There are lots of different ways you can invest your money. They range from simple options like investment savings accounts and GICs to more complicated investments like stock trading or forex trading.
No matter what type of investment you choose, there is a level of risk attached. As a general rule, low-risk investments deliver lower returns, while high-risk investments come with the potential for higher returns.
To help you find the best investment account for you, we’ve split the options into two types of accounts: defensive investments and growth investments.
Types of investment accounts
All investment accounts fall into one of two categories—defensive investments and growth investments.
Choosing an investment account may seem a little overwhelming at first, but it’s simpler than you might think. The first thing you need to do is work out what your investing goals are:
Why are you investing? Are you saving for retirement, a home deposit or maybe your children’s education?
What is your time horizon? Are you investing for the short, medium or long term?
How much risk are you willing to accept?
How much money do you have to invest?
Will you need to be able to access your money quickly in an emergency?
Once you have a clear vision of what you want to achieve, you can start comparing your options. Ultimately, many people decide that they need a combination of investment accounts to suit their needs.
For example, you could open a savings account to save for a vacation or an emergency fund, and a stock trading account to buy and hold stocks and ETFs for the long-term to help fund your retirement.
Growth investments
Growth investments have the potential to increase in value. This could mean investing in stocks of small-cap companies with growth potential, either through a self-directed investment account or a robo-advisor.
It could also mean looking for alternative options like peer-to-peer investments, or trading forex with leverage to amplify your profits.
Growth investments can deliver much higher returns than defensive investments, but they come with a higher level of risk. There’s no guarantee that you’ll get your money back—in fact, you could lose money—and you don’t get the security of CDIC protection that you enjoy with savings accounts and GICs.
But if you choose the right investments, you could end up with much more money when all is said and done.
1. Stock trading accounts
Stock trading platforms and apps let you connect to stock markets so you can trade stocks, ETFs and a wide range of other financial products. It’s easy to buy and sell stocks online or via your broker’s mobile app, and some discount brokers even offer commission-free trading.
Stocks also offer two potential sources of income: capital gains when you buy low and sell high, and the passive income of dividend payouts.
The risk level varies depending on the investment you choose. For example, investing in a money market fund or an index fund that tracks the S&P 500 will generally have a lower level of risk than investing in penny stocks.
Depending on your broker, you may also be able to use self-directed investment accounts to trade mutual funds, bonds, options, futures and cryptocurrencies.
Key features of a stock trading account
Invest in Canadian stocks and ETFs online
Many brokers also provide access to US stocks and ETFs, and some let you trade a wide range of international markets
Many platforms charge a brokerage fee every time you trade, but some offer $0 commission trading
Choose from a cash account (invest your own money) or a margin account (trade using money you borrow from the broker)
Easy access to your money when you want to cash in your investments
Canadian Investor Protection Fund (CIPF) coverage if you open a brokerage account with a CIPF member
What are the downsides of a stock trading account?
The biggest risk of trading stocks is that you could lose money. In fact, if the company goes bust and its share price falls to $0, you could lose your entire investment.
Market volatility is another risk to consider. Historically, stock markets go up in the long-term, but they can experience plenty of fluctuations in the shorter term. That’s why stocks are generally seen to be a better long-term investment and not as well suited to short-term goals.
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Finder Score for stock trading platforms
To make comparing even easier we came up with the Finder Score. Trading costs, account fees and features across 10+ stock trading platforms and apps are all weighted and scaled to produce a score out of 10. The higher the score, the better the platform—it's that simple.
Robo-advisors are automated investment services that use algorithms to manage your investment portfolio. When you sign up, you’ll need to provide details about your investment goals, time horizon and risk tolerance. Based on the info you provide, the robo-advisor will invest your money in a diversified portfolio of ETFs or mutual funds.
Robo-advisors make it quick and easy to get started, especially if you’re a new investor, and they often have low or no minimum investment requirements. They can also take emotion out of the equation and allow you to take a hands-off approach to investing, but just be aware that management fees apply.
Key features of a robo-advisor
Get matched with a pre-built portfolio based on your financial goals and risk appetite
Portfolios can be conservative, aggressive or balanced
Access Canadian and international investments
Lower management fees than human advisors
Automatic portfolio rebalancing to ensure that your investments continue to match your goals and risk tolerance
Many robo-advisors offer tax-loss harvesting
Monitor your portfolio via a mobile app or online
What are the downsides of a robo-advisor?
Using a robo-advisor means you don’t have complete control over where your money is invested. If you prefer to take a hands-on approach to investing, you’ll probably want to open a self-directed investment account instead. Or if you want a custom portfolio that has been directly tailored to your financial situation and goals, approaching a human investment advisor may be a better option.
You’ll also need to pay management fees, which are usually to the tune of 0.25% to 0.50%. That might not sound like much, but it will still take a bite out of your profits.
3. Peer-to-peer investment accounts
Peer-to-peer lending platforms connect borrowers who need loans with investors who want to put their money to work to earn a competitive return. P2P lending is an alternative way to invest your spare cash, and it’s often possible to get better returns than you can get from a savings account. You can choose which loans to invest in based on your risk tolerance.
In Canada, goPeer lets you invest in personal loans, while Lending Loop provides access to small business loans.
Key features of a peer-to-peer investment account
Earn a competitive fixed interest rate
Your money is locked away for a fixed period
Your money is pooled with the funds of other investors to provide loans
Interest rates for borrowers are determined based on their creditworthiness and risk level
You earn passive income when borrowers make repayments
What are the downsides of a peer-to-peer investment account?
You’ll need to pay a fee to the peer-to-peer lending platform, which will eat into your profits. Check the fine print to find out how much of a difference fees will make to your bottom line.
But the biggest risk with this type of investing is if the borrower defaults on the loan. You don’t get the security of protection from the Canada Deposit Insurance Corporation or the Canadian Investor Protection with this type of investing. You’ll need to check what measures the platform has in place to ensure that it only provides loans to reliable borrowers, along with the steps it will take to recover any losses.
Forex traders aim to make a profit from changes in exchange rates by selling one currency to buy another. They speculate on whether the value of one international currency relative to another will go up or down, which is why it’s classed as trading rather than investing.
You can trade currencies 24 hours a day, 5 days a week
The forex market is decentralized with trades made “over the counter”
Traders can use leverage, so you only have to put down a small percentage of the total trade value up front
Leverage means any gains you make are magnified, but so are any losses
Forex trading is highly complicated and risky
What are the downsides of a forex trading account?
The major risk of forex trading comes about because you can trade with leverage. While this means any gains you make will be amplified, it will also increase your losses when the market moves against you. This means you could potentially lose more money than you invest.
It’s also worth noting that foreign exchange rates are volatile and complicated. There are myriad factors that can affect the value of one currency vs another, and exchange rates can change quickly.
Finally, the 24-hours-a-day nature of forex trading means you’ll need to be willing to put in the time and effort needed to track your investments. That’s why forex trading is best left to experienced traders.
Disclaimer: General information only. All forms of investments (and in particular, trading CFDs, commodities and forex) carry significant risk, including the risk of losing more than the invested amounts, market volatility and liquidity risks. Past performance is no guarantee of future results. Such activities are not suitable for most investors.
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Defensive investments
Defensive investments come with low or no risk. They offer a safe way to grow your bank balance, and while they might not be particularly glamorous or exciting, they’re ideal for anyone who doesn’t want to risk losing their money.
Defensive investments can provide a steady stream of interest income. And if you open a savings account or GIC with a Canada Deposit Insurance Corporation (CDIC) member institution, you get the added peace of mind of CDIC insurance protection.
1. Savings accounts
A savings account is the most basic type of investment account and one that most people are familiar with. How it works is simple: you deposit money into the account, and in return your financial institution pays interest on every dollar.
You can help your balance grow even quicker by setting up a recurring deposit from your chequing account to your savings account every time you receive your income.
Key features of a savings account
Pays interest on your entire balance—the larger your balance, the more interest you will earn
Interest rates fluctuate, so a change to the Bank of Canada’s policy interest rate could affect your savings account interest rate
No monthly fee
No minimum balance requirement
Easy access to your funds when needed
Manage your account via online and mobile banking or by visiting a branch
Eligible deposits covered by up to $100,000 CDIC insurance protection
The biggest downside of a savings account is that it simply doesn’t offer the same potential for high returns as other riskier investments.
While putting money in a savings account will generate returns, you could miss out on the chance to make bigger profits from other investments—especially during periods when interest rates are low.
For some people, the easy access to funds a savings account provides can also be a drawback. If you’re the type of person who can’t resist the temptation to dip into your savings, you might be better off locking your money away in a GIC.
The other thing you need to watch out for is that you may need to meet specific requirements to earn the maximum advertised savings account interest rate. For example, the juicy rate a bank advertises may only apply for a short introductory period, or you might need to deposit a minimum amount each month to earn the maximum rate.
To make comparing even easier we came up with the Finder Score. Interest rates, account fees and features across 50+ savings accounts and 25+ lenders are all weighted and scaled to produce a score out of 10. The higher the score the better the account - simple.
Guaranteed investment certificates (GICs) are another low-risk investment option, but they generally offer a higher interest rate than savings accounts. They require you to deposit your money with a bank or other financial institution for a set period, and in return you’ll be paid interest. It’s a “set and forget” way to grow your money.
There are also GICs that allow you to withdraw your funds before the term ends, but they offer lower returns than traditional GICs.
Key features of a GIC
Deposit your money for a fixed period of time
Terms range from 1 month to 10 years
Minimum deposit requirements apply
Interest can be fixed or variable
No setup or maintenance fees
At the end of the term, you get back the money you invest
Most GICs will penalize you for early withdrawals, though cashable GICs are available
Eligible for CDIC insurance protection
What are the downsides of a GIC?
Like savings accounts, GICs offer lower returns than you may be able to get from higher-risk investments. So if interest rates are relatively low, you could potentially be missing out on much more lucrative opportunities elsewhere.
To get the best rates, you’ll also need to lock your money away for a fixed period. And if you need access to funds in an emergency, you’ll be penalized for withdrawing your funds before the GIC reaches maturity.
Another drawback of GICs is that minimum deposit requirements apply. Requirements vary between banks, but you’ll commonly need to have at least $500 or $1,000 to invest.
What is the best investing account in Canada?
There’s no single account that is the best choice for everyone. In fact, there may be several types of accounts that meet your needs.
An investment account isn’t a one-size-fits-all product. The right account for you will depend on how much you have to invest, your financial goals, your time frame and how much risk you’re willing to take on.
Once you have a clear idea of your personal situation and investing goals, you can start comparing different types of investment accounts.
Registered vs non-registered accounts
The next factor you need to consider is whether you want a non-registered or registered investment account. Non-registered accounts are regular investment and savings accounts that don’t offer any tax advantages, while registered accounts are registered with the federal government and entitle you to various tax benefits.
You can use the investment income from a non-registered account for any legit purpose, but registered accounts are designed to help you reach specific financial goals. And the investment income you earn in a non-registered account is taxed at your marginal tax rate, registered accounts offer tax-sheltered benefits.
For example, a registered retirement savings plan (RRSP) lets you make tax-deductible contributions to invest for your retirement. You can invest in cash, GICs, stocks, ETFs, bonds and more in an RRSP, but you won’t pay tax on your investment income until you make a withdrawal. This will hopefully occur in retirement, when you’ll be in a lower tax bracket.
When you’re choosing an investment account, it’s well worth checking whether you can take advantage of the perks offered by a registered account.
Bottom line
The right mix of investment accounts for you depends on your financial goals and how much risk you’re willing to take on. Understanding your investing goals is the crucial first step toward building a secure financial future. Once you know what you want to achieve, you can compare the best investment accounts in Canada to find the perfect balance between risk and reward.
Frequently asked questions about investment accounts
Each type of investment account has its own application requirements, though you generally need to be the age of majority in your province or territory (either 18 or 19). Some investment accounts have a minimum opening balance requirement, and you’ll need to provide your name, date of birth, address, contact details, Social Insurance Number (SIN) and proof of ID when applying.
Yes, in many cases it is possible to open a joint investment account. Banks and credit unions offer joint savings accounts and GICs, while many online trading platforms support joint accounts. Check with your financial institution to find out whether joint accounts are available.
Yes, and it’s often a good idea to do so. By holding a diverse range of investments, you can help manage risk across your portfolio. Savings accounts, GICs and safe-haven investments like gold can provide stability during times of market volatility, while stocks, ETFs and other assets provide the potential for more capital growth.
Yes, you will typically be taxed on your investment income at your marginal tax rate. However, different rules may apply if you hold your investments in a registered account like an RRSP or TFSA, which allows you to take advantage of tax benefits. To get a better understanding of your tax obligations, check out our guide to how stocks are taxed in Canada.
Tim Falk is a freelance writer for Finder. Over the course of his 15-year writing career, he has reported on a wide range of personal finance topics. Whether you're investing in stocks and ETFs, comparing savings accounts or choosing a credit card, Tim wants to make it easier for you to understand. When he’s not staring at his computer, you can usually find him exploring the great outdoors.
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Stacie Hurst is an editor at Finder, specializing in loans, banking, investing and money transfers. She has a Bachelor of Arts in Psychology and Writing, and she has completed FP Canada Institute's Financial Management Course. Before working in the publishing industry, Stacie completed one year of law school in the United States. When not working, she can usually be found watching K-dramas or playing games with her friends and family.
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Disclaimer: General information only. All forms of investments (and in particular, trading CFDs, commodities and forex) carry significant risk, including the risk of losing more than the invested amounts, market volatility and liquidity risks. Past performance is no guarantee of future results. Such activities are not suitable for most investors.