Investing, Real Estate, Stock Market

10 Safe Investments With High Returns in Canada For 2022

If you’re just starting or are a risk-averse investor, you may be wondering what are the safe investments with high returns out there. Do they really exist? Sure, they do!

While there’s no shortage of safe investments with high returns in Canada, determining the best one could be challenging especially for beginners.

This article discusses the top safe investments with high returns in Canada. You will also learn the factors to consider when narrowing your selection. 

Let’s go there!

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What is a Safe Investment and Is It Worth It?

Safe investment means different things to different people. But the common definition is that a safe investment is an investment with a low-risk level.

Since most low-risk investments have high liquidity, it’s not out of place to say that safe investments are easily accessible and can be used to cover emergency funding.

But are safe investments worth it? The short answer is yes! Safe investments are worth it if you’re looking to earn high returns on your investment while keeping your risk low.

However, you need to understand that returns of safe investments are not comparable to the returns of investments with high-risk levels.

The aged-long golden rule is that the higher the risk level, the higher the return. As such, safe investments which have low-risk levels can’t provide the highest return possible.

That being said, there are safe investments in Canada with competitive returns you need to consider if you’re looking to minimize risk and maximize gains.

Let’s go over them.

10 Safe Investments With High Returns in Canada

While no investment is 100% safe, other investments appear to be safer because of their low-risk levels and competitive returns.

Below are the 10 safe investments in Canada with high returns based on their risk levels:

1. High-Interest Savings Account (HISA)

A high-interest savings account (HISA) is a safe investment with a high return in Canada. Savings in a HISA attracts a higher interest rate than savings in a regular savings account.

With a HISA, you can hardly lose your money because your savings are insured for up to $100,000 by the Canada Deposit Insurance Corporation (CDIC). 

If you want to maximize your returns with a HISA, you should sign-up with one of the best online banks in Canada.

Besides offering high-interest rates, most online banks don’t charge monthly fees and transaction fees. 

For example, Tangerine currently offers a promotional interest of 4.25% on its savings account. Saven Financial, Motive Financial, and Oaken Financial offer 3.00% high interest on their high-interest savings accounts.

2. Money Market Accounts

If you want to invest in safe investments with short-term maturity and high liquidity, consider a money market fund.

A money market fund operates as a type of mutual fund that gives you exposure to government and corporate bonds.

With a money market fund, you will earn fixed interest for a given duration by borrowing money to the government and corporate bodies. Examples of money market funds in Canada include:

  • Bankers’ Acceptance
  • Promissory Note
  • Commercial Paper

The major drawback of money market funds is that they are not guaranteed by their insurers nor covered by the CDIC. This makes money market funds relatively riskier than other fixed-income securities.

3. Guaranteed Investment Certificates (GICs)

A GIC is fixed-income security with a low-risk level and interest guaranteed. Unlike a savings account, a GIC account locks in your deposit for a specific period in exchange for guaranteed interest.

The longer you lock in your deposit, the higher interest you will earn with a GIC. You can choose from a 1-month GIC term up to a 10-year GIC term.

Like savings accounts, deposits in a GIC account are also insured for up to $100,000 by the Canada Deposit Insurance Corporation.

With interest rate guarantee and deposit protection, GIC appears to be one of the safest investments with high returns in Canada.

One of the leading providers of the best GIC rates in Canada is EQ Bank. The online-only bank currently offers a 4.50% high interest on a 1-year GIC term. 

4. Fractional Shares

The stock market is not only risky but costly due to the prices of stock shares. Fractional shares have democratized the stock market by making it accessible for both rich and poor investors.

Instead of saving hundreds of dollars to buy the shares of the big companies out there, fractional shares allow you to invest in the same companies with as little as $1 on each.

This not only reduces your risk in the stock market but also reduces your investment cost. Should the market go bearish, you will have little to worry about compared to the person that invests in full shares.

And since you can invest in multiple companies at once with a little budget, you can easily gain a proportional share of the return of all the companies you invest in. 

In 2021, Canadians witnessed the establishment of the first fractional shares in Canada by Wealthsimple, one of the country’s leading wealth management institutions.

With such development, you can buy fractional shares of both Canadian and American companies with as little as $1 on Wealthsimple Trade.

For more information about fractional shares in Canada, check out these 4 Quick Facts about Wealthsimple Fractional Shares

5. Dividend ETFs

Dividend ETFs are a type of exchange-traded fund that pay regular dividends to investors. 

Generally, ETFs are low-risky and low-cost compared to stocks and mutual funds. This is because an ETF gives you exposure to different companies and assets in one portfolio, lowering your investment risk and costs.

But with a dividend ETF, you will gain exposure to a diversified portfolio that pays dividends regularly. Depending on the ETF, you can receive the dividend monthly, quarterly or annually.

Unlike other safe investments with high returns, dividend ETFs have low volatility because they invest in companies with an established dividend-paying history.

The following are some of the best dividend ETFs in Canada:

  • BMO Canadian Dividend ETF 
  • Vanguard FTSE Canadian High Dividend Yield Index ETF
  • iShares S&P/TSX 60 Index ETF
  • Horizons Active Canadian Dividend ETF
  • CI WisdomTree Canada Quality Dividend Growth Index ETF

6. Dividend-Paying Stocks

Dividend-paying stocks simply refer to companies that pay regular dividends to their investors. These companies are usually well-established with attractive public profiles.

Regardless of the stock performance, you will receive your dividend payment once the distribution period reaches. As expected, the distribution amount and schedule depend on the stock you invest in.

While most dividend-paying stocks usually pay dividends quarterly, others pay monthly or annually. As such, you can count on dividend-paying stocks for emergency funding.

That said, all the five big banks in Canada are among the providers of the top dividend-paying stocks in the country. 

7. Bonds

Government and corporate entities issue bonds to generate funds for project execution. When you invest in a bond, you will receive periodic interest payments throughout the contract.

Generally, government bonds are safer than corporate bonds. However, you will earn higher interest on a bond issued by a corporation than a bond issued by a government body.

But when investing in corporate bonds, ensure you do so through a well-established company with a good track record.

If you want to invest in a diversified low-cost bond portfolio, I recommend you invest in a bond ETF such as:

  • Vanguard Canadian Aggregate Bond Index ETF (VAB)
  • BMO Aggregate Bond Index ETF (ZAG)
  • Vanguard Short Term Bond Index ETF (VSB)
  • iShares Canadian Hybrid Corporate Bond ETF (XHB)

8. Index Funds

Index funds are passive-based investment vehicles with high returns. Index funds track the performance of a given market instead of investing in it.

Unlike actively-managed funds, index funds don’t invest in a particular fund, reducing your investment costs and risk.

The major drawback of index funds is that they don’t have control over their underlying holdings and can’t guarantee returns. 

Notwithstanding, we have seen how index funds outperform actively-managed funds severally in the past. This makes index funds a worthy safe investment with high returns in Canada.

That said, the following are some of the best index  ETFs and mutual funds in Canada:

  • TD Canadian Aggregate Bond Index ETF
  • TD Canadian Equity Index ETF
  • Horizons Europe 50 Index ETF
  • CIBC Global Bond Ex-Canada Index ETF
  • RBC Canadian Index Fund
  • Scotia Canadian Index Fund
  • CIBC Canadian Index

9. Annuities

Annuities are another safe investment in Canada to consider if you’re a senior. When you purchase an annuity from your bank or insurance company, you will access long-term financial security in your retirement.

That long-term financial security is in exchange for the lump sum payment you made to purchase the annuity. You will receive monthly interest payments throughout a certain period or your lifetime.

Usually, the annuity interest payment is higher than what you will get from other fixed-income securities in Canada. This is a great way to survive inflation while on retirement. 

And depending on the account you used to buy the annuity (registered or unregistered), you will get a tax advantage on your annuity investment.

The major drawback of annuities is that they are only accessible to retirees. Young investors have to wait till they get older to invest in annuities.

10. Low-Volatility Fund

As the name implies, a low-volatility fund is a type of fund that invests in companies with little volatility. These funds usually have low price fluctuations and are suitable for long-term investments.

With a low-volatility fund, you will earn stable long-term income and withstand frequent market turmoils. That’s not to say that low volatility is not affected by market fluctuations. But the impact varies with those of highly volatile funds. 

The major drawback of low-volatility funds is that they can be more expensive than other funds. Notwithstanding, they are ideal for those looking for safe investments with high returns in Canada.

That said, the following are some of the best low-volatility funds in Canada:

  • TD Canadian Low Volatility Fund 
  • BMO Low Volatility CAD Equity ETF   
  • Fidelity Canadian Low Vol Index ETF
  • iShares Edge MSCI Min Vol Emerg ETF
  • Mackenzie Max Diversif World Dev ETF
  • Vanguard Global Min Vol ETF

Recommended: Best Short-Term and Long-term Investments in Canada

Which Safe Investment in Canada is Perfect For You?

There you have the top safe investments with high returns in Canada. Which should you choose? It’s up to you to decide.

Frankly speaking, none of the above investments is 100% safe. And their level of safety varies from one investment to the other.

So to make a cost-effective decision, it’s essential to first evaluate your financial condition to know which investment is suitable for you. 

Evaluating your financial condition will also help you understand how much you can invest and the investment length.

Other factors you need to consider when choosing a suitable safe investment in Canada are discussed below: 

  • Investment Goals

Your investment goals define the reason behind your investing. These goals could cut across children’s education, down payment, debt payment, retirement planning and so on.

Whatever your investment goals are, you need to align them with the perfect investment to achieve the desired result. 

If you have a problem identifying which investment vehicle suits your goals, kindly refer to your financial advisor.

  • Risk Tolerance

Although the above investment options fall under the low-risk category, some of them are safer than others.

As a result, you’re in the right position to determine a safe investment based on your risk tolerance.

By knowing how much you can afford to lose, you can easily decide whether to invest in a safe investment under fixed-income, stocks, bonds, ETFs, or index funds.

The good news is that one of the above investment options could be suitable for you regardless of your risk level.

But if you’re not sure about your risk tolerance level, kindly refer to your financial advisor to make an informed decision.

The Bottom Line

The bottom line is that you can’t go wrong with any of the above compilations if you’re looking for high returns under a low-risk investment vehicle.

But to make an informed decision, you need to choose the investment option that suits your financial situation, investment goals and risk tolerance.

Above all, working with your financial advisor will ensure you make a customized investment decision that will save you more in the long run.

Which of the above safe investment options are you going with? Kindly let me know in the comment section below.

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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.

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