Moving to Canada means a lot of expenses, but also a good chance to earn more money than back in your home country. Great healthcare, access to good social funds, and amazing education at affordable prices are just some things that you can gain by moving to Canada, but you can also make your hard-earned cash work for you as well. Not only is the pay in Canada fair and square, but the country offers a lot of chances for you to invest and make your money grow. Without further ado, let’s consider how to start investing in Canada as an investor immigrant.

The immigrant investor program is a popular program that some use to move to Canada. Under the program, you should invest a considerable amount of money into a Canadian business, have a good business plan, and be willing to move there. It is as simple as that. But, once there, your money should not simply stay in your bank account. Quite on the contrary, investing your money will make it grow, will protect you against inflation, and will enable you to retire early. So, let’s consider some popular options that you can use to put your money to good use.

Contents Show

How To Start Investing in Canada?

So, how to start investing in Canada? Well, the answer is both simple and complex. In its essence, investing is seen as purchasing your future income or your future gains. Not only that, but investing is putting your money where it can actively make you more money, without necessarily asking for too much work or input on your side. Keeping your money passive and in your bank account all the time is a sure way to reduce its value – as inflation is ever-present and seems to only get higher as the years pass by.

Besides investing in yourself, your education, health, and knowledge, you can also invest in stocks, bonds, or ETFs. Yet another popular option is saving in a bank, but low interest rates (much lower than inflation rates) make this a very unpopular option for many. Investing in any of the three aforementioned streams is sure to provide much better returns and make your investment worth both the time and the money invested.

Investing in stocks pretty much means investing in companies that already exist in the market. By purchasing stocks or fractional stocks on the stock exchange, you start owning a part of the business, and there is no better place to do so than the stock market. Unlike real estate, the stock market offers unpredictable returns, but in the long run, the returns and profits are always there.

Stocks, however, are considered high-risk investments. If you would prefer low-risk investments, you should forget about the stock market and go for bonds. This type of investment means that you purchase bonds from the government. These papers can generate returns, and they are considered much less volatile than the stock market and individual stocks.

The next option is ETFs or exchange-traded funds. They pool money from different investors and enable the funds themselves to purchase more stocks than a sole investor could. The investment gains are then dispersed among all who have contributed to the fund. Investments into ETFs are still considered higher-risk investments but are generally seen as a better investment opportunity than purchasing individual stocks on the Canadian stock market and take less time than active investing.

However, before making any investment decisions, there are several things to consider:

  1. You should set clear financial objectives
  2. You should set your risk threshold
  3. You should decide on your investment strategy
  4. You should determine your fixed income/equity split

Set Financial Objectives

One of the most important considerations to make when thinking about how to invest your money in Canada is the financial objectives or investment goals that you would like to make before the first investment is made. Saving for retirement may sound like a cliche, but this is a perfect example of a good financial goal. As not many have clear financial goals, it is important to consider your money goals, even beyond retirement planning, and to start thinking in terms of long-term growth. Here are some examples of setting clear financial goals for investment/saving purposes:

  • Short-term goals (up to 5 years):
    • setting up an emergency fund
    • purchasing a car
    • purchasing a long trip
    • short-term bond investment
    • GICs
    • forming a high-yield savings account
  • Medium-term goals (5-10 years)
    • paying off your home
    • purchasing another property
    • starting a business
  • Long-term goals:
    • retirement savings
    • children’s education
    • leaving a trust fund for your children

How Much Risk Can You Tolerate?

In reality, there are risks with any kind of investment and these are usually proportional to the yields that you can make with each type of investment. The higher the possible yields, the higher the risk that they will not happen.

In a way, investing your money anywhere where high yields are promised can be an endeavour similar to the financial bubbles we have seen throughout history, the newest ones being the cryptocurrency bubble and the NFT bubble. Still, many young Canadian investors rush into investing their money solely based on the rate of return and do not take into consideration their risk tolerance. This can bring about a higher chance of financial difficulties, especially in the long run, so let’s consider risk factors that you should think about when investing:

Monetary Situation

If you have a lot of debt, it is best you pay it off. When doing so, you should pay minimum payments on your entire debt owed and then focus any remaining funds on paying off the debt with the highest interest rates. Usually, these are credit card debts. Having access to cash for quick fixes and more sizable expenditures is also helpful, and so is having a six-month emergency fund, as it will allow you to invest in more risky ventures.

Income Stability and Employment

If you are thinking about how to build an investment portfolio in Canada, you should consider taking some time to overview your income stability and employment. As a rule of thumb, you should consider investing only the money that you can part with, and if you already live paycheck-to-paycheck, you should consider getting another job, asking for a raise, taking up a side hustle, or another form of additional income. Still, if you have no permanent employment, but can still make a lot of money periodically, start thinking about your average monthly expenses. Set this amount of money aside and dedicate everything else to investments.

Time Scale

Time in the market beats timing the market and this has been proven numerous times. Frequent smaller investments tend to beat periodic larger investments when it comes to returns. In addition to this, you should also consider if you need a quick turnover of your money or if you are investing for long-term goals only.

Investment Expertise

In recent years, we have seen huge dips in the markets all over the world. The dips are further fueled by fear of many who think they will lose by not selling their bonds and stocks, which brings their prices even further. You should understand that dips are a normal occurrence in any market and that this is the time to buy, not sell. After all, when you see discounted items in a supermarket, you are more likely to purchase them than walk away, are you not?

Your Risk-Taking Capacity

Based on these investment goals and factors affecting your risk tolerance, it is safe to say that there are three basic risk profiles that you should decide upon:

  • Aggressive Risk Profile – this risk profile is intended for all who would like to invest their money for quick returns. This type of investor is often called an active investor. This type of aggressive and speculative investment is recommended to younger people, who still have a lot of time and future income to offset any current losses. When it comes to the investments themselves, they are usually direct investments into startups or high-return stocks. It is also specific to people with high-risk tolerance
  • Moderate Risk Profile – this type of investment is recommended for people in their 30s and 40s. Under this risk profile, you would be seeking ways to make your money grow by mixing stock investments and more long-term, lower-yield investments, such as bonds. This is a good strategy, which offers both growth and stability. When it comes to the portion of your portfolio that you should dedicate to the riskier stocks and investments, it should drop with your age, around 2.5% per year, assuming you are starting at the age of 20 and plan to invest to the age of 60
  • Conservative Risk Profile – this profile means that you invest very little to none in high-risk stocks and that you rather choose a portfolio of ETFs and bonds. This investment portfolio, with conservative asset allocation, will significantly reduce the level of risk, but unfortunately, it will also reduce your returns – this plan typically does not return more than 4-5% a year. Instead of being focused on timing the market and using the ups and downs for higher gains, they use total time spent in the market for an average upward return over longer periods

Which Investment Strategy Do You Adopt?

Which investment strategy you will adopt can be influenced by many factors. We’ve discussed some of those above, so let’s take a look at what a basic investment account can look like for different people:

  1. Fred is 25 years old, has just finished his University, and has decided to live frugally to save as much as he can. He quickly establishes a six-month emergency fund, thanks to his low life costs, and then prioritizes paying off his student load. He will not be making any investments until the student loan has been paid off, as the high interest rate makes this his priority. By the age of 27, he has paid off the student loan, and he decides to keep living in a smaller flat. The money saved is divided equally between the stock market and individual stocks. The latter are more speculative, promising higher returns for a higher risk of investment. Fred is sure that he can cover for any money that is lost, this is why only 30% of his money is dedicated to this stock.
  2. Narissa is 35 when she starts investing. So far, she has taken her time paying off the student loan and is now living in a comfortable place with her boyfriend. They decided to move in to keep the living expenses low and now share their bills as well. The savings that Narissa makes are divided: 50% are stocks that she chooses herself, and 50% are ETFs. The management fee is low, so she can afford it and has someone to talk to when she needs investment advice. A portion of the money saved is sent to a high-yield savings account, as she plans to have a baby by the age of 40 and will need some extra cash. The future of her family depends on her and her boyfriend’s income stability, so she plans to move more of her money to ETFs and start purchasing bonds instead of stocks when she turns 40
  3. Michael is 55. He has spent the last 10 years investing in a mix of ETFs and bonds, where bonds take up most of his income invested – around 60%. He has been living comfortably so far but has managed to stay out of debt. 30% of his money goes to ETFs and only around 10% goes to the stock market. He believes in a well-balanced portfolio, as his investment time horizon is short and he would like to retire by the age of 65. He continues to cut his expenses, as this both liberates more funds for investments and expands the time he will be able to use his retirement funds, as each year he will be pulling less from it.

Besides this, our friends above can also decide between active investing and passive investing. While the former can lead to better results, it takes a lot of time and is best left to portfolio managers. However, they can cost a lot, so passive investing, based on the belief that markets are efficient over time, is what most people decide to go for. Both work well, as long as you do not take on more risk than you can manage.

Alternative Methods for Determining Your Fixed Income/Equity Split

In line with our three examples, we can see that every person has a different style of investing. We can notice that younger people tend to have more space for errors and that they are likely to profit from riskier investments. The key here is that they have more time to learn and correct their mistakes, and are more likely to have more capital to spread out, both over time and different speculative investments.

With this in mind, we can conclude that there is no single best way to invest your money. In general, the older you are, the less risky your investments should be. This is called the life cycle investing and it states that the older you get the lower the interest and capital gains you should be accepting.

Some models take your age as the best determiner of how much of your portfolio should go into low-risk investments, such as bonds and real estate during the correctional phases in the market. ome models tend to be riskier and say that your age -10% should be dedicated to low-risk investments. In any case, diversification and control of possible risks is of paramount importance.

Why You Should Start Investing in Canada?

Canadian investment options are many. Canada is a developed country with a good economy and strong prospects for growth. The Canadian economy is among the top 7 economies of the world and is likely to keep growing, thanks to good guidance, stable government, and little to no internal (or external) disputes. In fact, Canada is a very attractive destination for all who would like to invest their money and make it grow. Canadian banks are stable and big and offer a variety of financial products, all of which make your investment money stay in good hands.

Greater Returns on Investments

When it comes to the returns on your investments, the Canadian financial market offers several ways that your qualified investments can pay off. Even if you have a collection of investments, you can still reap the benefits, while only some of this income is considered taxable income.

Direct investing in stocks can bring about returns in the form of capital gains and dividends. A good Canadian investment plan will always have at least a portion of the funds invested in the stock market. Those who wish to provide themselves with even more security often invest in several stock markets at the same time, with the US stock market being the next safest bet. Dividend stocks are very popular, and dividend reinvestment plans are a great option for those seeking compounding to help them grow their wealth.

Bonds offer much less in terms of capital gains, but people purchase them because of the security of this type of investment earnings. Bonds pay off through coupons, but the main benefit with them is the interest or the capital growth in the value of each of the bonds you hold. These provide enough security to secure your investing strategy and help reduce the risk in stock investing where stocks make up most of your portfolio.

The third option to invest in Canada is real estate. Over the past two decades, it can be seen that both the prices of real estate and the height of rent have gone up. This is a sign of a good and stable real estate market, although some do complain that properties in Canada are becoming too expensive. When it comes to these, it is important to note that the market is expected to keep expanding as Canada will keep bringing foreign nationals as immigrants to its soil to keep boosting its economy.

When it comes to real estate, the returns can be made through capital gains, investments into the modernization of the units you already possess, and renting the units. We recommend a mixture of them all, as property taxes in Canada are not low – renting the unit will pay for the taxes, but you will also have to report this as rental income to the Canadian government.

Retirement Preparation

Preparing for retirement is also one of the reasons you may want to invest in Canada. Namely, in Canada, you have to choose your retirement options and there are many to choose from. Saving for retirement is one of the common investments made in Canada, and the best reasons for investing here include providing for yourself at a later age and being able to retire early – some manage to retire by the age of 50.

Surpass Inflation

Inflation is a silent killer and balanced investing can help you keep the security of your money while at the same time helping your money grow in line with or even surprise inflation. In the former case, your money will not lose its worth, despite inflation, while in the latter, it will definitely be gaining in value. It is important to note that, to beat inflation, you will need to keep collections of investments to make sure that a single industry being hit will not bring down the value of your portfolio. For this reason, we recommend mixing stocks, bonds, rental properties, and pension funds. Each of these can be further diversified to provide more financial stability during difficult times.

While bonds can only be diversified by going out into international markets and purchasing bonds from other countries, stocks can be diversified in many different ways. Bear markets are a great period to make investments, despite the ever-falling prices. When it comes to the Canadian market corrections, they happen after the market has been overvalued for a while. The upcoming year or two are predicted to be the correction years. Using extra income you have to diversify across entertainment, food, transportation, and energy industries is a great way to provide more security for your portfolio.

When it comes to rental properties, there is not much that you can do for now. The issue with these is that in the post-pandemic years, many investors started purchasing apartments and homes for renting later on, but this brought about a purchasing frenzy and has increased the prices of these rentals to the point that they have become unaffordable even for people who would like to rent, not just purchase.

The following years will be correcting the prices of real estate in Canada, so to prepare for this, you can increase the energy efficiency of your rentals, thus bringing their maintenance and operational costs down, and you can invest in solar panels. Purchasing an array that is larger than what you really need will easily help you earn a little extra cash – not enough to make you rich, but enough to help pay off the system while increasing your property value.

Obtain Your Financial Objectives

Reaching your financial objectives is the real reason people venture into investments. As medium-risk investments are your best bet for both making money and keeping it secure, it is important to be able to adjust your investing style to match these. Market risk and spreading your investments over several financial market sectors can help you save for or be able to afford a home, a luxury car, a big retirement nest, and many more perks that living in a developed country such as Canada has to offer. When it comes to obtaining your financial objectives, only you can set them, and choose the types of investment options that best suit your financial goals.

Check Out How to Build Wealth in Canada:

What To Invest?

Spending hours on investment strategy is no use if you have no money to invest. For this reason, we always suggest you live a modest life, without too many luxuries, but also without starving yourself of life’s simple pleasures. When it comes to these, you can treat yourself but do not overdo it. When it comes to saving money in Canada, especially for investment purposes, there are a multitude of ways to do that. However, we also recommend you seek ways to make more money without sacrificing too much of your free time.

Once you have some money that you can put aside, it is time to make some achievable investment goals and start working on those. Canada has a strong resource market, and there are many places where you can invest your money. Stocks, index funds, bonds, ETFs, mutual funds, cryptocurrency, and GICs are just some of them. Numerous companies will help you find the best pension or retirement plan for you and financial companies will also help you understand how each of these work.

Stocks

Stocks are shares of a company that another individual or a legal entity can possess. When it comes to these, it is important to note that once you purchase stocks or shares of a company, you gain the right to future profits of the company. These profits are paid out to you in regular intervals, usually once or twice a year.

It is easy to get misled by the dividends that a company is paying out. They are usually represented in monetary amounts or as percentages of the profits that the company pays out on an annual level. However, you should understand that higher dividends, although they do represent a good way to make some extra income, can also mean that the company is experiencing or will be experiencing financial difficulties. When it comes to these, they can bring down the value of the stock you have purchased before the dividends can make your investment worthwhile.

At the same time, there is always a risk that a single company could go down for a variety of reasons. Bear markets, inflation, political instability, and periods of wars and energy crises have all seen giant companies succumb to the pressures and declare bankruptcy. When it comes to protecting yourself from these risks, it is important to choose multiple companies within the same industry and to also diversify across industries.

If you are smart enough about how you invest your money, you will have a highly diversified portfolio and average returns of 9-10% a year. These are capital gains. When it comes to dividend income, you should be looking at dividends that can pay out some 4-5% of their profits. Anything higher than this can bring in more money, but it is much better to stay in the safe zone.

Index Funds

Index funds are the next best thing when it comes to diversifying your portfolio. Not only do they hold many stocks at the same time, but they are also professionally managed. When it comes to this type of fund, the best example is the S&P500 (Standard and Poor 500), containing stocks of 500 companies that have a proven history of being reliable money-maker for shareholders. The indexes can be purchased whenever you want, but as with anything else, we recommend you go with a bear market, if you are in one. Index funds of this size can withstand many economic injuries and generally retrieve some 6-8% in profits a year.

Bonds

Occasionally, a need will arise that the country, province, or city you live in needs to borrow money from you. When it comes to this situation, it can also happen to companies. If this is the case, they can issue bonds that you purchase and then they pay out the money back to you, plus the interest rate. When it comes to bonds, they have a lower risk level, but this also means that the interest rate paid out is going to be lower than with some other forms of investments.

Not all bonds are created equal. In general federal government bonds are considered to be the safest option there is. Even the biggest companies cannot guarantee as much as the government can as company financials are much more volatile than those of the government. A few years of bad company management can bring down even the biggest companies, and you, as an inspired investor, could lose your money.

For this reason, you should seek to purchase either very safe bonds and lose some money on the lower interest rate, or seek to purchase bond ETFs or bond mutual funds. This way, passive investors can secure their money and work on their achievable investing goals without working too much on the investment itself. Bonds generally return 2.5-3% a year, which is sometimes not enough to secure your investment against inflation.

ETFs

ETFs are Exchange-Traded Funds that can hold many stocks or bonds at the same time. They are traded just like any other stock and they are likely to perform well thanks to a high number of stocks in them. They diversify across companies and industries and are some of the best investment tools there are even for a confident investor. Their average annual returns are 6-8%, so they are considered to be of a low to medium risk.

Mutual Funds

Mutual funds can be comprised of bonds and stock shares of different companies. They are usually actively managed by a mutual fund manager. These funds make their profits by purchasing shares and selling them at a higher price later on. When it comes to mutual funds, they do charge a mutual fund fee, and in Canada, this fee is some 2-3%. One other way that mutual funds make money on your investment is through the dividends yielded by the shares held by the fund. They typically make 6-8% on top of your money annually, without the fees.

Cryptocurrency

Cryptocurrency is an alternative form of payment that is not regulated by any central bank. When it comes to cryptocurrencies, they rely on a new technology, called blockchain, which provides all the security of transactions and data privacy based on a diversified approach to data storage and updating. When it comes to cryptocurrency, the market is very volatile and the value of the currencies themselves fluctuates a lot. Still, many have become millionaires by proper investment into the new tech: but many lost a lot of what they had. In any case, we would recommend that you only keep a very small fraction of your investments in crypto. Any gains are difficult to establish and are pure speculation.

GICs

Guaranteed Income Certificates or GICs are a form of investment that is meant for those who need a short-term solution for their money growth. They are very liquid and versatile, but they offer lower returns, so they are not the best solution for those who have.

How to Choose an Investment Vehicle?

Best investments in Canada are already outlined for you. They represent conservative and moderate investments that have the aim of securing a lot of funds when you retire. As it usually goes, there is not one option for this type of investment in Canada, but rather multiple kinds. they include the RRSP, TFSA, and RESP funds. Let’s learn more about the ways to invest money in Canada and secure a good retirement:

A Registered Retirement Savings Plan – RRSP – is a good way to save for retirement. One of the most popular investing accounts, it offers tax advantages and is a perfect solution for long-term retirement savings. This way, you can make contributions that are tax-deductible and you only need to pay taxes when you start making withdrawals. When it comes to the limits, there is an annual contribution limit and you cannot access your funds before retirement.

TFSA

Tax-Free Savings Account – TFSA – is another great way to save for retirement. These types of investments offer tax-free growth on your investments and you can withdraw the funds at any time. There are usually no penalties when this is done, so these funds are considered very flexible and popular. As with RRSPs, there are annual contribution limits that you should consider.

RESP

Registered Education Savings Plan – RESP – is a form of a registered plan for saving up money if you have children and would like them to go to college. When it comes to this, it is important that they come with government grants and are tax-deferred. The plans are not so popular, although they are a great way to secure your children’s future. The plans are a great addition to your basket of investments.

FAQs

Why Is It So Hard to Buy Crypto in Canada?

Purchasing crypto in Canada is difficult because it has not yet been recognized as a legal tender. Nevertheless, when it comes to crypto, many do continue to manage their crypto funds, as there are no limits to purchasing or trading it. However, you should understand that investing your money in crypto can be a big issue as it is a very volatile form of investment.

What Is the Safest Way to Invest Money in Canada?

Where to start investing in Canada and keep your money safe? You can invest in Canada-issued bonds and ETFs or mutual funds. Any regular bank or bank trading platform will have a lot of information on investments, and some of the biggest banks have their own funds as well. Do not forget to also get information on how to collect money on dividends (cash dividends), taxes on dividend income, and other important information, such as their brokerage fees and alternative brokerage platforms that you can access.

How Can I Invest with Little Money?

Even if you have a little money, you can still invest. Paying off your debts and being debt-free is almost a valuable asset. When it comes to investing properly, you should decide between real estate, mutual funds, ETFs, or pure stocks. When it comes to these, many banks offer online brokerage, investing money in bonds, corporate bonds, etc. Please pay attention to cost per trade, make automatic contributions (cash contributions), and automatic reinvestment. Please beware that you will have to pay annual income taxes and that you will need to consider many online brokerage services to see which one works the best for you.

What Are the Best Stocks to Buy for Beginners in Canada?

If you are a beginner in Canadian investing and would like to purchase shares of a company in the exchange market, you will need to spend some time getting educated about it. If you have the money ready, we recommend you go for a solid emergency fund first, then invest your Canadian dollars in mutual funds and ETFs before starting to purchase individual stocks. When it comes to these, it can be difficult to estimate which companies will make it to the next decade, and doing anything on your own without being very well informed first can cost you all your money.

How to Start Investing in Stocks or Other Investments with Small Amounts of Money?

Investing does not have to be difficult and you do not need a lot of money to start investing. Even if you have no savings and would like to invest CAD100 a month, you can do this. The thing is that you will need to find a good type of fund (ETF or mutual fund), with low fees per transaction and then slowly build your portfolio – the benefit of time and the compounding interest will do their charm.

Final Thoughts

Investing is the next big thing as many individuals now try to invest from early on to ensure that their hard-earned pre-tax dollars go to the right hands, instead of being wasted. When it comes to this, several financial professionals can give you good advice on how to manage your money. Please beware that simply showing up and investing may not be the best thing, especially as you may still have debts and high interest rates to pay. This guide is supposed to provide you with basic information on how you should handle your money to start on the investment journey but is not meant to be legal or financial advice of any kind.