’s always best to pay off high-interest debt before you invest because you pay more in interest than you’d earn in any investment vehicle.
- Do a self-assessment. How comfortable are you with risk, really? Can you invest for yourself, or would you prefer someone else’s advice? Do your goals align more with passive or active investing? These are all things to ask yourself before you start investing your $50K.
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This isn't an exhaustive list of all the trading platforms out there. What's best for you depends on your own investing strategy, budget and financial goals.
1. Invest in stocks, ETFs and more with a self-directed trading account
The stock market can be a great way to grow your wealth, as long as you’re comfortable making your own trades. You can invest in any combination of stocks, ETFs, mutual funds, bonds, and more.
Pros
- Low-cost online brokers. Many online brokers offer low fees, small minimum investments and commission-free trades.
- Comprehensive options. You can invest in a range of stocks, bonds, mutual funds and ETFs.
- Easy to diversify. Spread out your risk by investing in ETFs and low-cost index funds.
- Beats inflation. The stock market produces an average 5.6% yearly return (taking into account inflation), making it a good way to accumulate wealth and stay ahead of the cost of living.
- Liquid investment. It’s easy to sell off some of your portfolio when you need it.
Cons
- Volatility. The stock market as a whole is very volatile and experiences daily dips and swings. However, different assets can mitigate overall stock market fluctuations.
- Can be risky. If you throw all your money in stocks instead of making a plan to diversify, you could lose all your money.
- Research is required. Depending on your level of skill and how comfortable you are with self-directed trading, you’ll need to do some research on the best assets for you.
- Watch out for fees. Some brokers charge hefty fees and commissions, which could eat into your profits.
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2. Invest in real estate
With $50K to invest, there are several ways you could invest in real estate. You could go through a company like Wealthsimple to purchase real estate investment trusts (REITs) through an exchange traded fund (ETD). Alternatively, you could connect with commercial property developers through a peer-to-peer lending platform like Lending Loop, or put a downpayment on a house and rent it out yourself.
Learn more about property investing in our detailed guide.
Pros
- Passive income. Real estate is an attractive investment because it produces a steady flow of income.
- Plenty of options. With $50K, you can choose to invest in REITs, commercial properties or your own rental property.
- Safe options. If you want to invest in real estate in the safest way possible, you can purchase REITs, which are made up of hundreds of different properties and trade like stocks.
Cons
- May need accreditation. Some crowdfunding sites won’t let you directly invest in real estate without qualifying as an accredited investor.
- Possible risk of default. If you choose to invest in a single property, you could lose your money if it defaults.
- Illiquid investment. Real estate can’t be easily sold or converted to cash, so it’s not the best option if you’ll need your money soon.
3. Invest in bonds
If you plan on making a big purchase in the near future, such as buying a home or sending the kids to college or university, it may make sense to invest your money in bonds. Terms typically range from a few months up to 30 years.
Pros
- Little risk. In general, bonds are considered stable investments and carry less risk than other securities.
- Provide passive income. Bonds produce a steady, fixed income and offer higher returns than other safe investments like savings accounts.
Cons
- Risk varies. Government bonds are typically safer than corporate bonds, although this isn’t always the case. You’ll want to check what letter grade it was assigned by the credit rating agencies.
- Higher investment minimums. Unlike stocks, bond prices usually start at $1,000. But some can cost much more than that.
- Could lose value. Your bond could lose value if the issuing entity defaults or interest rates rise when you’re ready to sell.
4. Contribute to your RRSP (or Spousal RRSP)
If you’re looking to save for retirement, you can get a jump start by opening or contributing to your Registered Retirement Savings Account (RRSP). With this registered account, you can invest funds in stocks, bonds, ETFs, and mutual funds just like any other account type, but you will be able to take advantage of RRSP tax deferrals.
Pros
- Tax-deferred growth. You fund an RRSP with pre-tax money, so it can grow in the account without being subject to tax until you retire (when you’ll likely be in a lower tax bracket).
- Use funds to buy your first home. You can withdraw funds before you turn 71 for qualifying expenses, such as your first home (through the Home Buyers’ Plan) or certain educational expenses (through the Lifelong Learning Plan).
Cons
- Can’t use contributions or gains until retirement. You’ll pay a penalty if you withdraw RRSP funds before you’re 71 (with the exception of the Home Buyers’ Plan).
- Contribution limits. There is a yearly maximum to how much you can contribute to your RRSP, and penalties for over-contributing.
5. Invest with a robo advisor
If you’d like exposure to the stock market but you aren’t comfortable investing yourself, a robo advisor is a good alternative to a traditional adviser.
Pros
- Lower fees. Required fees and investment minimums are much lower than with a traditional financial adviser.
- Goals-based investing. Robo-advisors make algorithmic recommendations based on your goals, risk tolerance and investing timeline.
- Requires minimal time or effort. Robo-advisors keep your portfolio in tip-top shape by performing routine tax-loss harvesting and automatic rebalancing for you.
Cons
- Limited flexibility. You typically can’t choose your own investments. Your account is invested in a pre-made portfolio based on your risk tolerance, along with other factors, and is rebalanced to stay within your risk level.
- Not entirely personalized. Robo-advisors give advice based on the questions they ask you. But they can’t ask follow-up questions if your situation is unique.
- Managed by a computer. While you can still communicate with customer service (and many times, financial advisors), if you prefer face-to-face discussions about investing, this may not be the best option.
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Bottom line
Investing $50K is a large sum of money, which means you have potential for larger returns and a more diversified portfolio. If you have multiple goals you’re trying to reach, splitting it up among different investments may be the best option for you. Take some time to map out your goals, risk tolerance, and strategies you’re willing to use to diversify your portfolio. Then, compare investment platforms until you find the best options for you.
How to invest 50000 dollars in Canada FAQs
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If you know you’ll need your money in the near future, consider keeping it in a GIC or in short-term bonds issued by the Canadian government. You can also use a savings account – your returns will likely be lower but your money will be liquid.
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If you want to invest in REITs, find a broker like TD Direct Investing that can help you open an investing account and start sifting through your options. If you want to invest directly in real estate, check out Lending Loop, a peer-to-peer lending platform that connects borrowers with investors and vice versa.
You can even take a look at a crowdfunding platform like FrontFundr that advertises investment opportunities (including real estate projects) to solicit funds from members of the public. To be on the FrontFundr platform, all business have to pass a highly rigorous screening process.
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It depends, but it's not likely in this current real estate climate in most regions in Canada. If you live in a very low-cost area, $50K may be enough to cover the down payment, closing costs and some of the repairs. But flipping houses is one of the riskiest ways to invest in real estate, so make sure you do your research and get a home inspection before you buy.
Disclaimer: This information should not be interpreted as an endorsem*nt of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circ*mstances, and obtain your own advice, before making any trades.
