How to Invest $10k in Canada [2024] | 3 Strategies

Summary: In this guide, we will introduce three strategies for investing 10k CAD in Canada, the pros and cons of those methods, and what to consider before you start investing, as well as our recommendation for the most suitable broker in Canada: Interactive Brokers. 

Best Platform for Worldwide Stock Trading & Investing

• Highly trusted multi-asset broker with clients in over 200 countries

• Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)

• Low commissions starting at $0 with no platform fees or account minimums

• Easily fund your account and trade assets in 26 currencies

• IBKR pays up to 4.58% interest on cash balances of $10k or more

Up to 4.58% interest on balance*

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How to safely invest $10k — things to consider 

Before you start investing, take note of the following factors:

• Financial goals: The first step in any investment strategy is identifying your financial goals. These could be short-term (saving for a vacation, paying off a debt), medium-term (buying a house), or long-term (retirement planning). Your goals will largely determine your investment strategy;
• Risk tolerance: Your risk tolerance is the measure of risk you are willing to take on in pursuit of returns. Typically, the higher the risk, the higher the potential reward;
• Time horizon: This refers to how long you’re willing to hold the particular investment. If you’re young and saving for retirement, you have a long-term horizon and may be able to take on more risk. If you’re older and closer to retirement, or if you’re saving for a goal like buying a house in a few years, your horizon is shorter, and you may want to consider less aggressive investments;
• Knowledge and experience: Understanding financial markets and the financial vehicles on offer is crucial. If you’re new to investing, you may want to steer clear of complex investment products such as CFDs or options;
• Liquidity needs: Consider how quickly you’ll need to convert your assets into cash. Some investments, like stocks and bonds, are pretty liquid. Others, like real estate, are not. If you think you’ll need access to your money in the short term, you should lean towards more liquid investments;
• Diversification: Don’t put all your eggs in one basket. Spreading your investments across various asset classes can help reduce risk;
• Costs: Be aware of the costs associated with investing, including broker fees, account fees, and fund management fees. These costs can eat into your returns over time, so it’s essential you understand them upfront; 
• Inflation: Inflation can erode your purchasing power over time. Consider investments that can outpace inflation so you can preserve and grow the value of your portfolio. 

Remember, investing is not a one-size-fits-all process. Everyone’s financial situation and goals are unique. Therefore, personalized advice from a qualified professional can be valuable. You could also take a quiz to find out what kind of investor you are. 

Best ways to invest $10k in Canada

Congratulations! You’ve reached a major savings milestone: you have successfully saved up your first $10k. This is no small feat and is a testament to your financial discipline and savvy saving habits. Your next step is figuring out how to invest that $10k and put it to work for you.

So, where to invest $10k in Canada? Thankfully, numerous options are available to you. But ultimately, the most effective way to invest $10k is to identify and choose the investment vehicle (or a combination of them) that best aligns with your specific financial circumstances, risk tolerance, and long-term financial objectives. 

Below you will find our pick for the four best ways to invest $10k:

1. ETFs;
2. Stocks;
3. REITs;

Now, let’s look into more detail.

1. ETFs

Investment type: Long-term growth

Risk Level: Low (varies between funds)

Broker to consider: Regulated, secure platform Interactive Brokers

Best Platform for Worldwide Stock Trading & Investing

• Highly trusted multi-asset broker with clients in over 200 countries

• Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)

• Low commissions starting at $0 with no platform fees or account minimums

• Easily fund your account and trade assets in 26 currencies

• IBKR pays up to 4.58% interest on cash balances of $10k or more

Up to 4.58% interest on balance*

Get Started

An exchange-traded fund (ETF) is a type of pooled investment that aims to replicate the performance of a specific index such as the S&P 500, a sector, commodity, or other asset. Like conventional stocks, ETFs can be bought and sold on a stock exchange.

ETFs offer a low-cost method to gain exposure to a broad range of securities within a limited budget, i.e., instead of buying individual stocks, investors can buy shares in a fund that targets a representative cross-section of the broader market. 

In fact, the most successful investor of the 20th century, Warren Buffet, has often said that most investors, both retail and professional, would be better off with indexing, stating:

“A low-cost index fund is the most sensible equity investment for the great majority of investors. By periodically investing in an index fund, the know-nothing investor can actually outperform most investment professionals.”

To give a historical example, in 2021, amid the post-pandemic recovery, the S&P 500, regarded as the single best gauge of the US stock market, yielded a return of 26.89%. And although the benchmark declined significantly by –19.44% in 2022, since its inception in 1957, it has still delivered an average return of 10.21%.

Pros and cons of investing $10k in ETFs in Canada

Pros

• Instant diversification across various industries, sectors, or asset types;
• Lower expense ratios than mutual funds due to their passive management style;
• Liquid instruments that can be traded throughout the day;
• ETFs disclose their holdings daily, so you can see exactly what assets you own. 

Cons

• If the entire market or sector goes down, your investment is likely to decline as well;
• ETFs mirror the performance of an index, meaning you won’t significantly outperform the market;
• You can’t adjust the holdings of an ETF to suit your individual preferences or risk tolerance; 
• While a winning tactic, returns will materialize after years, not weeks or months.

2. Stocks

Investment type: Long-term growth

Risk Level: Varies

Broker to consider: Regulated, industry-leading low-cost trading platform Interactive Brokers

Best Platform for Worldwide Stock Trading & Investing

• Highly trusted multi-asset broker with clients in over 200 countries

• Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)

• Low commissions starting at $0 with no platform fees or account minimums

• Easily fund your account and trade assets in 26 currencies

• IBKR pays up to 4.58% interest on cash balances of $10k or more

Up to 4.58% interest on balance*

Get Started

While riskier than ETFs, for more independent investors who enjoy doing their own research on companies as well as analyzing the overall economic conditions and trends, investing $10k in individual stocks could be a suitable strategy.

As you research your possibilities, though, don’t forget to diversify. In short, no matter how much a particular stock or company appeals to you, investing your entire $10k in one stock is not advisable.

Instead, curate a portfolio of stocks from various industries and sectors, ideally ones that can counterbalance each other’s risks. For example, if you buy shares in a financial services company, which could do well when interest rates rise, also buy some in a utility or real estate company, which should do well when interest rates fall. 

Pros and cons of investing $10k in stocks in Canada

Pros

• Individual stocks can offer significant returns if the company performs well;
• Some stocks pay dividends, providing a regular income stream in addition to potential capital gains;
• You have the freedom to choose which companies to invest in based on your research and beliefs;
• Stocks are highly liquid, meaning you can easily buy and sell them at any time. 

Cons

• Investing in individual stocks can be risky, particularly if the company performs poorly;
• When buying individual stocks, you must manage your portfolio yourself, which can be incredibly time-consuming;
• Stock prices can be highly volatile, taking you on an emotional rollercoaster, which might result in poor decision-making;
• Generating profits through stocks generally takes decades, not weeks or months. 

3. Real Estate – REITs

Investment type: Long-term growth and diversification

Risk Level: Medium

Broker to consider Regulated multi-asset investing platform Interactive Brokers

Apart from the stock market, you might also consider investing in real estate. While $10k may not be sufficient for a down payment for an investment property, you can still gain access to the real estate market through real estate investment trusts (REITs).

REITs are companies that own, manage, or fund income-producing real estate. You can buy or sell shares in REITs (including REIT mutual funds and REIT ETFs) through a brokerage account, just like stocks and ETFs, making them the most liquid real estate investment available. Learn more about this type of investment strategy in our REIT investing guide.

Pros and cons of investing $10k in REITs in Canada

Pros

• Provides value appreciation and rental income without the hassle of actually buying, managing, and selling properties;
• REITs offer some of the highest dividend yields on the market;
• Returns over the past 20 years have outperformed the S&P 500, as well as the rate of inflation;
• REITs are publicly traded like stocks, making them highly liquid assets (unlike physical real estate investments);
• Offers a ready-diversified real estate portfolio for any budget without requiring much time or expertise. 

Cons

• Dividends are taxed as regular income;
• Hypersensitive to interest rates;
• Some REITs might have high management and transaction fees;
• Because 90% of a REITs taxable income is paid out as dividends, only 10% is reinvested into the REIT to buy new holdings, resulting in slow growth. 

Conclusion

Before you throw yourself to the whims of the stock market, take care of the basics, such as paying off debt, setting up or continuing to fund a retirement plan, and building an emergency fund. 

Start your journey with a clear set of goals and adapt your investment approach as necessary as your circumstances change, but stay committed to building wealth for the long term. 

Ultimately, investing is a marathon, not a sprint, and regardless of the financial vehicles you choose to build your nest egg, your portfolio will inevitably experience both ups and downs over time. But remain patient and focused on the future, and it won’t be long until you find yourself researching how to invest $500,000.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

FAQs about how to invest $10k in Canada