Investing, Real Estate, Stock Market

Best Investments in Canada 2023: Safe Investments With High Returns

Congratulations on considering the path of investing!

Even if you’re not new to the investing world, you have just taken one of the essential steps in making an informed decision on that path. That’s, seeking knowledge. 

When you engage the investing industry blindly, you’re guaranteed one result – costly poor decisions. 

Looking for the best investments in Canada will not only help you avoid costly mistakes but will also make it easy to compare and choose the option that suits your goals and risk tolerance.

In this article, I will go over eight best investments in Canada with the potential for high returns. 

Let’s dive in! 

Best Investments in Canada
Photo Credit: Amit Kamble

Best Investments in Canada For Short-Term & Long-Term Horizons

The investment industry is democratic! It’s open to the rich, the poor, and people with a low and high-risk tolerance. As such, there’s no one-fits-all best investment out there. 

That simply implies that there are different best investment solutions to consider. But for the sake of this comparison, we shall categorize them into short-term and long-term investments. 

Best Short-Term Investments in Canada

Short-term investments are defined by their short time horizon usually within a year or less. Due to their high liquidity, short-term investments are less risky as you can convert them to cash quickly and without penalty.

The main drawback of short-term investments is that they offer lower returns due to their high liquidity and low risk.

Examples of short-term investments include peer-to-peer lending, savings accounts, GICs and money market accounts. 

For this compilation, we shall limit our discussion to the following best short-term investments in Canada.

1. Peer-to-Peer Lending

Peer-to-peer lending, A.K.A P2P lending, is the act of lending money to people or businesses through a third-party platform.

Instead of lending money to someone directly, you can use a P2P lending platform to earn interest while protecting yourself in the event the borrower defaults on repaying the loan. 

Examples of P2P lending platforms in Canada include Lending Loop and goPeer

Before signing up on any P2P lending platform, you need to understand the fees involved, minimum funding amount, interest payment and loan repayment schedule.

If you’re looking to diversify your portfolio with fixed-income assets, you can’t go wrong with P2P lending due to its high return potential.

But is P2P suitable for you? Ensure that your risk tolerance is on the high side as the amount you lend may not be repaid.

Also, a P2P lending platform can eat up a significant portion of your returns with several service fees.

The bottom line is that you should invest only what you can afford to lose on P2P lending – as with the case with most investment options. 

2. GICs

GICs, the abbreviation for guaranteed investment certificates, are some of the proven short-term investment options with high returns in Canada. 

With a GIC, you lock in your savings for a given period, expecting a fixed interest in return. How much interest you earn depends on the GIC term you invest in. 

The terms range from 1 month up to 10 years, with the minimum investment being $500. With these flexibility terms, GIC fits in among both the best short-term and long-term investments in Canada.

The low-risk levels of GICs also make them safe fixed-income investments with high returns in Canada. 

So if you’re looking for an alternative to a savings account, you can’t go wrong with a GIC. But to make the best of your GIC investing, ensure you invest with a financial institution that offers competitive rates.

EQ Bank is a reputable online bank offering competitive GIC rates on terms ranging from 3 months to 10 years. As of the time of writing, the bank offers a  4.50% high interest on a 1-year GIC term. 

3. High-Interest Savings Account

A high-interest savings account (HISA) is another best short-term investment in Canada with a low-risk level. 

Unlike a regular savings account, savings in a HISA attracts high interest that is usually calculated daily and paid annually.  

HISAs were popularized by online-only banks that have low operational costs as they operate entirely online. 

With such a structure, most online banks find it easier to pass on their operational savings to their clients in the form of high-interest rates.

Today, online-only banks are the ultimate alternatives to the big banks not only in terms of high-interest rates but on low fees, minimum balance and convenience. 

You can open high-interest savings account at an online bank in Canada without worrying about minimum balance, monthly fees, transaction fees, or transaction limit. 

As of the time of writing, the following online banks offer competitive rates on high-interest savings accounts in Canada:

Best Long-Term Investments in Canada

In this section of the best investments in Canada, we’re going to look at those vehicles that are suitable for a long-term horizon.

Generally, long-term investments range from one year and above. While these types of investments have low liquidity and high-risk levels, they cover up with high earning potential.

Examples of long-term investments include mutual funds, bonds, stocks, real estate and ETFs. 

Without much ado, let’s dive into the best long-term investments in Canada.

1. Stocks

Stocks have maintained an outstanding reputation for their stability and growth capabilities. Investing in a stock simply means investing in the shares of a company. 

And by investing in the shares of a company, you automatically become part of the owners of that company.

Besides getting a share of the company’s dividends and capital gains, you can also influence the company’s management as a shareholder.

As with other investment vehicles, stocks don’t have an earning guarantee. As we have seen in the past, stocks can be riskier than most investment options out there.

Your investment can go up or down depending on the performance of the company you invest in. This explains why it’s essential to invest in the stocks of high-performing companies. 

The following are some of the current best-performing stocks in Canada that are traded on the Toronto Stock Exchange (TSE)

  • Royal Bank (RY)
  • Telus (T)
  • Algonquin Power (AQN)
  • Goeasy Ltd (GSY)
  • Loblaw (L)
  • Shopify (SHOP)

If you’re just starting, here are the 5 Best Stocks to Buy For Beginner Investors.

You should also consider our recommendations on the 7 Discounted Stocks to Buy Right Now.

For more related information about the stock market, visit our Stocks Archive.

  • Alternative to Stocks: Fractional Shares

The drawbacks of stocks can be summarized into two – high-risk and expensive. Fractional shares have eliminated these drawbacks by allowing you to become a shareholder with as little as $1. 

For example, the current price of Meta (Facebook)  per share is $142.82. Instead of buying a single share of Meta with such an amount, you can buy fractional shares of the same company for just $1.

That way, you will have enough money to invest in other big companies around the world, thereby diversifying your portfolio with a little budget. 

So by trading fractional shares, you minimize your investment risk and become a shareholder of several companies you couldn’t have afforded if you were to buy their full shares. 

In Canada, a fractional shares trading platform was launched in 2021 by the leading wealth management and financial institution called Wealthsimple. 

Through Wealthsimple Trade, you can buy fractional shares of Canadian and American companies for as little as $1. 

Recommended Reading: 4 Quick Facts about Wealthsimple Fractional Shares

2. ETFs

Exchange-traded funds, abbreviated as ETFs, are also a leading alternative to stocks due to their low cost and diversification. They operate like mutual funds but they’re also traded on stock exchanges like stocks. 

With an ETF, you invest in a single fund that holds several underlying funds and securities and is diversified across different markets and sectors.

This not only saves you the stress of investing in individual stocks but allows you to invest across different companies with a low budget.  

However, the type of ETF you invest in can determine your investment return. Some of the current best ETFs in Canada are:

  • Vanguard Growth ETF Portfolio (VGRO)
  • Vanguard FTSE Canada All Cap ETF (VCN)
  • IShares Core Canadian Short-Term Bond Index ETF (XSB)
  • Horizons Active Canadian Dividend ETF (HAL)
  • BMO Equal Weight Banks Index ETF (ZEB)
  • iShares Gold Bullion ETF (CGL)
  • CI First Asset Canadian REIT ETF (RIT)

When choosing the best ETF in Canada, consider the asset allocations, management fee, management expense ratio (MER), and past returns.

3. Real Estate

Real estate is one of the best long-term investments in Canada that provide growth and stability. 

As the demand for real estate properties continues to outweigh the rate of supply in most parts of Canada, investors have a favourable playing field. 

But it must be noted that the real estate market is not for the faint-hearted. A sudden mortgage rate increase can change your investment fortune to the negative.

In addition, you need a large sum of capital to engage in the Canadian real estate market. But if you’re on a low budget, you can invest in real estate investment trusts (REITs) or real estate crowdfunding sites such as Addy Invest

Related: 5 Strong Tips For Buying a Second Property

4. Bonds

Bonds are issued by corporate and government entities as loans with the aim of raising money for projects. 

When a corporate or government entity issues a bond and you bought it, your money will be used to fund a project(s) which in turn will earn you a periodic interest. 

Bonds usually pose a low risk to lenders with government bonds being the safest. On the other hand, corporate bonds often offer higher interest than government bonds.

That being said, you can invest in bonds through the company that issues bonds or invest through a broker that supports bonds or bond ETFs.  

The bottom line is that if you’re concerned about safety, you go for government bonds. But if you’re looking for high returns, consider corporate bonds.

5. Mutual Funds

Finally, mutual funds also count among the best investments in Canada. Like an ETF, a mutual fund holds a basket of funds in one portfolio that is diversified across different assets depending on a given investment objective.   

By doing so, mutual funds also reduce your investment risk as your funds are invested across different companies and assets.

The major downside of mutual funds over ETFs lies in their high management fees. This is expected since a mutual fund portfolio is constantly managed by a portfolio manager who’s responsible for the entire investing process.

In addition to the high cost, mutual funds are also restrictive as only the portfolio manager has a say on how funds are invested and managed. This couldn’t be a problem if you don’t have the time or experience to self-manage your investment.

To make the most of a mutual fund, consider investing through an investment manager with proven years of experience. Some of the best mutual funds in Canada include:

  • RBC Bond Fund – O (best fixed-income mutual fund)
  • TD Comfort Balanced Portfolio – F (best balanced mutual fund)
  • RBC Select Very Conservative Portfolio – A (best conservative mutual fund)
  • Vanguard Emerging Markets Select Stock Fund (best emerging market mutual fund)
  • Scotia Private Real Estate Income Pool – M (best real estate mutual fund)

How to Choose the Best investment in Canada

What’s the overall best investment in Canada? It’s up to you to decide. What I have just done is discuss the best investment options that are suitable for different investors.

When deciding which investment options to choose, there are many factors you need to consider, the major of which includes your:

1. Financial Situation

Firstly, you need to assess your overall financial situation to determine what to invest in, how much to invest, when to invest and how long to invest. 

While investment is key to financial freedom, there are certain situations when it makes no sense to invest. For example, if you have large debt obligations, you better clear them off before you start investing. 

This underscores the fact that understanding your financial situation will help you make an informed decision on choosing the perfect investment vehicle.

2. Investment Goals

What are you investing for? Is it for a down payment? Emergency? Children’s education? Or your retirement? 

It’s common to have as many investment goals at a time!

The interesting part is that there’s a perfect investment vehicle for every investment goal or combination of goals. All you need is to know your goals to identify the investment option that suits them. 

But if you’re not sure about your investment goals, your financial advisor is in the right position to help you out. 

3. Risk Tolerance

How much risk are you willing to take? This is a critical question to determine the right security to invest in.

It’s common to say you have a high-risk tolerance amidst a bullish trend when your emotion is unchecked. 

However, bearish trends could easily expose your real risk tolerance as that portrays the challenging state of the stock market.

But you must not wait till the market gets bullish or bearish before you can identify your risk tolerance. You just need to be sure of how much you are willing to lose at any given time.

Again, your financial advisor is in the right position to help you assess your risk tolerance if you’re not sure about it.

4. Time Horizon

Finally, as we classified the best investments in Canada across short-term and long-term horizons, it underscores the importance of understanding your time horizon when choosing the best investment vehicle.

The easiest way to determine your investment time horizon is to ask yourself – when do I need the money? It’s in a month? 1-year? Or 10 years? Ask yourself!

Whatever the time horizon could be, one of the above collections could be your perfect investment solution.

Over to You

Hopefully, now you’re more informed about the best investments in Canada for short-term and long-term investing.

The ball is now on your court to decide which of the above investments is suitable for you based on your financial situation, investment goals, risk tolerance and time horizons. 

Please don’t finalize your decisions based on the above recommendations without contacting your financial advisor. Financial OX is not liable for any action you take by reading our informational content. Click here to learn more about our disclosure.

For more related information about the Canadian investment industry, visit our Investing Archive.  

If you have any related questions or concerns, kindly drop them in the comment section below or contact our team at [email protected].

Photo of author

About John Adebisi

John Adebisi is a CPA, FCCA and MBA holder with a Bachelor's degree in Accounting & Finance. He has over a decade of experience in writing personal and business finance content for audiences across North America, Europe, the UK and Africa. In addition to his writing experience, he also has a strong background in financial research and analysis, giving him a unique perspective of the financial markets. John derives pleasure in helping people make smart financial decisions, and he believes that knowledge and experience can be valuable resources for anyone who wants to learn how to manage their money.

Leave a comment