Investment is one of the best means of achieving financial freedom.
However, your investment can be a hindrance to your financial freedom if you don’t do it right.
With different investment vehicles to choose from in Canada, it’s easy to get confused about which investment account to open.
From high-interest savings accounts, stocks, ETFs, TFSA, GICs there are several investment options in Canada.
As a result, many smart Canadians like you are asking the question, “what is the best investment in Canada?”
While the best investment varies from person to person, here I discuss the best investment options in Canada that meet the needs of different investors.
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Real Estate Investing
Understanding Investing in Canada
Before we discuss the best investment in Canada, it’s important to understand the basic concept of investing.
Investing refers to financial commitment for financial return. In other words, investing is the process of committing money to get more money.
Since the aim of investing is to get financial returns, it’s essential to know which investment account can guarantee the best financial return.
As a result, your investment can be a vehicle to achieving your financial objectives such as children’s education, house possession, and retirement planning among others.
Because different investors have different financial objectives, investing is divided into different types such as:
- Mutual funds
- Cash equivalents
- Real estate
The above types of investing can be categorized into two:
- Short-term investing
- Long-term investing
Depending on your financial situation, investment objective and risk tolerance, the best investment in Canada can be short-term or long-term investing.
Best Short-Term Investment in Canada?
As the name implies, the best investment for the short term refers to investment options with short time-frames.
Here are the best investments in Canada for the short term:
A savings account has been a traditional investing option for investors looking for interest in their savings.
However, if you’re looking to earn high interest in your savings, I recommend opening a high-interest savings account.
High-Interest Savings Account
As the name implies, a high-interest savings account (HISA) offers you a high return on your savings.
Online banks are the leading providers of HISA in Canada as they have less operating costs than brick and mortar banks.
As a result, it’s easier for them to convert the cost of building physical banks to high-interest savings accounts.
Tax-Free Savings Account (TFSA)
Unlike a savings account or a high-interest savings account, a TFSA account is a tax-advantaged account with no tax implications on your deposit or withdrawals.
What I also like about a TFSA account is the flexibility of withdrawing your money at any time without any penalties.
Despite the contribution limit, you can earn more on a TFSA account than on a savings or HISA account.
Guaranteed Investment Certificates (GIC)
A GIC is another best short-term investment in Canada that gives you high interest on your savings upon maturity.
From a 1 to 5 year period, you can invest in a GIC and earn a higher return than you will on a savings account.
Furthermore, GIC is one of the low-risk investments as your funds and interest are guaranteed upon maturity.
What I also like about a GIC is its flexibility. This means you can hold it on a TFSA, RESP, RRSP or RRIF.
Best Long-Term Investment in Canada?
As the name implies, long-term investments are investment vehicles with a long time horizon. This means you must have a long-term investment objective to open a long-term investment account.
That said, here are the best long-term investments in Canada:
A stock is one of the most popular investment vehicles worldwide. Not only does investing in stock allow you to own a share in the world’s popular brands, but it also gives you wide exposure and high returns.
However, stocks have a high-risk profile which is common with most investment vehicles with high returns.
Hence, most financial advisors recommend ETF overstocks.
Exchange-Traded Funds (ETFs)
ETF is what you need if you’re looking for an all-in-one investment account with stocks, commodities, or bonds.
Thus, ETFs are low-cost investment vehicles that hold several investment assets without investing in each individually.
With an ETF, you don’t have to worry about the failure of one asset because your portfolio is diversified, reducing your investment risk.
However, you need to invest in the best broker, such as Wealthsimple or Questrade, to make the best out of your ETF investment.
The Canadian housing market is a promising one as the demand for housing is increasing by the day. This means more returns for realtors and real estate investors.
While Canada’s real estate market has been consistent over the years, you should know the risk attached to participating in the market.
Low liquidity delays sales and an economic downturn may reduce rent. As a result, you must have a high-risk profile to participate in the Canadian real estate market.
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 in selecting 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 financial situation is the first step to choosing the best investment in Canada.
As I often advise, do not think of investing if you have much debt. There’s no sense in investing while you have large debt incurring high interest.
If you’re battling with too large a debt, follow these steps to pay them off fast before you start investing.
However, if you don’t have a large debt, it’s essential to ask yourself the following questions as regards the investment vehicle that’s right for you:
- How much can you invest?
- How long do you intend to invest?
Answering the above questions will help you understand whether to choose a short-term or long-term investment account.
Additionally, it will help you narrow your selection to the best investment account under short-term and long-term periods.
For example, if you don’t have an emergency fund, you may find high-interest savings account ideal.
But if you have already built an emergency fund, an ETF could be your perfect investment account.
2. Risk Tolerance
After examining your financial situation, the next step is to examine your risk tolerance.
It’s essential to know your risk tolerance level because different investment options have different risk profiles.
But the unconventional rule in investing is that the higher the risk, the higher the returns.
However, not all high-risk investments can guarantee high returns.
As a result, you need to know your investment level so as to know which investment account you will be comfortable with.
To learn about your risk tolerance level, consult a financial advisor or use an online risk survey site like the Vanguard’s Investor Questionnaire.
3. Investment Objective
Finally, you need to know your investment objective to choose the best investment in Canada.
As a result, you need to ask yourself: “why am I investing?” Is it for your children’s education, retirement planning or down payment?
Thus, whatever your investment objective is, there’s an investment account that’s perfect for you in Canada.
How to Invest in Canada
Depending on the investment account you want to invest in, there are different ways to invest in Canada.
However, the cost-effective means of investing in Canada is Robo-advisor.
Robo advisors are able to offer low-cost investment portfolios because they operate online.
By using a robot and professional portfolio managers, Robo-advisors offer the best investment solutions.
Because they operate online, you can quickly contact Robo-advisors 24/7. Furthermore, you don’t have to worry about picking or rebalancing your portfolio yourself.
However, not all Robo advisors offer the best results. Thus, you need to invest only in the best Robo advisors in Canada.
Best Investment Banks in Canada
If you’re interested in investing through a brick-and-mortar bank, then it’s essential to consider the best investment banks in Canada.
Generally, the best investment banks in Canada are the Big Five Banks, namely:
- Royal Bank of Canada (RBC)
- Bank of Nova Scotia (Scotiabank)
- Bank of Montreal (BMO)
- Canadian Imperial Bank of Commerce (CIBC)
- Toronto-Dominion Bank (TD)
However, the Big Five Banks are high-cost compared to Robo-advisors with low-interest rates on savings and high fees on investment assets.
Best Investment Companies in Canada
If you’re looking to invest through a Canadian investment company or firm, choosing the best one is important.
Here are some of the best investment companies in Canada as of the time of writing this review:
1. TD Bank (TSE: TD)
Toronto-Dominion Bank (TD) is one of the best investment companies in Canada.
As one of the Big Five Banks, TD Bank is less vulnerable to global economic instability than its competitors.
Although you cannot make a quick buck on this bank, you will enjoy long-term returns. TD Bank is ideal for investors looking for guaranteed and safe investment firms.
2. Hydro One (TSE: H)
Most investors seek safety in a stock that delivers value and is less vulnerable to double-digit gains or losses in a volatile market. Hydro One is an example of a stock that has withstood the storm.
Since it was sold to Ontario province, traders have remained optimistic about Hydro One for obvious reasons.
With less than 4% dividend yield, Hydro One often trades a share between $20 and $24
3. Canadian Tire (TSE: CT)
Canadian Tire is another excellent investment in Canada with competitive offers.
It has invested in e-commerce and innovative technology to keep up with the changing market. Additionally, the company has partnered with popular companies and has broadened its product offerings.
As a result, you shouldn’t be worried about a recession with this company.
4. Suncor Energy (TSE: SU)
From crude oil, natural gas to renewables, Suncor has invested in a wide range of energy sources.
Aside from that, it is investing millions of dollars in upgrading infrastructure throughout Canada.
No matter how deep the fall in crude oil prices will be, Suncor will be able to endure because of its strong financials.
Top Rules of Investing in Canada
Now that you know the best investment in Canada, the best investment banks in Canada and the best investment companies in Canada, it’s essential to know the top rules of investing.
Here are the top rules you should watch out for when investing in any security in Canada:
1. Don’t Put All Your Eggs in One Basket
This rule means you should diversify your investment. Putting all your eggs in one basket is not only risky but limits your exposure.
You should diversify your assets, rather than focusing on a single stock. So, even if one component of your investment doesn’t yield a return, others will yield.
As a result, you should consider investing in sectors, geography, and investment securities (bonds, stocks, cash equivalent, real estate etc).
2. Build an Emergency Fund
If you’re investing in a long-term investment portfolio (stock, ETF or bond etc.), ensure that you’ve built an emergency fund in case of any sudden surprises.
Unlike short-term investment portfolios (TFSA, HISA etc.), long-term investment portfolios have penalties on early withdrawals.
As a result, you need to have an emergency fund before you can fall back on it in case the unexpected happens while investing.
3. Rebalance Your Portfolio
Rebalancing your portfolio is a smart way of making the best of your investment. You need to rebalance your portfolio regularly to reflect the market fluctuations.
The easy way to rebalance your portfolio is to use a Robo-advisor. Unlike a human advisor, a Robo advisor rebalances your portfolio automatically.
Verdict on the Best investments 2022 Canada
That’s it about the best investments 2021 Canada. Hopefully, you now understand the best investment in Canada and how to get started.
As mentioned previously, you must identify your financial situation, risk tolerance and investment objective to make the best investment in Canada.
However, if you want to make a cost-effective investment in Canada, you should use a Robo-advisor since it has competitive offers.
But if you’re in doubt about how to get started, consult a financial advisor.
Let me know in the comment section any questions or concerns you have about the best investment in Canada.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
The primary purpose of Money Reverie is to help everyday Canadians make better financial decisions by providing up-to-date financial news and information, reports, product reviews, and government programs.