We all know the value of hard work, but, more often than not, the key to financial success is more than your own sweat—it’s about being wise with your savings and making your money work as hard or harder for you as you do.
It’s difficult to find out the best investments in Canada if you are a first-time investor. However, no matter how daunting it is, we are here to assist you.
This article provides an introduction to investing, outlines principles and technical terminology, and advises on various investments based on your financial condition and comfort level. More so, it will show you the best investments in Canada.
Why you should invest in Canada
Before someone invests, they should be able to answer the question, “What does it mean to invest?” Investments are properties or products gained intending to generate additional income or appreciation in value.
They are a purchase made not for the present but to be useful in the future. We often make an investment expecting the potential payoff will outweigh the initial cost.
Investors in Canada benefit from:
- GLOBAL MARKET ACCESS.
- UNPARALLELED TALENT.
- LOW COSTS.
- REDUCED RISK.
These are just a few of the reasons international investors are flocking to Canada. Canada is the best country in the world for foreign investment. That is everything there is to it.
It’s difficult to seize opportunities and avoid danger in today’s volatile environment. FDI into Canada grew by 18.6 per cent from 2018 to 2019, making Canada’s 2019 FDI results 42.5 per cent higher than the previous 10-year average FDI total.
Canada is the destination, and investors are taking note. As we are just recovering from the pandemic, Global companies must expand while mitigating risk, which is why international investors will continue to choose Canada for its tremendous opportunities and its stability.
Global investors see a stable Canada as our economy moves from contraction to recovery. They value Canada’s agility, with programmes that respond rapidly and robustly to business needs.
And you, as a resident, take advantage of the best investments in Canada.
What is an Investment goal?
Everyone has financial aspirations in their lives, from preparing for a rainy day to planning a secure retirement. Managed funds have a long-term investment plan that can assist you in achieving clear objectives.
Your choice of a fund should reflect the type of life event that you are planning for, as its investment style will determine the returns you can expect over differing timescales.
Before you consider these best investments in Canada, you must check to see they align with your goals.
Types of Goals
The three most popular forms of investment goals are:
- Retirement savings or long-term property acquisition (15 years or more)
- Long-term life activities, such as school tuition (10-15 years)
- Rainy day or lifestyle funds to finance medium to short-term aspirations such as a dream sports car (5-10 years).
- The minimum time period for all forms of investment should be at least one year.
Whatever your personal investment target is, it is important to understand the time frame from the start, as this will influence the investments you can consider helping you achieve your objectives.
It’s also a good idea to update your priorities with a financial advisor regularly to account for any changes in your personal circumstances, such as the addition of a new family member.
Things to consider before you enter the best investments in Canada.
Investing is all about balancing risk and return. Simply stated, low-risk investments means lower expected returns. Higher risk assets have higher expected returns in the long run.
Where to invest money In Canada?
Many low-risk investments are less likely to lose money. Only don’t plan to become wealthy by investing in a high-interest savings account or a GIC (GIC). Options can have excellent long-term returns, but as a riskier investment, stocks are far more volatile and can even lose money in the short term.
Top 13 Best Short and Long Term Investments in Canada 2021
- Blockfi Savings Account
- Bank Savings Accounts
- Money Market Accounts
- Alternative Investments
- Checking Accounts
- Short-Term Bond Funds and ETFs
- Government of Canada Bonds
- Provincial Bonds
- Municipal Bonds
- Investment-Grade Corporate Bonds
1. Blockfi Account
Let’s face it, you’re not going to earn anything in a bank savings account. That’s why, to me, of all the items on this list, getting into cryptocurrency savings account actually seems the sanest, and I have parked a significant amount of short term funds in this account.
With Blockfi, you deposit some cash by buying a stablecoin (not actual cash). Your money is accessible any time so it is very liquid. Blockfi makes loans to other parties, like a bank does, except the loans are in cryptocurrency.
Blockfi can pay you up to 8.6% per year back in stablecoin, which can be exchanged back for CAD. 8.6% is well over 16 times what you will get at the bank. So what’s the downside?
Having a cryptocurrency savings account is not the same as having a savings account at your bank. There is no CDIC insurance on your money like with a regular bank. There are also concerns around digital theft.
Blockfi does have its own insurance of deposited funds that can guard against theft or other problems, but it is not very easy to figure out how it specifically differs from FDIC insurance.
Despite these risks, I believe Blockfi is a viable bank alternative. If interested, I recommend placing a small amount of cash (not all of it) into an account and increasing from there based on your comfort level.
Cryptocurrencies are here to stay, and this seems like the next evolution in banking, but be prepared for some bumps along the way.
2. Online Savings Account
A high yield savings account might be the answer if you’re looking for a risk-free way to earn some interest on your assets. You’ll get a small amount of interest just for holding your money in these accounts.
Aside from opening an account and depositing funds, this technique needs almost no effort on your part. The best high yield savings accounts have attractive interest rates and no fees.
3. Money Market Account
The best money market accounts are currently paying an APY that is very similar to one year CDs while also providing direct access to their assets. These accounts issue ATM cards, receipts, and deposit slip to depositors.
Money Market accounts are calculated based on the account balance rather than the amount of time you have invested your money.
Because of all of these reasons, many people regard money market accounts as a form of “savings account on steroids.”
While there is little risk involved, you will be able to secure a higher rate of return.
4. Alternative Investments
Alternative investments are part of a healthy and diversified portfolio. The problem is many alternative investments aren’t very liquid and require a holding time of at least a few years.
For example, real estate is a classic alternative investment. But unless you’re flipping houses, the investor is in it for the long haul. You can try
- Lending Loop
- Canada Savings Bonds
5. Guaranteed Investment Certificate (GICs)
Similar to their US cousins, GICs pay a set percentage of interest-based on the period of time for which your money is locked in. Basically, a GIC is a loan to the bank, credit union or deposit broker.
You can often choose to invest for a fixed period of time as little as 6 months to as long as 10 years. The longer the time frame, the higher the interest rate.
You might want to consider going with a GIC term of 5 years or less, as that is the maximum term that the CDIC will insure, with a dollar value up to $100,000.
And much like CDs in the United States, with a GIC you are required to keep your money in the account for the duration of the term. If you need to pull the money out sooner, there may be a penalty or even no interest paid at all.
While this defeats the point of investing in a GIC, it’s good to know that you can get at your money if you find yourself in a situation where you need it.
6. A (Tax Free Savings Account) TFSA
A TFSA is an investment account that’s sponsored by the government. If you’re a Canadian over the age of 18, you’re eligible to save or invest in a TFSA up to a certain amount annually ($6,000 for 2021), and unused contribution room can be rolled over into future years.
A TFSA is a tax shelter; it gives every Canadian of the age of majority some savings or investment room to earn, tax-free.
Some confusion arises from the fact that, despite the name, not every TFSA is a traditional savings account. While you can put cash into a high-interest savings account or other savings vehicle within a TFSA, it can also hold investments like stocks or bonds, mutual funds, GICs or ETFs.
In this way, a TFSA is similar to a registered retirement savings plan (RRSP), with the exception that with the TFSA you do not pay tax on the earnings after you make a withdrawal.
On the other hand, where you can claim RRSP contributions as deductible on your income tax return, that perk doesn’t apply to TFSA contributions.
7. Online Checking Accounts
Just like online savings accounts, an online checking account can also serve short-term investment needs.
You get many of the benefits of online savings accounts with even more liquidity because the number of withdrawals isn’t limited.
And the best part is, online checking accounts tend to offer cash bonuses! Which certainly helps sweeten the deal, especially with interest rates remaining low.
8. Short-Term Bond Funds and ETFs
Short-term bond funds are products that are usually only managed by a professional financial advisor.
Bonds are not as stable as money markets, but they do offer the potential to earn a higher yield.
These bonds are a product of the market and will payout according to the market’s current condition in fluctuating monthly payments.
Short-term bonds usually mature in terms within 2 years or less, which can make them an ideal choice for investors with that type of timeline.
9-11. Government, Provincial and Municipal Bonds
Federal, provincial, and municipal governments issue bonds to fund deficits or to raise capital for program spending. Generally, maturity terms range from over two to 30 years and interest is payable on a semi-annual basis. The most highly traded bond issues have terms of five, 10, and 30 years.
12. Investment-Grade Corporate Bonds
Corporate bonds are debts issued by companies to raise capital to finance operations and projects. Companies that issue debt are given a rating based on their financial strength, prospects and history.
Investment-grade bonds must be rated “BBB-” or “Baa3” or higher by credit rating agencies Standard & Poor’s or Moody’s.
Corporate bonds are riskier than government bonds and usually have a higher risk of default. However, the increased risk comes with higher returns than “safer” government bonds. Liquidity varies depending on the issuer.
Investments come with their risks, but their rewards usually outweigh all the risks that come up from these investments.
When investing, you must be guided to put your money into trustworthy ventures that can pay you huge ROIs and guarantee the safety of your investment.
These best investments in Canada can help you get returns from your money when you invest there.