Best 5 Investments in Canada – Investing Options 2024

Are you looking for the Best 5 Investment Options in Canada? Here we have compiled a list of some of the trending and best investments for Canadian investors.

Personal Finance and Investing

Who in this world does not have financial goals? Everyone is running around for something or the other. It could be short term goals or long-term goals, planning for retirement or for holidays or for healthcare or for kid’s education. Smart personal financial planning requires developing a framework that includes monthly budgeting, reserving an emergency fund, using credits wisely and paying them off in a timely manner, and last but not the least investing. Following this plan in a disciplined manner, will give you financial stability. Financial Literacy plays an important role in all this.

Let us assume that you are on top of your monthly budget, you have set aside funds to meet contingencies, and you are able to pay loan instalments regularly. At this stage, you must start concentrating on investing your money.  Investing in simply purchasing and holding an asset for a considerable period of time to take advantage of its capital growth and income returns. May it be stocks, ETFs, real estate investment, or other alternatives, your financial goals must align with your strategies.

The challenge in investing is to figure out, how much to invest, where to invest and how often to invest. As Canadians, you have numerous investment options to choose and pick where to invest.

So, let’s get an idea about these topmost investment options in Canada.

Best 5 Investments in Canada – Options to Explore

Here we have discussed the 5 best investment options in Canada, where you can invest your funds in. How much to invest and how often to invest depends on your personal finances.

1. Robo-Advisors

Robo-advisory emerged in Canada around 2014 and it is perfectly suited for investment beginners, where you can have a hands-off approach. Well, let us explore how it works. You are required to research and compare various platforms the offer robot-advisory and set up an account, you deem is best for you. Once done, you are required to answer to a questionnaire that asses your investment goals, timeframe, and risk appetite.

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Based on the responses, your risk-taking attitude is determined and the pre-determined default portfolio is chosen for you, where your funds are all invested. The portfolio is automatically re-balanced and is constantly tracked on your behalf.  The portfolio also generally contains Exchange Traded Funds (ETFs) or mutual funds within and for this purpose you are charged a percentage of your portfolio. Some well-known robo advisors in Canada are Wealthsimple, Qtrade, RBC invest ease, Questwealth etc.

Robo Advisors – Pros

  • Easy to open an account
  • Low fees
  • Automatic rebalance
  • Readily available portfolios

Robo Advisors – Cons

  • No personalisation
  • No access to advisers  

Also, have a look at the Best Robo Advisors in Canada

2. Exchange Traded Funds

It takes huge amount of time and expertise for you to research the market and invest in shares that tracks an index or a collection of assets. If you invest in ETFs, the fund manager of the ETF does this for you, in return for management expense ratio that is a percentage of your investments. An ETF contains a basket of shares and as its name suggests it can be traded in stock exchanges such as Toronto Stock Exchange or Canadian Securities Exchange.

Example: A Vanguard All-Equity ETF Portfolio (VEQT) invests 100% in shares and it aims to offer you long term capital growth, whereas, a BMO Aggregate Bond Index ETF (ZAG) is designed to shadow the performance of FTSE Canada Universe Bond Index and the ETF invests 100% in a mex of debt instrument that has maturity period greater than 1 year.

ETFs – Pros

  • Diversification
  • Can trade in stock exchange
  • Low fees
  • Automatic re-investment of dividends. 

ETFs – Cons

  • Attracts buy/sell costs
  • Capital gains
  • Attracts transaction costs when bought and sold
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3. Mutual Funds

A mutual fund or a managed fund is an investment vehicle that contains various assets such as shares, bonds, cash, commodities, etc. within itself. It is managed by professional fund managers. A mutual fund is generally not traded in the stock exchange. Every mutual fund has its own Product disclosure statement (PDS) that contains the goal of the fund, asset allocation, investment time frame, fees etc.  If the objective of the mutual fund matches your needs, then you can invest in the fund. The price of a mutual fund is determined based on the value of the assets it contains.

Example: if you wish to invest in equities of emerging markets, it is impossible for a person to spend time, research and invest in a portfolio of such shares, instead you can invest in Fidelity Emerging Markets Portfolio. Similarly, you wish to have access and exposure to equities of Europe, you may invest in RBC European Equity Fund.

Mutual Funds – Pros

  • Diversification
  • Managed Professionally
  • Minimal investment balance required
  • Less time consuming

Mutual Funds – Cons

  • Attracts Fees
  • No transparency
  • No control over your funds

4. Bonds

A bond is basically a type of loan that is issued as a fixed income financial instrument. It is a loan for the issuer and asset for the investor. Bonds are issued by both governments and corporates. A bond has a principal invested, interest rate and time period. If you are looking for capital guaranteed investments, then bonds are the best options as its value does not raise or fall like stocks.

In addition, you will also be receiving the agreed interest rates on a timely basis.

Bonds – Pros

  • No risk
  • Capital guaranteed
  • Stable interest payments

Bonds – Cons

  • Low interest rates when compared to growth assets
  • There are chances where companies default your bond
  • No capital growth

5. Segregated Fund

If you invest in a segregated fund, your funds are in turn invested in a pool or a mix of investments that are designed as a deferred variable annuity. The investments are managed and designed by the insurance company. They are famous in Canada and are issued by the insurance companies. You can take advantage of death benefit payments as well as capital growth from this type of asset.

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Majority of the segregated funds offer a minimum pay out of 75% to 100% of the premiums paid and they are guaranteed. Some famous Segregated funds in Canada are Manulife Investment Management, Beneva Inc, Canada Life, Empire life insurance company etc.

Segregated FundPros

  • Capital guarantee
  • Mix of investment and death benefit

Segregated FundCons

  • Lower interest rates
  • Higher costs
  • Locked-in agreement

Saving money only in a bank account in Canada may not help you achieve your financial objectives. You have to think further and start investing it. No matter how small the investment is, you should plan and initiate working towards your investment goals.

Also have a look at, the Best Online Stock Brokers in Canada and make your investment journey simpler.

Which is the Best Investment Option in Canada?

We have listed a broad list of investment types in Canada. It is important for you to research your own investment goals and the markets before commencing to invest. You can also take the help of a professional financial adviser for this purpose.

Also, discover the Types of Insurance in Canada that can help protect you an your family in uncertainities.

Not to forget, the real estate investment option in Canada, looking at the soaring housing prices in some of the top cities.

Although, the above investments seem to be best, they are subject to market risk, volatility risk, economic risk, capital loss risk, timing risk, inflation risk etc. Which is the best investment for you and why? Do share your thoughts.

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