Are you unsure of how and where to invest your money? From real estate investing to stocks, index funds, GICs, and more, there are numerous ways to invest in your future.

In times of economic uncertainty, it’s especially important to find the right investment vehicle that fits your initial investment, financial goals, investment strategy, and risk tolerance.

If you’re looking for the best ways to invest money in Canada, then you’re in the right place. Below, I’ll go over some time-tested and reliable investment vehicles, weigh their pros and cons, and offer some tips to help you make the most out of your investment.

Best Ways To Invest In Canada

Before you invest money, it’s important to set some solid financial goals for yourself. This will help you create an investment strategy that will help you reach your goals quicker.

Some important questions to consider include:

• Are you investing to earn passive income or for your retirement?
• What is your risk tolerance?
• Are you investing a lump sum, or do you plan on contributing regularly?
• How much do you plan on contributing to your investment account?

It’s okay if you don’t have all of the answers now. However, I encourage you to start thinking about these questions, though, as the answers will help you make the best decision.

With that in mind, here are some of the most popular (and reliable) investment options available!

1. Exchange Traded Funds (ETFs)

• Who They’re Best For: Passive investors looking to diversify their portfolio and reduce risk
• How To Get Started: Check out this ETF investing guide

If you’re just starting your investment journey and building your investment portfolio, jumping straight into the stock market and buying individual stocks will be tough. The stock exchange is a very volatile place, even for experienced investors.

While you could get lucky and earn exponential profits from investing in penny stocks, this investment strategy is very risky, and you are even more likely to lose your hard-earned money.

Instead, consider investing in exchange-traded funds.

ETFs are a low-cost, low-effort way to diversify your investment in the stock market. An ETF is a collection of securities, such as stocks or bonds, that you can buy or sell on a stock exchange, similar to individual stocks.

ETFs can be purchased online through brokers like Wealthsimple, Questrade, and others. You can also invest in ETFs with registered accounts, such as a registered retirement savings plan (RRSP) or tax-free savings account (TFSA).

Since ETFs include a variety of securities, they offer an excellent diversification of investments that will help to spread out your risk.

2. Guaranteed Investment Certificates (GICs)

• Who They’re Best For: Investors looking for a low-risk, guaranteed return on investment
• How To Get Started: Purchase GICs through a financial institution

Guaranteed investment certificates (GICs) are fixed-income securities, meaning that they offer a guaranteed return on your investment. When you purchase a guaranteed investment certificate, you essentially agree to lend a set amount of money to a financial institution in exchange for a guaranteed interest rate.

GICs have set terms, which can range from as little as one year to as long as ten years. Once the term is completed, you’ll receive your investment back with the promised interest rate. Rates can vary but typically range between 3% and 4%.

EQ Bank is currently offering an incredible 5.50% interest rate on one-year GICs.

Unlike the stock market, which can offer gains one year and losses the next, GICs are very low-risk investments. In fact, the main “risk” is that you’ll be without your money for the duration of the term.

In the event of an emergency, you can take your money out of a GIC. However, this will incur early termination fees.

3. Dividend Stocks

If you want to take a more active approach to investing and buying stocks, consider purchasing dividend-paying stocks. Dividends are additional payments offered to stockholders as a form of profit sharing for holding shares in the company.

Some companies pay monthly dividends, while others pay quarterly dividends every three months.

For example, if a company offers a $1 monthly dividend per common share, and you earn 100 shares, then you’ll receive a $100 dividend payout each month.

It’s important to note that not all companies on the market offer dividends. Even fewer offer consistent dividends. A company could have a bad year and choose not to issue dividends.

So, if you want to invest in dividend-paying stocks, I recommend looking for companies that have a history of consistent (and preferably increasing) dividend payouts. If you play your cards right, you could build a steady passive income stream by holding dividend stocks for the long term.

4. High-Interest Savings Account (HISA)

Many savings accounts offer a measly interest rate of 0.5% or less, which means you’ll only earn 50 cents for every $100 you have invested. This is not a smart way to save money.

Instead, I recommend opening a high-interest savings account. These special savings accounts allow you to save and offer interest rates that range between 2% and 4%, which is upwards of 300x or more than traditional savings accounts.

The main downside of HISAs is that they typically have a limit on how much you can keep in the account. For example, some HISAs have a $100,000 or $200,000 maximum, which could limit wealthier Canadian investors.

Interest rates are also subject to change, which means you may not earn the same rate in the future. In this case, you can always withdraw your money and switch to a different HISA instead.

5. Real Estate Investment Trusts (REITs)

• Who They’re Best For: Investors looking for a lower-risk way to invest in real estate
• How To Get Started: See my list of the best REITs in Canada

Investing in real estate can be very profitable. However, it can also be risky and often requires a large initial investment of both time and money. There’s also the headache of paperwork, permits, and any other work that you need to put into the property.

A REIT is a publicly-traded company that invests in commercial and residential real estate. As the company grows its profits from its real estate investments, the dividends payments to you will likely increase. All REITs also offer monthly dividends, which can offer an additional stream of income.

With a real estate investment trust (REIT), you can passively invest in real estate without the headaches. The monetary investment is also much lower, and you can get started with $100 or less.

Related Reading: Best real estate investing options in Canada

6. Government And Corporate Bonds

Similar to GICs, bonds are fixed-income investments issued by corporations and the government to fund projects and operations. Investors essentially lend money to these entities with the promise of getting back the principal investment plus interest, making bonds significantly less risky than stocks.

Bonds are most commonly used to balance out the risk of the equities that you hold in your portfolio. The easiest way to invest in bonds is through an ETF.

Bonds typically have a term period of at least one year, and many bonds may have longer, up to twenty years or more.

Investing in bonds offers the potential to diversify a portfolio and buffer against stock market volatility, as bond yields aren’t subject to the market’s performance.

Unlike GICs, though, bonds do come with certain risks.

For example, the value of government bonds can be affected by changing interest rates and inflation, which can pose a serious issue for long-term bonds. As far as corporate bonds go, there’s a risk that the company could go bankrupt and default on its obligations.

7. Robo-Advisors – Automated Investing Services

• Who They’re Best For: Passive investors who want to avoid the high fees charged by financial managers
• How To Get Started: Read my list of the best robo-advisors in Canada

Robo-advisors, or automated investment platforms, are digital platforms that utilize complex algorithms to determine the ideal investment allocation based on the user’s financial goals, risk tolerance, and investment choices (such as halal, kosher, or eco-friendly investments).

Unlike human financial managers, who typically require substantial account sizes, robo-advisors often allow users to start investing with a very initial investment, making them an excellent choice for beginners.

Robo-advisors are also far more affordable than their human counterparts, offering lower account management fees and similar (if not better) returns on your investment.

As AI and machine learning become increasingly incorporated into the financial world, robo-advisors will only become more competent.

8. Peer-To-Peer Lending (P2P)

• Who It’s Best For: Those who want to lend money to fellow Canadians online
• How To Get Started: Participate in P2P lending with companies such as goPeer.

Unlike traditional loans that are obtained from a bank or financial institution, peer-to-peer (P2P) loans are obtained directly from other individuals within a P2P lending network.

These networks consist of investors and borrowers.

As a borrower, you would submit an application for a personal loan to the platform for review. Once reviewed, the platform would push the offer to other Canadian investors, who would have the opportunity to review your application and offer funding.

As an investor, you can actively scroll through offers that match your level of investment risk.

You’ll be able to see information about the applicant, including their credit score, the purpose of the loan (debt consolidation, credit card debt, auto repair, etc.), and decide whether or not to lend your money and at what interest rate.

The borrower will then be able to review lending offers and choose a lender with the best offer.

The P2P lending network will act as the middleman for the transaction, keeping both parties accountable. As the borrower pays the money back, the investor will earn interest.

goPeer is Canada’s first regulated and approved P2P lending network. Despite the regulation, there are still risks involved, so you should always do your due diligence before lending.

Related Reading: My Full Review Of goPeer Lending

9. Precious Metals

• Who They’re Best For: Investors looking for a reliable safe haven asset
• How To Get Started: Read my guide on how to buy gold in Canada

Precious metals, like gold, silver, and platinum, have long been considered safe-haven investments, particularly in times of economic instability.

For example, the World Bank’s precious metals index increased by 9% during the first quarter of 2023, driven in part by market uncertainty, a weakening US dollar, and inflation.

Unlike fiat currencies, which are essentially just pieces of paper that we’ve accepted as currency, precious metals are tangible assets which provide a sense of security to investors.

Precious metals are also a great way to diversify your investment portfolio and hedge against inflation, as their performance doesn’t usually correlate with assets like stocks and bonds.

You can invest in precious metals in several ways:

Personally, I like precious metal ETFs. Storage can be problematic when purchasing physical metal, and investing in single precious metal stocks could increase your risk if an underlying company experiences financial problems.

By investing in precious metal ETFs, you spread your risk and don’t have to worry about physically storing the metals.

10. Art And Collectibles

• Who They’re Best For: Those who want to enjoy their investments before selling them
• How To Get Started: Start researching rare watches, cars, and works of art

Generally, I recommend that investors avoid splurging on unnecessary items. Designer clothing, diamond watches, and supercars may provide temporary enjoyment but often lose their value over time.

In some cases, however, it can actually pay to treat yourself.

Rare art and collectibles can actually increase in value over time, even if you use and enjoy them periodically.

Perhaps the best example of this is the market for fine watches. I’m not talking about the diamond-studded watches you see in music videos and TV, but mint-condition factory watches such as limited-production Rolexes.

• Barons recently reported that the average price of pre-owned Rolex watches increased from $20,000 USD in 2020 to $37,000 USD in March 2022.
• Certain rare supercars have also massively increased in value due to supercar manufacturers embracing the hybrid and electric vehicle revolution.
• Notable works of art are also a good safe-haven investment. Pieces by Andy Warhol, Basquiat, and others have reportedly been sold for millions more than they were originally purchased for.

That being said, investing in art and collectibles involves a lot of risk. You really have to understand the value of what you’re buying.

Not every watch, car, or painting will increase in value. In fact, many of them immediately decrease in value after purchase.

11. Whole Life and Universal Life Insurance

Whole life and universal life insurance policies are considered a kind of hybrid investment and insurance product, as they carry a cash value component.

Unlike term life insurance policies, which only provide a set death benefit and no inherent cash value, whole and universal life insurance policies accumulate cash value over the policyholder’s lifetime.

When you make a premium payment, part of it goes toward the death benefit, and part of it goes toward the policy’s cash value.

Similar to an RRSP, the cash value can grow tax-deferred, and the policyholder will only pay taxes if they withdraw from the policy prematurely. If you die without taking out the cash value, it can be passed on to your beneficiaries tax-free.

Another key benefit of these life insurance policies is that you can also borrow money against your cash value, which could offer a more favourable interest rate than borrowing from the bank or using a credit card.

There are some drawbacks to investing in life insurance, though. For example, the returns generated by your cash value can be lower than you’ll receive investing the money yourself.

Whole and universal life insurance policies can also be complex, and it can take years for your cash value to begin accumulating to the point where you can borrow against it or see significant returns.

How To Get Started: See my list of the top whole life insurance companies in Canada.

Understanding The Major Asset Classes

Now that you’ve had a chance to look over some of the more popular investment choices, let’s take a look at the different asset classes.

Each investment (asset) is categorized as a class, differentiating it from other asset classes. Each perspective asset class comes with its own unique benefits, drawbacks, risks, and rewards, so it’s important to understand the difference between them.

• Equities (Stocks): Stocks represent ownership in a publicly-traded company, and their value can fluctuate with the stock market or based on the company’s performance.
• Commodities: Commodities are raw materials or primary goods that can be bought and sold, such as gold, oil, natural gas, agricultural products, and metals.
• Fixed Income (Bonds): Fixed income securities, such as government and corporate bonds or GICs, are debt instruments that return your investment with a predetermined interest rate.
• Real Estate: Real estate investments involve owning and/or managing properties such as residential, commercial, or industrial buildings.
• Cash and Cash Equivalents: Includes cash, bank deposits, and short-term money market instruments.
• Derivatives: Derivatives are financial contracts whose value is derived from an underlying asset or index. Examples include options, futures, swaps, and forwards.
• Alternative Investments: This asset class includes a broad range of investments beyond traditional stocks and bonds, such as hedge funds, private equity, venture capital, real estate investment trusts (REITs), infrastructure projects, and commodities futures.

Diversifying Your Investment Portfolio

Asset allocation is the process of diversifying your investment portfolio. The more diverse your portfolio is, the lower your overall risk is, as your investments aren’t solely dependent on the performance of one market or asset.

Pro-Tip: Take Advantage Of A Tax-Free Savings Account (TFSA)

Before you start investing with a standard brokerage account, I recommend maximizing your TFSA contributions, as any gains realized are tax-free, allowing you to avoid dividend, interest, and capital gains tax. TFSAs can be used to hold a number of investments, including (but not limited to):

Understanding Risk Tolerance

Risk tolerance defines how much risk you’re willing to take on. For example, stocks are considered a higher-risk investment, while index funds and ETFs are lower risk, and fixed-income investments like GICs have an even lower risk.

It may be a good idea to diversify your portfolio to include a mix of secure low-risk investments along with a few higher-risk, higher-reward investments.

What’s The Best Way To Start Investing Money In Canada?

I can’t tell you the best way to invest your money, as it largely depends on your own investment goals, risk tolerance, and your initial investment. A trustworthy financial advisor will be able to go over your finances and help you decide on an investment strategy that best fits your goals and lifestyle.

However, if you’re just getting started and you’re looking for something simple and reliable that doesn’t require a major initial investment, using an automated robo-advisor is a great first step.

Check out my list of the best robo-advisors in Canada.