How to Invest 100k in Canada: 7 Distinct Ways (2023)

If you have saved up $100,000 and are considering ways to grow your money, there is a wide range of approaches that you can take to investing.

Although the stock market is a natural option to consider when investing, 41% of Canadians do not invest in the stock market at all.

Investment asset classes, or different types of investments, come with various levels of risk and reward. If an investment offers a higher rate of return, it typically comes with a higher level of volatility or risk.

I will outline how to invest 100k in Canada below and go through some of the key features of some of the best investment asset classes that you can consider.

Key Elements to Consider Before Beginning to Invest

Before making an investment, it’s important to think about your personal financial goals, risk tolerance, and time horizon.

You can ask yourself several important questions which can help to build the frame of a financial plan and help you to make a choice when it comes to choosing one or more investments.

Some questions to consider include the following:

  1. How frequently do you plan to review the performance of your investments?
  2. What are your expectations for returns on your investments?
  3. Are there any existing investments that you need to take into account when making your current investment decisions?
  4. Will you have the capacity to research and manage your investments thoroughly?
  5. What are your financial objectives over the short, medium, and long term?
  6. How much time do you plan to commit to your investments?
  7. Are you willing to accept a higher level of risk in exchange for potentially higher returns?
  8. When do you anticipate needing to use the money you are investing?

How to Invest 100k in Canada: Seven Investment Approaches to Consider

1. Exchange-Traded Funds (ETFs)

Exchange-Traded Funds (ETFs)
  • Risk: low – high
  • Minimum investment amount: low
  • Fees: low
  • Time dedication needed: low
  • Investment time horizon: short – long
  • Liquidity: high
  • Income: low – high

Exchange-traded funds, or ETFs, are investment vehicles that track the performance of a specific underlying asset or group of assets. These assets can include stocks, bonds, commodities, and even currencies.

ETFs offer investors the ability to diversify their holdings in a manner similar to mutual funds, but they are traded on stock exchanges and can be bought and sold like individual stocks.

One key benefit of ETFs is their low cost, as they are passively managed and, therefore, typically have lower fees than actively managed mutual funds. This makes them an attractive option for those seeking to build a diversified portfolio on a budget.

Aside from being cost-effective, ETFs are also highly flexible. Because they can be bought and sold like stocks, investors can quickly adjust their holdings in response to changes in the market or their personal financial circumstances.

This flexibility is a major advantage for those looking to fine-tune their investment strategy.

ETFs can offer various levels of income and typically have a very low investment minimum.

Overall, ETFs provide investors with a low-cost, flexible way to diversify their holdings and potentially achieve their investment goals. With a wide range of ETFs available to suit different objectives and risk tolerances, they have become increasingly popular in recent years.

If you are looking for ideas when it comes to exchange-traded funds, make sure to read my in-depth guide on the best ETFs in Canada.

If you are buying ETFs in Canada, make sure to consider using Wealthsimple Trade as a platform. Wealthsimple Trade allows you to trade most North American ETFs (and stocks) without trading commissions. Make sure to take advantage of Wealthsimple’s signup bonus.

2. Starting a Small Business

Starting a Small Business
  • Risk: high
  • Minimum investment amount: high
  • Fees: low – medium
  • Time dedication needed: high
  • Investment time horizon: medium – long
  • Liquidity: low
  • Income: low – high

Starting a business can potentially lead to very impressive returns, but it also carries a high level of risk.

The launching of a private business is different than most typical investment options because it takes a substantially higher level of time commitment and effort and is also much more complex. You should seriously consider your strengths and abilities before choosing a business to launch.

Launching a business that you have a background or an education in can boost your chances of turning it into a profitable venture down the road.

Businesses typically require a substantial amount of funding and resources. Some costs can include:

  • Land or rent
  • Inventory
  • Advertising
  • Labour
  • Software and systems

Businesses are typically funded either through significant savings, business loans from financial institutions, or a mix of both.

Before starting off, you should have a clear vision for your business and a plan for achieving your goals, which may involve conducting market research and identifying your target customer base.

Private businesses can come with fees (especially if buying existing businesses through a broker), typically have a long investment time horizon, and are extremely illiquid. Income levels from a private business will depend on your ability to control costs and turn a profit.

Starting a business with $100,000 will likely limit you to a smaller business or it may require you to obtain outside financing. In most cases, you will be leasing your business’ land if you only have $100,000 to invest.

While starting a business can be a rewarding and exciting investment, it’s essential to understand the risks and challenges involved. By carefully researching and planning, you can increase your chances of success and maximize the potential returns on your investment.

3. Robo-Advisors

Robo-Advisors
  • Risk: low – high
  • Minimum investment amount: low
  • Fees: low
  • Time dedication needed: low
  • Investment time horizon: medium – long
  • Liquidity: high
  • Income: low – high

Another investment option to consider if you are looking to invest 100k in Canada is to take advantage of one or more robo-advisors.

A robo-advisor is a digital system that provides investment advice and builds portfolios on behalf of its clients. A robo-advisor can create extremely well-diversified portfolios of many investment asset classes, such as stocks, bonds, funds, and sometimes alternatives.

Robo-advisory platforms collect client information from new clients by providing them with one or more questionnaires to complete. These questionnaires allow the robo-advisor to build a portfolio that mirrors the client’s risk tolerance (anywhere from low risk to high risk) and overall financial goals.

Robo-advisors are generally offered by brokerages at low fees and require minimal time for clients to set up their portfolios. Two excellent choices for Canadians when it comes to robo-advisors include Wealthsimple Invest and Questwealth.

Robo-advisory platforms can be used for short or long periods of time and require minimal time for clients to set up their portfolios. Portfolios can be tweaked towards shorter or longer investment time horizons as well as towards other investor preferences, such as regular income streams.

While a robo-advisor is not technically an investment, it serves as a substitute for a human financial advisor for simpler portfolios. Once a robo-advisory portfolio is set up, it is fairly simple to liquidate in the event of an emergency)

If you are looking for more information on a wide range of options within Canada, take a look at my guide on the best robo-advisors in Canada.

4. Liquid Alternatives

Liquid Alternatives
  • Risk: low – high
  • Minimum investment amount: low
  • Fees: medium – high
  • Time dedication needed: medium
  • Investment time horizon: short – long
  • Liquidity: medium – high
  • Income: low – high

Liquid alternatives are a fairly new way to access complex hedge fund strategies with much lower investment minimums. Typically, pure hedge fund strategies are usually reserved for sophisticated investors with very large portfolios.

Investors that have $100,000 to invest are able to access hedge fund strategies without the complications of purchasing a traditional offering memorandum (OM) hedge fund.

It’s important to note that liquid alternatives can vary significantly in terms of structure, risk, and performance targets.

Examples of different liquid alternative strategies include:

  • Market-neutral
  • Long-short
  • Dedicated short-bias
  • Merger arbitrage

A market-neutral strategy typically aims for conservative returns irrespective of market conditions, while a dedicated short-bias fund seeks to generate returns through short positions when markets are declining.

Investment managers started launching liquid alternative strategies several years ago as both mutual funds and exchange-traded funds. Due to the lower fees that ETFs typically charge, I recommend using the ETF version of liquid alternative strategies when possible.

Since liquid alternative strategies are highly complex, it is important to have an excellent understanding of the strategy behind the fund. This can usually be obtained by thoroughly reading all of the liquid alternative fund materials that should be available on the investment manager’s website.

Liquid alternative strategies usually work best when paired with other investment strategies or assets within your investment portfolio. This can include stocks, bonds, or other funds.

In order to get more information and specific ideas on options here in Canada, be sure to read my guide on the best liquid alternative funds in Canada.

5. Stocks

Stocks
  • Risk: medium – high
  • Minimum investment amount: low
  • Fees: none – low
  • Time dedication needed: high
  • Investment time horizon: long
  • Liquidity: low – high
  • Income: none – high

Stocks (or equities) are a common investment option that involves owning a small percentage of a publicly traded company. This allows you to become a partial owner of well-known corporations.

Equities can vary in terms of their characteristics and associated risks, with a medium level of risk being typical. In the event of a company’s bankruptcy, shareholders are paid after creditors, which makes stocks fairly risky and susceptible to substantial downside risk.

The minimum investment amount for stocks depends on the price of a share of the particular company, which can range widely. Stocks do not have any fees, but you may need to pay trading commissions to buy and sell them.

If you are looking to buy and sell stocks without trade commissions in Canada, make sure to check out Wealthsimple Trade as a discount brokerage.

Researching and managing a stock portfolio can be time-consuming, and the investment horizon for stocks is usually long. The liquidity and dividends of stocks can also vary greatly depending on the company.

If you are looking to build a highly diversified portfolio of stocks, it may be a good idea to consider a low-cost stock exchange-traded fund. Stock ETFs provide you with the opportunity to purchase tens, hundreds, or even thousands of stocks at once.

If you are determined to build your own stock portfolio, make sure to consider how well you are diversified not only across different sectors but also across different countries and geographies.

I have put together an ultimate list of the best stocks in Canada – make sure to check it out to get some great ideas when it comes to individual stock picks.

6. Guaranteed Investment Certificates (GICs)

Guaranteed Investment Certificates (GICs)
  • Risk: low
  • Minimum investment amount: low
  • Fees: none
  • Time dedication needed: low
  • Investment time horizon: short – long
  • Liquidity: low
  • Income: medium

Guaranteed investment certificates (GICs) are another option to consider if you are looking to invest 100k in Canada and are not looking to take on risk. GICs involve depositing your money with a financial institution for a set amount of time in exchange for a specific yield.

Whether or not you will require liquidity during the term of the GIC will help you to make a decision about choosing a cashable or a non-cashable GIC. Canadian GICs are offered across a wide range of investment terms, from as little as several months to as much as several years.

Cashable GICs can be redeemed early, but the investor typically surrenders most of the gains once this is done. Non-cashable GICs cannot be redeemed before their maturity. For this reason, non-cashable GICs tend to offer a slightly higher yield to investors.

GICs as a whole can be considered very low-risk investments. In Canada, they are usually insured by the CDIC (Canada Deposit Insurance Corporation), typically for up to $100,000. The CDIC offers this protection in case a member financial institution faces insolvency and can’t return an investor’s deposit.

Most, if not all, of the financial institutions in Canada that offer GICs to investors are members of the CDIC.

The minimum investment required for GICs is generally very low and financial institutions do not charge fees for offering GICs. GICs are very straightforward products to understand and require little due diligence or time commitment from the investor.

Keep in mind that since GICs are low risk investments, they can be expected to offer modest returns. The yields on GICs are typically in line with the level of Canadian interest rates – if interest rates are high, GIC yields will be high (and vice versa). For example, a 1-year GIC at EQ Bank is currently at 4.85%, which is pretty decent.

If you are looking to learn more about GICs, take a look at my article which outlines whether GICs are worth it in Canada.

7. Real Estate Investment Trusts (REITs)

Real Estate
  • Risk: medium – high
  • Minimum investment amount: low
  • Fees: medium
  • Time dedication needed: low
  • Investment time horizon: medium – long
  • Liquidity: high
  • Income: medium – high

A REIT, or real estate investment trust, is a type of pooled investment that purchases and manages income-generating real estate properties. These properties can be very diverse, ranging from apartments to office buildings to hotels.

Instead of buying one or more physical properties, a REIT allows investors to pool their money together and purchase a diversified portfolio of real estate, giving it several advantages over simply owning a rental property.

Some of these advantages include:

  • Additional property diversification
  • Less time involvement
  • Ability to have ownership in expensive properties (i.e. hotels)
  • No management of the property is required

REITs are usually required to distribute a specific portion of their taxable income to investors through dividends, causing them to usually offer attractive income streams.

Due to how REITs are structured, they are publicly traded on most stock exchanges. REIT units are also bought and sold just like a share of a publicly-traded company.

REITs also allow you to gain exposure to more specific areas of the real estate market. More specific examples of REIT mandates include:

  • Diversified REITs
  • Residential REITs
  • Industrial REITs
  • Retail REITs
  • Office REITs

Each different kind of REIT will come with its specific characteristics and features and may perform differently at various times throughout an economic cycle. Be sure to look into the specific features of the type of REIT that you are looking to invest in before purchasing it in your portfolio.

If you are looking for real estate investment trusts to potentially consider adding to your portfolio, be sure to read my guide on the best Canadian REIT stocks.

Frequently Asked Questions

How to Invest 100k to make $1 Million

Investing $100,000 with the goal of growing it to $1,000,000 is a difficult task. This would require increasing your initial investment by a factor of ten.

How attainable this goal is depends on the growth potential of your underlying investment as well as the time horizon that you are allocating to your investment. Ideally, you will want to invest in investments that offer higher potential returns over a long investment time horizon.

Some examples of investments with higher historical average returns include:

  • Stocks
  • Private Equity
  • Real Estate
  • Starting a successful small business

How to Invest 100k for Passive Income

If you are looking to invest 100k for passive income with little involvement on your part, several options exist. Most investment options will require you to open a brokerage account, likely a self-directed account.

If you are looking for high passive income, you will want to consider asset classes or investments that offer a high yield. Some examples include:

  • High-yield bonds (or high-yield bond funds)
  • Covered call funds
  • Bonds
  • Dividend-paying stocks
  • Guaranteed Investment Certificates (GICs)

Keep in mind that income (especially interest income) is taxed less efficiently than capital gains in Canada.

Conclusion

How To Invest 100k In Canada

An investor with 100k to invest has an abundance of options in Canada, with more options being available outside of the seven outlined above. Your choice of what to invest in should be guided by your goals and particular circumstances.

An investment asset class may be better suited for a specific type of investor versus another – no one asset class exists as a “silver bullet” for guaranteed investment success.

With that said, the seven investment options outlined above are all excellent options to consider when planning how to invest a lump sum of $100,000.

If you are just getting started with investing and putting your saved money to work, make sure you read my thorough outline on how to start investing in Canada.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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