Investing for beginners in Canada: Your complete guide
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If I could go back in time, I would smack my younger self’s hand away from the umpteenth pack of Magic the Gathering cards it was reaching for, and inform younger me that my money could be far better used by investing it.
The best time to start investing was decades ago. The second best time to start is right now.
I’m going to walk you through every detail you need to consider to start your investing journey, why it matters and the benefits you can look forward to.
After reading this, jump over to how to start investing to go a little deeper on the subject.
Investing for beginners | The investing basics you need to start
I wouldn’t blame you for conflating “investing” with “saving.”
They’re similar concepts, and, in fact, cross over from time to time. For one, both saving and investing involve not spending your money – or at least, not exchanging it for goods and services.
The key difference with saving money is that you’re likely keeping your money in cash, perhaps in a high-interest savings account, making anywhere from a fraction of a percentage in interest, up to around 4%.
With investing, you’re keeping your money in the market.
You’re buying stocks and bonds (preferably a combination), parking your money there and watching it grow over time. Optimistic estimates for well-diversified investment portfolios suggest your money will probably increase (on average) about 7% annually – and that is compound growth, which means it accrues faster the longer you keep it in for and the more money you have.
“But wait,” you may say. “Isn’t this just trading? My cousin told me that GameStop was a great investment.”
Stop right there. Investing and trading could not be more different, apart from both happening in the market. Investing is a long-term strategy with historically minimal risk, and solid growth potential. Trading is a bit more like gambling. There’s no such thing as a guaranteed win, and even the greatest traders in the world get it wrong as often as not. That’s why the key to investing is diversification – some stocks go up, others down, but in totality the trend is upwards, at a rate of about 7% a year (depending on your risk tolerance, but we’ll get into that later).
So, what is the purpose of watching your money grow over the years? Well, there’s a variety of reasons you might invest, including your child’s education, a trust fund or a real estate investment. But the number one most common type of investment is to save for retirement.
At a certain age, most people can’t (or don’t want to) keep working, and at that point they’ll need to draw from the money they set aside during their career. That money tends to be a lot more if it’s been responsibly invested.
Why should you start investing as a beginner
Before we dive into the many reasons you should start investing, let’s touch on a different “I” word – inflation. You’ve probably heard this word a lot more in recent years, and it definitely relates to your investments. Inflation is complicated, and deserves an article of its own, but in effect it’s the process of goods and services becoming more expensive. Under normal circumstances, wage increases and incomes grow alongside inflation. But when it gets out of control (like after the pandemic) things get more expensive and your money becomes less valuable – what $10 used to get you, you’d need $15 for now. This is one of the most important reasons to invest, as opposed to saving. In 2022, inflation in Canada was a staggering 6.8%1. This meant, even if you were putting money into a high-interest savings account, your money was losing value faster than you were earning interest. On the other hand, if you had invested it, it likely would have held (and even increased) your worth, and would compound over time.
Sustainably growing wealth is a good thing
- It helps you reach financial goals, such as retirement, education and buying a home, that would be impossible just by stuffing cash into your mattress.
- It also gives you freedom to make choices, like choosing to retire – without a sufficient nest egg, retirement is a luxury some people may never be able to truly afford.
- It gives you financial freedom, the true goal of investing – it’s the most reliable way to grow your wealth to the extent you can make choices unencumbered by money troubles.
The Fire Movement Journey
The portfolio size you need before age 45 to reach the corresponding level of FIRE. If you're not focusing on retiring early and only care about financial independence, you can reach these milestones after 45.
- CoastFIRE (<$350k): Save aggressively early, then allow your investments to grow on their own while you stop or significantly reduce contributions.
- BaristaFIRE (<$500k): Transition to part-time or lower-paying work after achieving partial financial independence, supplementing your income as needed.
- LeanFIRE (<$1M): Achieve financial independence with a small portfolio, living minimally or even near the poverty line.
- Financial Independence ($1M to $4M):Traditional FIRE: Build a large investment portfolio to retire very early (usually by age 45) while maintaining your current lifestyle.
- FatFIRE (>$4M): Attain financial independence with a substantial portfolio, enabling a top 5% or 1% income and a luxurious lifestyle without working.
I am a member and advocate of the Financial Independence Retire Early (FIRE) movement. The idea is to save a substantial percentage of your income as early as possible, achieve financial independence and “retire” – or at least have more flexibility in what work you choose. FIRE followers can be on the extreme end of investing and saving, but the movement is built around one core idea – we’d rather be living than working.
Thing you must consider before you start investing for beginners
My father-in-law leant me a book when I graduated university called The Millionaire Teacher. It was about a guy who took investing, saving and financial independence so seriously, he was able to accrue over a million dollars on the shamefully low salary of an American teacher. Of all the useful lessons in that book, there was one chapter that stuck out, titled: “Debt is an emergency.”
Debt, by design, is meant to make money off you. Consider a credit card, where the debt you don’t pay off charges you upwards of 20% interest. So holding $100 in debt can cost you more than $20 – and that adds up fast.
Compare that to the optimistic 7% you stand to make from investments – if you’re investing and accruing credit card debt at the same rate, you’ll be losing 13% of your money. Even student debt, which is relatively low at 10%, still loses money faster than you could reliably gain. Suffice to say, debt is an emergency, and before you begin any investing strategy, you should get your debt under control.
In this guide, I want to encourage you to take money out of your bank accounts and invest it in the market. But, there’s one area I want you to maintain a substantial chunk of change, and that’s in your emergency fund.
There’s no specific number for how much money you should set aside in case of emergency. It comes down to your lifestyle and risk tolerance. Common wisdom suggests having three to six months of your expenses or salary set aside, but some advocate for having a year set aside. Personally, I lean on the lower side because I prefer the potential gain of my money in the market. And while divesting in the case of a serious emergency isn’t ideal, it’s also still an option.
Now we get to the fun part of investing – creating and sticking to a budget. While I’m kidding about the excitement, your budget is going to be a cornerstone of your investment success. It tells you how much money you have, where it goes and gives you a goal to stick to for contributing towards your savings.
It’s not always fun to see how much money you're spending, but it’s imperative to keep an eye on your cash flow and track what you spend.
There are many budgeting apps available to monitor your spending and most banks have basic budgeting features integrated into their platforms. Call me old-fashioned, but I opt for entering all my purchases manually into an Excel spreadsheet. This way, I know exactly how much I’ve spent each month.
Once you know where your money is going, you can start building your budget. If you already have a surplus, great. In your budget, you can allocate this extra amount to your investments each month. If not, it’s time to get out that red pen and start seeing where you sacrifice some of your spending (for me and my wife, that meant downgrading our $20 bottles of wine to $15 bottles).
They say, “pay yourself first” and that’s what you should do – after rent, groceries and other essential costs, invest your goal amount. And the rest can be for discretionary spending.
My father-in-law leant me a book when I graduated university called The Millionaire Teacher. It was about a guy who took investing, saving and financial independence so seriously, he was able to accrue over a million dollars on the shamefully low salary of an American teacher. Of all the useful lessons in that book, there was one chapter that stuck out, titled: “Debt is an emergency.”
Debt, by design, is meant to make money off you. Consider a credit card, where the debt you don’t pay off charges you upwards of 20% interest. So holding $100 in debt can cost you more than $20 – and that adds up fast.
Compare that to the optimistic 7% you stand to make from investments – if you’re investing and accruing credit card debt at the same rate, you’ll be losing 13% of your money. Even student debt, which is relatively low at 10%, still loses money faster than you could reliably gain. Suffice to say, debt is an emergency, and before you begin any investing strategy, you should get your debt under control.
Types of investments for beginners in Canada
There’s a number of different investment options to choose from, and realistically you’re probably going to want a mix of them. Here’s how they break down:
| Investment type | Definition | Average return | Risks |
|---|---|---|---|
| Stocks | A stock is a piece of ownership in a company that you can buy and sell, hoping its value increases, and you make a profit. | 7-10% | Stocks are the most susceptible to market swings. In a down time, your stocks might take a major hit in value, inconvenient if you want to sell during that time. |
| Bonds | A bond is like an IOU where you lend money to a company or government and they promise to pay you back with interest. | 3-5% | Bonds are notoriously safe, but over indexing means your portfolio might not grow as fast or as large. |
| ETFs | An ETF (exchange-traded fund) is like a basket of different stocks or bonds that you can buy and sell on the stock market, acting as a built-in diversification for your investments. | 7-10% | ETFs have the same risks as stocks, except they offer less risk owing to their diversification. |
| Mutual funds | Mutual funds are like ETFs in that they're also baskets of different investments, but they're managed by a professional and typically bought and sold once a day, unlike ETFs which can be traded throughout the day. | 2-6%, but can vary wildly depending on location | Because mutual funds are managed, you’ll have to pay fees that eat into your profits. Plus, they have historically performed no better (and often worse) than ETFs. |
| Real estate | Real estate investing is buying property or land, and hoping demand for it drives an increase in value. Speculative real estate investing is a major contributor to the housing crisis in Canada. | 4-6% | Depending on where you invest, real estate may not increase much in value. Plus, it is susceptible to bubbles, as the housing crash in 2008-2009 demonstrated. |
| REITs | An REIT (Real Estate Investment Trust) is a company that owns and operates income-producing real estate, like malls and office buildings, allowing you to invest in real estate without actually buying property. | 8-12% | Just like any investment, REITs can lose value if the real estate market takes a downturn. This can happen due to economic recession, changes in interest rates, or oversupply of certain property types. |
Couch potato portfolio
If a couch potato has a negative connotation in real life, it’s nothing but positive from an investing perspective. The core tenants of a couch potato investing go like this: buy low-fee ETFs or index funds (that follow major indexes like the S&P 500 or TSX), set up automatic contributions and check in from time to time to make sure everything is going smoothly. It’s a hands-off investing approach that history tells us works extremely well for saving for retirement.
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How to start investing for beginners
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What do you want in life? It’s a big question. While daunting, it's important to ask this question now because money will play a big role in getting you there.
Some potential goals could include home ownership, starting a family and retirement. It’s important to account for each of these goals in your investment strategy.
For retirement, you’ll want to get a bit more specific. When do you want to retire? My wife and I, for example, can’t see ourselves working until we’re in our 60s, so our investment plans have been much more aggressive.
Also, how much do you think you’ll want to spend in retirement? Will you be living a modest life in an isolated cabin in Northern Ontario or living it up in a penthouse in Toronto?
Your answers to these questions can be guesses for now. The important part is to pick a point on the map to aim for, even if that isn’t where you ultimately end up.
The first test of my risk tolerance came at the beginning of the pandemic. In less than a month, my portfolio dropped 30%. What did I do? Absolutely nothing. And it was one of the best financial decisions I ever made.
Risk tolerance is all about how well you’re able to withstand fluctuations in the market, without pressing the big, red abort button. Especially if you’re saving for retirement, which could be decades in the future, you’re guaranteed to experience some market drops along your investment journey.
In general, higher risk equals higher rewards. When you’re investing for a future goal, drops are nothing to fear. In fact, some seasoned investors actually look at this as the ideal time to put more money in the market.
Since the pandemic market drop, my portfolio has recovered by 150% — over double its original value. If I had panicked and taken it out, I would have lost tens of thousands of dollars.
The key is to understand yourself. The goal here is to prevent you from panic selling when the market drops. If you have ironclad will, then a 90 to 100% stock-weighted portfolio could be right for you. If you’re a bit risk averse, you may feel better with 80% to help you sleep at night through those inevitable drops.
Of course, you’ll need to adjust your risk tolerance along your investment journey. As you approach retirement, you’ll begin to move more of your portfolio to lower-risk investments.
When I started investing, it was all about maximizing the amount of money I could put in the market. Instead of taking the bus, I biked to work. I brought leftovers for lunch instead of buying. I resisted the urge to impulse buy video games.
All these little decisions add up quickly. My wife and I used to have a spare change jar that we’d use to accumulate our savings. Today, there are apps and bank features that take this same concept and apply it to the digital world.
If you started investing at 20 and contributed $10,000 per year, your total contributions would reach $138,000 by age 34. But thanks to the magic of compound interest, your investment balance would actually grow to approximately $220,554 by that time, assuming a standard market growth rate of 7%.
By age 40, with a total principal of $200,000, your investment would grow to $386,000, and by 60, it would reach $1.3 million—over two-thirds of that coming purely from the power of compounding.
The first 100k is a milestone on the investment journey. I truly believe in some ways it is even more impactful than one million (although truth be told, I can’t speak to that milestone yet). For me, it was the moment I thought, “wow, this stuff actually works.”
If your $100,000 is in high risk investments, then this is where the magic starts to happen. This money makes roughly $7,000 per year on average. That’s more than I’d make working the whole summer as a landscaper when I was a teenager. And instead of shovelling dirt, I’m doing absolutely nothing to make that amount.
The Canadian government offers several different ways to incentivize citizens to save their money — and you should be taking advantage of every one you can.
A Tax-Free Savings Account (TFSA) allows your investment income to grow tax-free. A Registered Retirement Savings Plan (RRSP) gives you tax breaks now when you contribute to it, and taxes you later when you withdraw (likely at a lower bracket than you are currently).
Related: Best TFSA investment options
Best practice is to focus on maxing out your TFSA first. For one, your money is more accessible in your TFSA as it can be withdrawn without penalty. But also, since RRSPs reduce your taxes, it’s better to save your RRSP room for you when you’ve reached your max earning potential in life.
For example, if you’re making $85,000 right now at 30 years old, you may want to save your RRSP room when you’re 40 making $200,000. While it's difficult to predict the future, on average, income peaks in your 40s and 50s.
A Locked-In Retirement Account (LIRA) is an account that holds money transferred from a pension. For example, when my wife left her job, she transferred her pension money into a LIRA, where it will rest until she retires. As the name implies, this money is locked-in — it cannot be accessed until retirement age under most circumstances.
Investing for Beginners in Canada: Just Start Now
The most important step in investing is simply starting.
Time in the market beats timing the market, meaning the sooner you begin, the more your money can grow through compound returns.
The stock market has seen ups and downs, but over time, it has always trended upward. If you’re overwhelmed by stock picking or portfolio balancing, a robo-advisor can handle it for you. Just set your risk tolerance, fund your account, and let the algorithm do the work—no need to worry about ETFs, bonds, or diversification. The key is building your nest egg now so your future self can thank you later.
Some of the best robo advisors in Canada
Beginner investment strategies
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This is the “set it and forget it” strategy popular with many investors, yours truly included. I have a dedicated amount I invest every month that I contribute when I’m paid. This is a great strategy for consistency and sticking to a budget, and it’s the one I’d recommend.
I’m not a fan of lump sum investing unless it’s done in tandem with DCA. I think only investing when you have a large amount of cash means you’re keeping money off the market where it could be growing, and isn’t a consistent investment strategy. That said, if you’re already a DCA enthusiast and you get a bonus or inheritance, by all means – invest a lump of it.
“Hedging your bets” may be a phrase that arose from gambling, but it applies perfectly to investment strategy. A single stock may go up or it may go down – there’s no consistent way to predict it (and if there were, we’d all be rich). But there’s one thing we do know – a diverse portfolio with a mix of investment types has traditionally always gone up in value over a long enough period of time. That’s the power of diversification.
Invest early, invest often and hold on for as long as you can. Compound growth means your money will grow exponentially, so the longer you hold the more dramatic that will be. Since most people want to retire at some point (as early as possible if you’re me) investing early means you can have that long-term focus without putting off your financial freedom.
Investing in stocks for beginners: Choosing the right brokerage account
If you’re ready to start investing, you’ll need a brokerage platform and account to do so. There are many options out there, but most banks offer a similar brokerage experience. If you’re comfortable moving away from an established bank, there are also a few fintech platforms to consider.
Related: Best Canadian brokerage firms
For beginner investors, it’s hard to beat the appeal of Wealthsimple. It’s pretty stripped down, offering just TFSA, RRSP, crypto and personal accounts, but those offer a great place to start. Its platform is attractive and intuitive, and allows you to do “socially responsible investing,” which limits your commitments to companies active in climate change or weapon production, among others. And there’s $0 commission for trading stocks and ETFs, which makes it a good option for those looking to avoid extra costs.
Interactive Brokers offers a bit more to seasoned investors than Wealthsimple, but the added complexity may not appeal to everyone. In addition to options, Interactive Brokers offers a wide range of other investment options (including precious metals), with advanced charting tools to aid you. If you're buying a lot of U.S. stocks and ETFs, their FX fees are the best in Canada and sure to save you money.
TD Direct Investing is a great cross-section for what the “investing with a bank” option looks like. RBC offers all available accounts like RRSP, TFSA, FHSA, RESP and more, and even gives you access to research reports and analyst ratings. But that comes at a cost – there’s a flat $9.95 fee per trade.
Investing money for beginners: Watch out for high fees
When it comes to investing, sometimes it's the small numbers you have to pay the most attention to. If you go to a bank to get investing advice, chances are that they will try to sell you a fund with high returns — all you have to do is pay two to 3 percent in management expense ratios (MERs).
MERs are the fees that the institution takes for managing your fund and it’s deducted from the fund’s returns. So while two to 3% may seem small, if the fund makes 7% on average annually — now you’ll only be seeing four to 5% of that return.
Luckily, with robo-investing and direct investing into ETFs, there are many great ways to keep your MERs under 1%. You’ll also want to watchout for transaction fees — the charge for buying or selling within your brokerage account.
Top investment books for beginners
Your financial success isn’t about how smart you are — it’s about how you behave with money.
Why beginners should read it: Understanding the emotional side of investing helps you make better long-term decisions.
Key takeaways:
- Wealth is built through patience, not luck.
- Compounding is the most powerful force in investing.
- Managing risk and emotions is more important than stock-picking.
Passive investing through low-cost index funds beats most active strategies over time.
Why beginners should read it: Bogle, the creator of index funds, lays out a foolproof strategy for long-term wealth building.
Key takeaways:
- The S&P 500 is your best long-term bet.
- Keeping fees low is crucial for high returns.
- Market timing doesn’t work — staying invested does.
Maximize life experiences by balancing saving and spending wisely.
Why beginners should read it: Investing isn’t just about growing wealth—it’s about using it to live fully.
Key takeaways:
- Don’t hoard money you’ll never use.
- Invest early but also spend meaningfully.
- Optimize your finances for different life stages.
Financial independence is achievable through simple, disciplined investing in low-cost index funds.
Why beginners should read it: A clear, no-BS guide on how to build wealth with minimal effort.
Key takeaways:
- Save aggressively and invest in index funds.
- Avoid debt and unnecessary financial complexity.
- Financial freedom gives you life choices.
Most millionaires don’t look rich—they build wealth through frugality and smart investing.
Why beginners should read it: Shows that financial success comes from habits, not high income.
Key takeaways:
- Wealthy people prioritize saving and investing over luxury.
- Living below your means is the path to financial freedom.
- Small financial decisions compound into massive wealth.
FAQ
Last updated
June 09, 2025
Cameron Smonk
Freelance Writer
Cam is a content marketer with a passion for saving, financial independence, and pulling off elaborate credit card point schemes. He has worked in Fintech and Finserve (specifically Group Retirement) and loves researching and writing about finance.
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