Investing

Investing is often misconstrued as a complex, opaque process reserved for the uber-wealthy; but did you know that 77% of Canadians have investments? This is despite the fact that only 10% of people say they are comfortable investing for themselves.

Investing doesn’t have to be complicated or mysterious, and here we break down all the major information you need about investing in Canada. This includes a list of Canadian investment services firms; click on any of the companies in the table below to learn more about them.

Top Investment Firms, Wealth Managers and Robo-Advisors

Company
Product Type
Price
Reviews
Availability
Robo-advisor, Investing, Savings
0.4% - 0.5% fee, plus 0.2% for ETF purchases
Canada, USA, United Kingdom
Robo-advisor, Investing,
0.35% - 0.6% based on the assets under management
All over Canada
Buy Silver & Gold Bullion Online
Price Varies by amount of Gold/Silver You Buy
Worldwide
Buy, Sell and Invest in Gold Online
0.4% annual maintenance fee, plus transaction fee of 1.8% of current wholesale market gold price when buying or selling
Canada & USA

What is Investing?


Simply put, investing is any activity where you put money into an asset, of any kind, with the expectation of future profits. This is slightly different from plain savings; there is almost no risk associated with savings, whereas investments come with some inherent risk. The asset you invest in could go up in value, or down. While any asset can be considered an investment (for example, a house is an investment), most people are referring to stocks, bonds and other investment vehicles when they speak about investing.

Why do People Invest?


There are many different reasons to invest, including:

  • Saving for retirement
  • Savings for other future costs, such as education
  • To increase rate of return and therefore have more money
  • To increase tax efficiency
  • To beat inflation

Whatever your reasons for investing, and whatever your comfort level, there are many different ways to achieve your financial goals via investments.

Data source: Wealth Professional

Canadian Investment Statistics


It’s certainly true that people have varying levels of comfort with investing, and some of those differences seem to be regional:

  • 51% of Canadians living in Atlantic provinces keep their savings in cash, versus 43% in the Prairies.
  • Young Canadians are more likely to hold their savings in cash rather than in investments; 57% of millennials save in cash, versus 46% of Gen Xers and just 36% of Boomers.
  • 78% of Canadians in the Atlantic provinces rely on financial advisors for their investment strategy, compared to only 62% of Albertans and 65% of Ontarians.
  • Of those with financial advisors, 66% speak with their advisor at least every few months, and 36% are not comfortable making financial decisions without help from their advisor.

TFSA and RRSP investments are two of the most common types of investment vehicle in Canada. Depending on the options you select when opening and adding funds to your TFSA and RRSP accounts, you can choose the type of asset(s) you wish to concentrate on. 

Data source: BMO

How does Investing Work in Canada?


Investing in Canada is much the same as elsewhere in the world. It starts with deciding on an investment approach. This isn’t as scary as it sounds, and you don’t need to be a financial whiz. Just ask yourself some simple questions:

  1. How much money do I have to invest?
  2. Will I have ongoing money to add to my investments?
  3. How much risk am I prepared to face?
  4. What’s the timeline for my investment?
  5. Am I prepared to pay fees to an advisor for help?

Answering these questions will help you to determine whether speaking to an investment firm is a good idea, or whether you’re comfortable starting off on your own.

If you do want help, research investment firms to find a reputable company that offers products that match your needs. The list shown above is a great place to start. Speaking with a financial advisor removes much of the day-to-day, ongoing management side of your investments, but it may not be worth the fees if you are expecting to simply invest money in a single asset and hold it for a long period of time.

Once you have answers to the above questions, you’ll have a much clearer idea about your investment strategy. This means you can now:

  1. Pick either the investment firm (if you’re getting help) or investment type (if you’re going it alone) that best suits your goals. This can be as simple as opening an investment account, and there are plenty of online ways to do this with.
  2. Seed your account with an initial deposit. Some accounts have a minimum deposit amount, but many do not.
  3. If you’re able, add money to the account over time (an automated deposit is a great way to ensure you meet your goals).
  4. Over time and if you’re comfortable, work on opening other accounts or using your existing account to purchase different asset types, to spread out your risk as you increase your investment level.

The important thing to remember about investing is that it’s never too early to start. Even very small amounts invested now can grow to large amounts in the future.

Types of Investment Help


There are a few different ways to get help with your investments, if you so desire:

Full-Service Investment Firms

A full-service firm is exactly what it sounds like: they offer all of the help and advice you might need with your investments. They do this for a fee, and some people cite these fees as a primary reason not to work with a full-service firm. Just as your money grows over time, the impact that fees have grows over time. These firms often have their own investment portfolios and products, which as a client you could access. Typically, people with complex investment strategies or large investments to manage rely on these firms.

Online Services

An online broker is sort of a halfway house between going it alone and having a personal advisor. Online services give you the tools you need to invest your money and manage your accounts; they also often provide educational materials and helpful tips and advice. They charge much lower fees than full-service firms - because they do not offer hands-on, one-on-one advice and management. These services can be useful for beginners, as there are low or no limits on how little you can invest; they are also useful for people confident in their own investment strategy but needing help with the logistics.

Robo-Advisors

Robo-advisors are a fairly recent invention; they utilize algorithms to make investment decisions, based on market data and your own financial circumstances. This is a growing field, and can be very useful if you want to automate some aspects of your investment strategy, especially for rebalancing and tax efficiency.

Types of Investment


There are as many different types of investment as there are ways to invest. Here are just the main types of asset that Canadians invest in:

Stocks

Stock (also known as equity) is an asset that represents a portion of ownership in a corporation. Units of stock are known as shares. You can only trade shares in publicly-traded companies; owning stock means that you share in the company’s profits (in proportion to how much of it you own). As the company does well, the share price increases and the value of your investment goes up, and as the company does worse the reverse. Stocks are bought and sold on stock exchanges, and are the staple of many people’s investment strategies - often via funds of many different shares held together.

Mutual Funds

A mutual fund is a pool of mutual money (from you and other investors) that is used to purchase a portfolio of different investments. A professional financier will manage the fund (for a fee, paid for from the fund), and it typically includes multiple different types of asset. Mutual funds allow individuals to access a portion of a large, diversified portfolio, without having to construct the portfolio themselves, and without needing a lot of money.

Bonds

Bonds are certificates you receive for a loan, to either a company or a government. A bond entitles you to a set amount of interest as well as repayment of the loan at a set date. Bonds are generally considered safe, long-term investments.

GIC

A GIC is a guaranteed investment certificate; this is a safe way to invest with no risk, as GICs protect your invested capital. They offer lower interest rates, sometimes variable.

ETF

An ETF is an exchange traded fund: a fund of different asset types (such as stocks, bonds and commodities) that is traded on the stock exchange. The value of the fund will be on par with the value of its contents, and so can change quickly in line with its contents. ETFs are another good way to use small amounts of money to invest in larger pools of diversified assets. They also come in different types, with varying levels of risk.

Treasury Bill

A treasury bill (or T-bill) is a short-term, low-risk investment issued by the government. Values and terms can vary. These are considered as safe as the government that issues them.

Commodities

Commodities are physical goods, such as oil, gold or grain. They are usually interchangeable with other goods of the same type, and are frequently used in the production of other goods. The price of commodities can change depending on many different factors, such as weather, supply, demand, currency exchange rates, politics, and other economic factors.

Frequently Asked Questions About Investing


How does investing work?

Investing, in its simplest form, is the purchase of an asset with the expectation of future profit. It works by buying an asset, or inputting your money into a fund that holds assets, and seeing the value change over time. People can invest by themselves, through an investment firm, or through an online service.

How do I start investing with little money?

Contrary to popular belief, you do not need millions to begin investing. Many online accounts, mutual funds and other investment vehicles have no minimum limit. You can open an account or purchase a portion of a fund with whatever you have, and add to it as you can. It’s never too early to start investing, no matter how little you have.

How do I start investing in stocks?

There are a few ways to invest in stocks; one is to purchase a specific company’s stock outright, if you have a clear idea of what you want to invest in. Many people do not have specific companies in mind though, and instead wish to invest in the stock market in general. This can be done by investing in a mutual fund or an exchange traded fund that tracks the stock market, rather than a single corporation.

How can I buy stock in Canada?

The Canadian stock market (TSX) is where Canadian companies trade their stock; you can purchase shares in Canadian companies via the TSX, or you can invest in the Canadian equity market itself by purchasing a stake in a fund that tracks the TSX.

What are mutual funds?

A mutual fund is a pool of money (from you and other investors) that is used to purchase a portfolio of different investments. A professional financier manages the fund.

What is a GIC?

A GIC is a guaranteed investment certificate; this is a safe way to invest with no risk, as GICs protect your invested capital.

How do mutual funds work?

Mutual funds rely on the premise that multiple people invest their money into the fund, and a professional manages the pool of money to invest in a multitude of different assets. This allows each individual to be invested in a diversified, professionally managed set of assets, without purchasing all of the assets entirely by themselves.

What is a segregated fund?

A segregated fund is a fund commonly used by insurance companies to manage individual insurance products. They offer the expectation of profit as well as insurance benefits.

What is direct investing?

Direct investing simply means investing directly into assets yourself, without an intermediary or advisor acting on your behalf.

How do I choose the right investment company?

Choosing the right investment company starts with understanding your own financial position and your goals. Once you know how much you can invest, how much risk you can deal with, and what you want from your investment, you must find a company that offers a product and service that matches your needs.

What do investment companies offer?

Investment companies offer professionals to manage your investments and to provide advice on your finances, and access to funds and portfolios they hold.

Are investment companies safe?

Investment companies in Canada are regulated by the Investment Industry Regulatory Organization of Canada (IIROC). This provides some oversight for businesses offering investment services to Canadians, to help ensure their customers are protected. Most Canadian investment companies are safe, though no company can guarantee profit.

Written By Smarter Loans Staff


The Smarter Loans Staff is made up of writers, researchers, journalists, business leaders and industry experts who carefully research, analyze and produce Canada's highest quality content when it comes to money matters, on behalf of Smarter Loans. While we cannot possibly name every person involved in the process, we collectively credit them as Smarter Loans Writing Staff. Our work has been featured in the Toronto Star, National Post and many other publications. Today, Smarter Loans is recognized in Canada as the go-to destination for financial education, and was named the "GPS of Fintech Lending" by the Toronto Star in 2019.