As someone who’s always been interested in finance and growing my wealth, I’ve spent countless hours researching and testing different investment strategies. Finding the best investments in Canada to invest your money can be daunting, overwhelming, and even downright scary at times.
However, I can tell you that Canada offers a diverse range of investment opportunities that are worth considering. From stocks to real estate, mutual funds to cryptocurrency, there’s an investment strategy that suits every investor’s risk tolerance and financial goals.
In this article, I’ll share my top picks for the best investments in Canada. You can expect to learn about various investment options, each with its unique benefits and risks.
So, stick with me as I explore the best investments in Canada and help you take your financial game to the next level!
The 8 Best Investments in Canada
Investing refers to financial commitment to get financial returns or committing money to get more money. Your investment can be a vehicle for achieving your financial objectives, such as children’s education, house possession, retirement planning, etc.
Different investments have different risk and return profiles. Some are riskier and have the potential for great returns. Others may have lower returns and lower risks. Some may be easier to buy and sell, and others may be difficult to trade.
The aim of investing is to get financial returns, so it’s essential to know which investment account can guarantee the best financial return.
Here are the best investment options you need to know before you start your investment journey:
1. Stocks
Stocks are investments that grant shareholders ownership in publicly traded companies, voting rights and potential profits through dividends.
Dividend-paying stocks are publicly traded and considered low-risk investments, with profitable companies in the energy, financial, and asset management sectors often offering high returns.
Examples of these stocks include Enbridge Inc, Royal Bank of Canada, and Toronto Dominion Bank.
Investing in dividend-paying stocks can diversify your portfolio and provide a passive revenue stream. While stocks can be volatile, with the market experiencing “bear” and “bull” markets, they still tend to have a yearly return rate of around 9% to 10%.
Dividend-paying stocks are a popular and safe investment option for Canadian investors.
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2. Funds
Funds come in two forms: mutual funds and exchange-traded funds. These can employ passive or active investment styles. Passive investment funds, like index funds, track a specific market index, while active investment funds aim to outperform the market using various strategies.
A management expense ratio (MER) is associated with funds, a percentage fee deducted annually from the investment. Keeping this cost low is important to maximise long-term returns.
Index funds are a type of mutual fund that passively tracks a market index and holds all the stocks in the index in proportion to their size, providing diversification and access to all stocks in a single market. Compared to other investments, index funds have relatively low fees.
Index funds can track various markets, from Canadian stocks to international and emerging markets, and can even hold bond index funds.
Investing in index funds can prevent significant losses and provide a passive revenue stream. Investors who prefer not to purchase individual stocks and bonds can invest in funds that hold various stocks and bonds in a “basket”.
3. Bonds
Bonds are a type of debt security that pay periodic interest payments, known as coupons, and return the face value of the bond at maturity, along with interest. They are less volatile than stocks and can help reduce fluctuations in a portfolio.
Bonds can be purchased from corporations or government agencies and act as a type of IOU for the investor.
When a bond is purchased, the issuer pays semi-annual interest payments called coupons, and the initial investment is returned when the bond matures.
Various types of bonds are available to Canadian investors, including government and corporate bonds, which come with different yields and levels of safety.
Government bonds are safer than corporate bonds, but they offer lower yields. Corporate bonds, on the other hand, are riskier but have higher yields. Investors can diversify their portfolios by purchasing bond ETFs or mutual funds that hold many bonds in one basket.
A downside is that since bonds are less risky, their returns are lower than the stock market.
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4. Cryptocurrency
Cryptocurrency is a digital currency or token secured by cryptography and often traded on a decentralised network known as a blockchain.
It’s a volatile investment option with the potential for great returns but also high risk due to the unregulated and speculative nature of the market.
The two largest and most popular cryptocurrencies are Bitcoin and Ethereum, while other smaller coins are labelled “altcoins”. “Stablecoins” attempt to maintain a flat value by being pegged to another asset.
Canadian investors can purchase cryptocurrencies on various brokerage platforms or regulated platforms like Wealthsimple Crypto. However, it’s essential to understand the risks involved and not invest more than you can afford to lose.
The value of cryptocurrencies is purely based on demand and supply speculation, and prices can be highly volatile. Diversifying your investments and only dedicating a small percentage of your portfolio to crypto investing is recommended.
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5. Guaranteed Investment Certificates (GIC)
Guaranteed Investment Certificates (GICs) offer a guaranteed interest rate for a set period, typically 1 to 5 years. The longer the term, the higher the interest rate. However, withdrawing your assets before the term ends results in high penalties.
GICs are ideal for short-term goals, such as saving for a car or a house or providing proof of funds when applying for study permits in Canada. Term deposits are very similar to GICs and are often used interchangeably.
GICs offer a safe investment option with a low expected return, making them suitable for those with a low-risk tolerance. They provide guaranteed returns and are best used for short-term investing needs.
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6. Real Estate
Real estate investing in Canada offers a unique investment opportunity for those looking for a steady stream of income and return.
The most common way to invest in real estate is through an investment property, which involves purchasing real property to flip it for a profit in the short term or holding onto it long-term and renting/leasing it out. This type of investment requires sufficient capital and access to credit.
However, for investors with smaller portfolios or limited resources, investing in real estate can still be achieved through real estate investment trusts (REITs).
REITs are shares of publicly traded investment companies that hold a diversified portfolio of real estate assets, including residential, commercial, and industrial properties.
One advantage of investing in REITs is the required payout of a substantial portion of their income to investors, providing a reliable stream of passive income through dividends.
This makes REITs a popular investment option for investors seeking steady returns and income with lower risks than a direct investment in physical properties.
Additionally, REITs allow investors to diversify their investment portfolios and reduce their overall exposure to risk. Investing in a REIT allows investors to access a diverse range of real estate assets and sectors that would be challenging or expensive to invest in individually.
Overall, real estate investing in Canada can be a lucrative investment option for both large and small investors. While direct investment in physical properties may require more capital and expertise, investing in REITs can provide a reliable stream of passive income and diversification opportunities for investors with smaller portfolios.
7. Commodities
Commodities are essential raw materials and goods for various industries and the economy. These include agricultural commodities such as wheat, soybeans, and corn, energy commodities such as oil and natural gas, and metals such as gold, silver, and copper.
While commodities can be volatile, and their prices can fluctuate significantly in the short term, they are still valuable investments. One advantage of investing in commodities is that their returns often have a low correlation to stocks and bonds, which means they can be an excellent addition to a diversified investment portfolio.
Investors can invest in some commodities physically, such as purchasing gold and silver bullion or commemorative coins. However, other commodities, such as oil, can only be invested in via more complex investment funds that utilize derivatives like futures contracts.
These instruments suit more advanced investors familiar with the risks of investing in commodities.
Overall, commodities can provide investors with a valuable opportunity to diversify their investment portfolio and gain exposure to basic goods vital to the economy. However, investors should know the risks and do their due diligence before investing in commodities.
8. Arts and Collectables
In addition to traditional investments like stocks, bonds, and real estate, Canadian investors can invest in alternative assets such as arts and collectibles. These investments can offer unique opportunities for diversification and potentially high returns.
Luxury watches are popular in collectibles, as they can appreciate value over time. High-end timepieces from renowned brands like Rolex, Audemars Piguet, and Patek Philippe can be especially valuable.
Luxury cars are another type of collectible that can hold their value or even appreciate over time. Vintage or rare cars from iconic manufacturers like Ferrari, Porsche, and Lamborghini can fetch high prices at auction.
Trading cards have also become an alternative investment option in recent years. Rare cards from popular sports like baseball, basketball, and football can sell for tens or hundreds of thousands of dollars.
Fine alcohol, such as vintage wine and rare spirits, can also be a potential alternative investment. These collectibles can appreciate in value over time and offer a unique way to diversify a portfolio.
When considering alternative investments, it’s important to remember that these assets can be illiquid and difficult to sell quickly. Fair valuations can also be challenging to determine, as the market for these assets can be limited. Researching and understanding the risks and potential rewards associated with these investments is essential before committing funds.
How to Choose the Best Investments in Canada
It may be challenging to narrow your selection from the above list of best investments in Canada. Even though they are the top-performing investment in Canada, you can’t rush to select any of them.
So how do you choose the perfect investment account that meets your needs? To choose the best investment in Canada that is perfect for you, you must consider your:
1. Financial Situation
Examining your current financial situation is the first step in making sound investment decisions. Pay off high-interest debts before considering investing, as the investment returns may not exceed your debt’s interest rate.
Also, consider your investment goals, risk tolerance, and timeline to choose between short-term or long-term investment accounts.
For example, a high-interest savings account is ideal for building an emergency fund, while an ETF may be better for long-term growth.
Research and evaluate your options before making investment decisions to ensure you choose the right investment vehicle based on your unique financial situation and goals.
2. Risk Tolerance
Understanding your risk tolerance is crucial because different investment options come with varying levels of risk.
While it’s true that higher-risk investments typically offer the potential for higher returns, it’s important to note that not all high-risk investments guarantee high returns. Investing in a comfortable way is crucial based on your risk tolerance.
To determine your risk tolerance level, consult a financial advisor or take an online risk survey like Vanguard’s Investor Questionnaire. Understanding your risk tolerance allows you to choose investment options that align with your goals and preferences while minimising risk exposure.
3. Investment Objective
To choose the best investment in Canada, it’s crucial to identify your investment objective. Ask yourself, “Why am I investing?” Is it for retirement planning, your children’s education, or a down payment on a home?
Once you’ve identified your investment objective, consider which investment account best fits you. For example, a Registered Education Savings Plan (RESP) might be the best choice if you save for your children’s education. Or, if you’re planning for retirement, a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA) might be more appropriate.
Choosing an investment that aligns with your investment objectives and time horizon is essential, as this will help ensure you achieve your financial goals. Consulting with a financial advisor can also help determine which investment account best fits you.
How to Invest in Canada
Depending on the investment account you want to invest in, there are different ways to invest in Canada. Investing via robo-advisors is the most cost-effective option in Canada.
Robo advisors can offer low-cost investment portfolios because they operate online. By using a robot and professional portfolio managers, Robo-advisors offer the best investment solutions.
However, the easiest way to start investing in Canada is to start with a brokerage account with a bank or discount brokerage like Wealthsimple or Questrade.
Discount brokerages in Canada offer low or zero-commission trading fees and can help your long-term financial goals. They provide all or some of the major investing assets in Canada, like stocks, mutual funds, ETFs, and bonds.
Wealthsimple Trade is a great trading platform that offers commission-free buying and selling of thousands of stocks. Its user-friendly interface and mobile-optimized investing dashboard make it easy to navigate and accept various payment methods, such as bank transfers and debit cards. In addition to traditional online stock trades, Wealthsimple Trade allows you to engage in other investment activities. It supports both taxable and registered (non-taxable) accounts such as RRSP and TFSA, and there is no minimum balance requirement when opening an account, making it accessible for investors with little money.
Questrade is an online discount brokerage established in 1999 with a $25 billion asset under management. Its popularity in Canada lies in its low commission, low trading fees, and multiple ranges of accounts. As a result, both beginners, intermediate and seasoned investors in Canada find Questrade attractive for DIY and active management investing. Key Features
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Final Thoughts on the Best Investments in Canada
Investing can be a powerful tool to help you reach your financial goals, but it’s important to make informed decisions and choose the right investment vehicle for your unique situation.
By examining your financial situation, determining your risk tolerance, and identifying your investment objectives, you can make confident decisions and start building your portfolio in Canada.
Remember to do your research, seek advice from trusted sources, and stay disciplined in your investment strategy. With patience and diligence, you can enjoy the benefits of investing and work towards a more secure financial future. Happy investing!
