Are you looking for the best investments in Canada? You have come to the right place.
There are so many investment options to choose from in Canada, ranging from stocks, bonds, GICs, mutual funds, ETFs, real estate and so on.
While the right investment can help boost your returns and help you achieve your financial goals sooner, the wrong ones can lead to losses and frustration. Hence, it’s important to choose the best investment for you that considers your goals, risk tolerance and overall financial situation.
This article discusses the best investments in Canada and the factors to consider when making your choice.
We’ll also look at the available investment accounts available to Canadians, especially the tax-advantaged registered accounts.
Overview of the Best Investments in Canada
Broadly speaking, you can classify the available investments in Canada into short-term investments and long-term investments.
Short-term investments are typically less risky, but also offer lower returns. They include savings accounts, money market accounts, GICs (Guaranteed Investment Certificates), and also peer-to-peer lending.
Long-term investments are those that have the potential to grow your money more, but they usually also come with more risk. These include stocks, mutual funds, bonds, and real estate.
|Short-Term Investment Options||Long-Term Investment Options|
|High-Interest Savings Account||Stocks including Fractional Shares|
|Guaranteed Investment Certificates (GIC)*||Exchange-Traded Funds (ETFs)|
|Peer-to-Peer Lending||Mutual Funds|
Note: GICs fall in both categories. You can buy short-term GICs with terms below 1 year and longer term GICs of 10-year terms.
We can also classify investments by their liquidity. Liquidity measures how quickly you can convert an investment into cash, without losing money on the sale.
Generally speaking, the more liquid an investment is, the lower its return will be. So all things equal, you should expect a lower rate of return on your money in a savings account than what you can get from a peer-to-peer lending platform or from real estate.
And in terms of cash flow, you can think of investments as providing a fixed income, variable income, or no income at all.
A fixed income means you receive a set amount of money each month or at set intervals, regardless of the market conditions. With a variable income investment, your payouts will vary depending on how the underlying investment performs.
And finally, with a no-income investment, you don’t receive any regular payments – instead, you hope to make a capital gain (or loss) when you sell the investment.
Now that we have a better understanding of the types of investments, we’ll start looking at the best investments in Canada.
Best Short-Term Investments in Canada
Short-term investments are those that can be cashed in within a year or less. They offer low risk and lower returns, but they’re also very liquid – you can usually sell or liquidate them quickly without penalty and without a loss in value.
The following are the best short-term investment options in Canada:
1. High-Interest Savings Account
A high-interest savings account is a great option if you’re looking for one of the best low-risk investments in Canada. You can open an account with any bank, and the interest rate is usually higher than a regular savings account.
Since the emergence of neo-banks in Canada, high-interest savings accounts (HISAs) have continued to grow in popularity.
This is because their high returns on savings make them a superior alternative to traditional savings accounts from the big banks.
In general, you can expect to earn more than 100x the interest on savings account offerings at big banks.
And the best part is:
Many online banks offer no-fee banking so not only are you earning more on your funds, you’ll also be paying less fees overall.
I’ve been recommending EQ Bank Savings Plus Account for years due to its non-promotional high-interest rate on registered and unregistered accounts – currently 125x what the big banks are paying.
Learn more about the EQ Bank Savings Plus and other best high-interest savings accounts in Canada here.
Or check here for a review of EQ Bank Savings Plus account.
2. Guaranteed Investment Certificates (GIC)
If you are looking for a safe investment with high returns potential in Canada, a guaranteed investment certificate (GIC) is hard to beat.
GICs are another short-term investment that is safe and offers a guaranteed return (usually higher than a savings account) over a specified period.
The longer the GIC term, the higher the rate – unless the GIC provider is offering a promotional rate on the shorter-term GIC terms. Short term GICs have a term less than a year – 3,6,9, or 12 months. But you can also buy GICs with terms as long as 10 years.
With the Canadian Deposit Insurance Corporation (CDIC) protection, your GIC investment is safe and guaranteed up to a $100,000 limit per category.
Like most things, you should compare rates from the different financial institutions to be sure you’re getting the best returns on your money and taking advantage of the best GIC rates in Canada.
3. Peer-to-Peer Lending
Peer-to-peer lending, or P2P lending, is the practice of lending money to borrowers through a peer-to-peer lending platform, such as goPeer.
This could be an alternative means of diversifying your portfolio with fixed-income securities and other assets.
P2P lending has high returns potential because of the high-interest charge on loans. However, you need a high-risk profile to invest in this investment vehicle because:
- There is no guarantee of loan repayment as you may loan money to people with poor credit history.
- Monthly and service fees can easily add up to consume a significant part of your investment.
Overall, P2P lending is for those with a high risk tolerance. But only invest a small percentage of your portfolio in this type of investment.
Learn More: goPeer Review
Best Long-Term Investments in Canada
Long-term investments are those that you expect to hold for more than a year. The best long-term investments in Canada are those that offer a combination of stability and growth.
And each one has its own different risk level and potential returns.
If you’re comfortable with their risk levels and longer investment horizons, consider the following long-term investment options in Canada:
Investing in the stock market can be a great way to build your wealth over time.
Stocks are shares in a company that represent a fraction of its ownership. When you buy stocks, you become a part owner of the company and can earn money through dividends and capital gains.
If you own shares and the company does well, your investment will increase in value. However, if the company does poorly, you will also share in the loss.
This explains why stocks are always classified among high-risk investment vehicles.
No doubt, stocks are more popular than most investment options because of their higher returns and wide exposure.
But knowing which ones to buy can be difficult and building a diversified portfolio with individual stocks can be quite expensive and time-consuming especially for someone with little capital.
Luckily, there are now a number of low-cost, exchange traded funds (ETFs) that give you instant exposure to different sectors of the stock market with a single buy.
Learn how to build a diversified portfolio fast in this post.
Alternatively, you can consider fractional shares. See below.
Next on our list of the best investments in Canada is fractional shares.
Fractional shares are a way for people to own a piece of a company, even if they don’t have enough money to buy a whole share.
With fractional shares, you can own a small part of a whole share for as little as $1. For example, you can buy 0.25 or 0.50 shares of Facebook, Twitter, or other popular stocks.
This makes it possible for people with limited capital to invest in the stock market and still own a piece of some of the world’s most successful companies.
So if you have $100, you can split it between different fractional shares without missing out on the benefits of owning full stocks.
As a result, you can easily diversify your portfolio with multiple fractional shares, limiting your overall investment risk.
With the introduction of Wealthsimple Fractional Shares in 2021, Canadian investors now have access to fractional shares with no commission on their trades.
Learn how to buy fractional shares on Wealthsimple Trade here.
6. Exchange-Traded Funds (ETFs)
Exchange-traded funds (ETFs) are a type of fund that can hold numerous asset types, such as stocks, bonds, precious metals and so on. They provide a simple way to diversify your portfolio and reduce your investment risk.
For example, if one asset (or stock) in your portfolio goes down in value, the loss may be offset by the gains in other assets.
An ETF is a type of mutual fund that trades on a stock exchange. ETFs are similar to mutual funds in that they hold a basket of assets, but they differ in how they are traded.
Like fractional shares, ETFs allow you to quickly build a diversified portfolio that invests in some of the biggest and most popular companies – but without the stress of buying them individually.
Another interesting part of ETFs is their low costs. Unlike mutual funds, ETFs usually have lower management fees and expense ratios, helping you save on investment cost.
However, your ETF trading platform can determine your overall investment returns. That’s why you need to consider the best online brokerages for ETFs in Canada.
- iShares Core Equity ETF Portfolio – XEQT Review
- Vanguard All-Equity ETF Portfolio – VEQT Review
- Best Gold ETFs in Canada
7. Mutual Funds
A mutual fund is a pool of securities managed by a portfolio manager that buys and sells stocks, bonds, money market instruments and other assets.
Like ETFs, mutual funds are invested in different types of assets, based on the objective of the fund. However, mutual funds generally have higher management fees than ETFs.
You don’t have a lot of control over what happens to your money when you invest it in a mutual fund. This is because all investment decisions are made by the investment manager.
But it’s an advantage if you’re not interested in managing your own portfolio and would rather have someone else do it for you.
Mutual funds also offer built-in diversification, which reduces your risk because your money is spread out across many different investments.
Overall, the higher fees can eat into your returns, so you may want to consider other hands-off investment options like robo-advisors.
But if you decide to go with a mutual fund, it’s important to invest in a fund with experienced portfolio managers with a long track record of performance.
Learn more: Best Mutual Funds in Canada
8. Real Estate
Real estate is a popular investment choice in Canada, and for good reason. It can provide stability and consistent returns, making it an ideal option for those looking to build long-term wealth. There are a variety of real estate investments and strategies available, each with its own set of risks and rewards.
You may invest in rental properties, buy and flip houses, invest in commercial real estate or buy publicly-traded real estate investment trusts (REITs).
With real estate, you generally need a huge capital to start investing. For example, depending on your market in Canada, you may need tens or hundreds of thousands to buy a rental property or flip a house.
Luckily, there are real estate investment opportunities that you can start with little money. A great option is REITs. You can buy units of a REIT for as little as $10, making this an accessible investment option for most people.
Crowdfunding real estate sites are another great option. For example, you can invest in real estate opportunities starting with just $1 on addy. Learn about its offering and how to get a $25 bonus in this post on addy promo.
Real estate is a great long-term investment choice, but it’s important to remember that there are risks involved. Make sure you do your research before investing and consult with a financial advisor to help you determine the best strategy for your needs.
Learn more: Best Real Estate Crowdfunding Platforms in Canada
9. Corporate Bonds
Corporate bonds are another popular investment choice in Canada. These bonds are essentially IOUs issued by companies to raise money for various projects or initiatives.
When you invest in a corporate bond, you are lending your money to the company in exchange for a fixed rate of interest over a set period of time. The company then uses this money to finance its operations.
You can either invest directly in a company’s bond, generally starting with a few thousands dollars. Even better, you can buy a bond ETF to get exposure to a basket of different corporate bonds. This is a great way to spread your risk and get consistent returns.
Bonds are considered relatively low-risk investments, making them a good option for those looking for stability and modest returns. But they can also come with higher risk when you invest in companies with lower credit ratings.
You’ll be compensated for the higher risk with higher interest rates. However, there is the potential for loss if the company goes bankrupt.
10. Government Bonds
Finally on this list of the best investments in Canada, we have government bonds.
Government bonds are another type of bond that you can invest in. These bonds are issued by the government to finance various projects, like infrastructure or social programs.
Government bonds are considered some of the safest investments because there is little chance that the government will default on its debt.
However, government bonds tend to offer lower returns than other types of bonds. All things being equal, you’ll get a higher return on a corporate bond than government bonds.
Investors can invest in individual government bonds through a bond broker or invest in a basket of bonds through a bond ETF that holds government bonds.
Still, government bonds can be a good option for those looking for stability and modest returns.
Types of Investment Accounts in Canada
Generally speaking, there are 2 broad categories of investment accounts in Canada:
- Non-registered accounts: These are investment accounts that offer little to no tax advantages when you invest in them. All your investment gains, interest or capital gains are taxed at your regular income tax rate in the year they are earned.
- Registered accounts: These are investment accounts that offer significant tax advantages to Canadians that invest through them. They allow your investments to grow either tax-free or on a tax-deferred basis. The most common types of registered accounts are RRSPs, TFSAs and RESPs.
Each type of account has its own set of rules and regulations, so it’s important to understand the difference before you start investing.
Let’s take a look at the 3 most common registered investment accounts in Canada.
1. Registered Retirement Savings Plan (RRSP)
RRSPs are a type of investment account in Canada that are intended for retirement savings, and offer a number of tax benefits.
Your contributions to an RRSP account are tax-deductible. Meaning, you can deduct your RRSP contributions from your income before calculating your taxes owing for the year.
This reduces the amount of taxes you need to pay for the year. However, there’s a limit on the amount you can contribute to your RRSP.
The RRSP limit is 18% of your previous year’s income up to a maximum dollar limit ($29,210 for the 2022 tax year).
In addition to the tax deduction, the money in your RRSP account also grows tax-free until you withdraw it in retirement – hopefully at a lower tax bracket than when you contributed to it.
Because of these tax benefits, the RRSP is one of the most popular and best investment accounts in Canada.
You can open an RRSP account at many financial institutions with the choice between a managed (e.g. robo-advisor, mutual funds) account or self-managing your own investments.
Don’t be misled by the “savings” in its name. You can hold many of the best investments in Canada covered above in an RRSP including GICs, Stocks, ETFs, real estate and more.
Learn more: Registered Retirement Savings Plan (RRSP) FAQs
2. Tax-Free Savings Account (TFSA)
The Tax-Free Savings Account (TFSA) is another popular investment account in Canada, and it’s quite different from the RRSP.
First, contributions to a TFSA are not tax-deductible – so there’s no immediate tax savings like with an RRSP.
However, the money in your TFSA account grows tax-free, regardless of when you withdraw it. This makes the TFSA a great option for saving for both short-term and long-term goals since you can access the funds whenever you need them without penalty.
And you never lose your TFSA contribution room. So when you withdraw the funds from your TFSA, you can recontribute them the following year.
Unlike traditional savings accounts, the government determines the annual contribution limit of a TFSA. While you can carry forward unused contributions, depositing beyond your contribution limit will attract penalties.
That said, $6,000 is the TFSA contribution limit for 2022. But you can contribute up to $81,500 in 2022 if you’ve been eligible for the account since its inception in 2009 but never contributed to it.
Like with an RRSP, you can open a TFSA account at any financial institution.
Learn more: TFSA Guide
3. Registered Education Savings Plan (RESP)
RESPs are to education savings what RRSPs are to retirement savings. The government offers a 20% grant on the first $500 you contribute per year, and there is no limit to how much you can contribute in total each year.
However, there is a lifetime contribution limit of $50,000 per child. Also, the government 20% grant, through the Canada Education Savings Grant, is capped at a lifetime limit of $7,200 per beneficiary.
Like RRSP and TFSA, you can open an RESP with traditional banks, credit unions, brokerages and even scholarship plan providers.
You can also open a managed account where the RESP is invested on your behalf or go the self-directed route.
If you prefer a hands-off approach to start savings for your kids’ education, consider opening a Wealthsimple RESP. Check my review here and learn how to get a $50 bonus.
To learn more about RESP, check the posts below for information on how to get started.
- Best RESP Providers in Canada
- Best Robo-advisors for RESP
Which Investment Account should you choose?
Like investment type, the best investment account
When it comes to choosing an investment account, there are a few things you need to consider such as:
- What is the purpose of the investment? If you want to save for your kids’ education, an RESP provides a better return than an RRSP because the government will top-up your contributions.
- What is your marginal tax rate? If you’re in a higher tax bracket now and expect to be in a lower bracket in the future, an RRSP will likely offer more tax savings than a TFSA.
- When do you need the money? If you think you might need the money in the next few years, a TFSA is a better option because you can withdraw the money without penalty and put it back the following year.
- Do you have available room in your registered accounts? If you’ve maxed out the contribution room in your account, then your only option would be to use a cash or non-registered account.
The bottom line is, there is no one-size-fits-all answer when it comes to choosing an investment account. It really depends on your individual circumstances and goals.
As always, If you’re still not sure which account is right for you, consult with a financial advisor.
Which Investment Option is Perfect for You Canada?
It may be easy to get confused from the above best investment options in Canada especially if you’re a beginner investor.
But one thing that’s clear from the above review is that different investment options have different risk levels and returns.
As you can see, some of the above best investment options in Canada have zero-low risk levels while others have mid-high risk levels.
|Zero-Low Risk Level||Medium-Risk Level||High-Risk Level|
|GICs||Diversified ETFs||Fractional Shares|
|Government Bonds||Mutual funds||P2P lending|
This means your best investment type depends on your risk tolerance.
So start by assessing your financial, investment goals and the level of risk you’re willing to take on. Then you can decide whether to invest in a short-term or long-term investment vehicle and the exact investment to go with.
But in practice, you’ll have different financial goals that require different investment types to be held in a mix of investment accounts.
For example, someone could be saving for retirement that is 20 years away and so comfortable with investing in a diversified ETF portfolio through a robo-advisor. But the same person may also have a car they are saving up to buy in the next 6 months, which would require a more conservative investment portfolio with a higher percentage of cash and HISA.
So bottom line is, it really depends on what your financial goals are as to what the best investment for you will be. If you’re not sure, consult with a financial advisor to get started.
They can help you figure out what your goals are and how to best achieve them.
What to consider to choose the right investment?
Here are some factors to consider when choosing the best investment in Canada that is right for you:
- Your investment goals: are you savings for retirement, education, a down-payment etc?
- The type of investor you are
- The amount of risk you are willing to take
- Your time horizon
- Tax implications: some investments have preferable tax treatments.
Once you have considered these factors, you can then compare different investments and their features.
What is the Best Investing Platform in Canada?
There are different investment platforms in Canada tailored to different investors. The right one for you will come down to your investing knowledge, financial goals, how much involvement you want and so on.
The following are the common ones:
Robo-advisors are automated investment platforms that handle the entire investing process for you. You only need to provide a robo-advisor with your investment objective and risk tolerance.
After that, simply contribute to the account and the robo-advisor will then handle all the investment decisions including investing, rebalancing, tax-loss harvesting and more.
In addition to automating the entire investing process, robo-advisors have lower management fees and management expense ratios than other investment platforms.
But with multiple robo-advisors out there, it’s essential to invest through one of the best robo-advisors in Canada, such as Wealthsimple Invest and Questwealth Portfolios.
2. Discount Brokerages
If you have intermediate or advanced investing experience, you can invest through a discount brokerage.
A discount brokerage is an intermediary platform that provides low-cost trading. Discount Brokerages like Wealthsimple Trade and Questrade help you save a lot on investment costs in Canada.
For example, ETFs and stocks on Wealthsimple Trade are commission-free. However, only ETFs purchases on Questrade is commission-free
In the end, you will save hundreds of dollars from trading fees and commissions on a discount brokerage than a full-service broker.
Both Questrade and Wealthsimple Trade offer new clients a $50 bonus when they sign-up through a referral link. Click on the respective links below to get started:
- Questrade: Get $50 bonus after funding your account with $1,000. Use Questrade promo code “WALLETBLISS”.
- Wealthsimple Trade: Get $50 cash bonus after trading a minimum of $150.
Related: Best Investment Apps in Canada
Verdict on the Best Investments in Canada
We are fortunate to live in a country that has multiple investment options with competitive potential returns across various risk profiles.
Hopefully, now you have a better understanding of the best investments in Canada that matches your risk tolerance and investment objective.
But if you need more help in making a decision, please leave a comment below.
Kindly explore our existing blog posts to learn more about other best investment solutions in Canada.