The Best Way to Invest $25k in Canada [2024] 

Summary: $25,000 is a solid sum, but it can become even bigger if you invest it wisely. In this guide, we’re taking a look at some of the best ways to invest $25,000 in Canada, assessing the advantages and disadvantages of each method, and giving you some tips on how to invest safely on our recommended investment platform Interactive Brokers. 

Investing in Canada

Investing can be a proper way to make some money on the side, but it can be tough if you don’t know where to start. After all, there are many options available for Canadians with $25,000 dollars in their pockets, and the best strategy for investing such a sum will depend on individual goals, risk tolerance, and investment time horizon.

However, perhaps the most flexible way you can invest $25,000 is to open a trading account on online investment platforms such as Interactive Brokers. That way, you can have control over your investments and choose to invest in a number of financial assets all in one place, such as stocks, index funds, bonds, and crypto. 

Preliminary notes

Before we delve deeper into various investment options, keep in mind that investing of any kind comes with certain risks. It’s important to do thorough research before making any investment decisions or seek professional help if you feel lost. 

Moreover, it’s important that you understand some investment basics and terminology before you proceed to create a solid investment strategy. For starters, consider things such as:

• Risk vs. return: Generally speaking, the higher the potential returns, the riskier the investment;
• Diversification: The idea behind diversification is that you ought to spread your investment across a number of different assets instead of dumping all your funds into one. This ensures that your portfolio can remain somewhat stable if one of your assets starts performing badly;
• Fees: Investing often incurs additional expenses (for example, physical gold requires storage and security), so try to invest in assets that won’t require a lot of additional fees.

The Best Way to Invest $25k in Canada

As mentioned, the best way to invest $25k in Canada is to open an account at an online investment platform where you can invest in a number of assets and diversify your portfolio. Some of the best assets to invest in are:

1. Stocks;
2. Index funds;
3. Bonds;
4. Crypto.

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1. Stocks

Investment type: Long-term growth

Risk Level: Varies

Recommended broker: Interactive Brokers

Investing in stocks has the potential to provide high returns. However, it also involves higher risks. In other words, it is important to do a lot of research and invest in companies that have a solid track record and promising growth potential.

Most importantly, consider factors such as the company’s financial history and industry trends. Moreover, try to research multiple stocks and invest in multiple companies across different sectors. Investing in stocks involves risk, and there is no guarantee of returns, so spreading your investments across various assets will give your portfolio some stability. 

Stock potential

When investing in stocks, you might see substantial fluctuations in profits from year to year. However, the stock market has generally shown a positive trajectory over the past century. This means that a buy-and-hold approach is recommended. 

In addition, you can try investing in dividend stocks, that is, stocks issued by companies that pay a portion of their income to shareholders as dividends. This is a good option for investors looking to increase their passive income over longer periods of time, for example, when saving for retirement.

Some of the more popular stocks in Canada as of 2024 are:

1. TELUS (TSX: T): Internet provider;
2. Royal Bank of Canada (TSX: RY): The largest bank in the country;
3. Canadian Natural Resources (TSX: CNQ): Oil and gas company;
4. TMX Group (TSX: X): The financial services company;
5. Northland Power (TSX: NP): A power producer.

Other popular Canadian stocks include:

1. Tim Hortons (TSX: QSR);
2. Lululemon (NASDAQ: LULU);
3. Enbridge (NYSE: ENB);
4. Dollarama (TSE: DOL);
5. WestJet (TSX: ONEX).

2. Index funds

Investment type: Long-term growth and diversification

Risk Level: Low, but varies between funds

Recommended broker: Interactive Brokers

Index funds are a type of mutual fund tracking a specific market index, for example, S&P/TSX 60, which comprises the 60 largest companies on the Toronto Stock Exchange. They are great for diversification, and since they come with low fees, they are a popular choice for long-term investors.

Moreover, due to their high diversification potential, investors investing in index funds rarely experience total losses. As such, index funds are typically considered a relatively safe investment compared to something like stocks, which makes them a good option for new investors.

Some of the more popular index funds in Canada as of 2024 are:

• S&P/TSX 60: This index tracks the performance of the S&P/TSX 60 Index, comprising the 60 largest companies on the Toronto Stock Exchange;
• Core S&P/TSX Capped Composite Index: This index tracks the performance of a broad range of Canadian companies, such as Royal Bank of Canada;
• Vanguard FTSE Canada All Cap Index: This index tracks the performance of small, medium, and large Canadian companies alike.

3. Bonds

Investment type: Long-term growth and diversification

Risk Level: Low

Recommended broker: Interactive Brokers

Investing in bonds is a terrific way to ensure a steady income at a lower risk compared to, say, stocks because Canadians can invest in bonds through their banks. However, the downside is that the returns are generally slower and smaller.

Still, bonds are a great option for new investors since the principle behind them is quite simple: when you buy bonds, you technically lend money to the body that issued them. In exchange, they provide you with regular future payments with interest. 

Canadians have several types of bonds at their disposal:

• Government bonds: Bonds are issued by the Canadian Government;
• Municipal bonds: Bonds issued by a government branch in charge of a province or city;
• Corporate bonds: Bonds issued by corporations.

Government-issued bonds are the safest option, but bonds, in general, show low volatility, little connection to the stock market (i.e., they retain their value even if the company’s stock falls), and high liquidity, especially those issued by a respectable company. 

4. Crypto

Investment type: Alternative investment and diversification

Risk Level: Very high

Broker to consider: Uphold

First things forest: Cryptocurrencies are a high-risk investment. This is hardly surprising as they’re a relatively new asset with a turbulent history characterized by scams (e.g., Ponzi schemes and rug pulls) and security concerns. Consequently, the prices of cryptocurrencies, even the most popular ones like Bitcoin (BTC), can be highly volatile compared to something like stocks. The upside is that this volatility can also generate incredible profits, so crypto remains a good investment option for investors with a higher risk tolerance.

Note, though, that cryptocurrencies are not considered legal tender in Canada — they are considered a form of property and securities (i.e., assets that can be traded between parties), and they are thus subject to securities laws in Canada. Moreover, the Canada Revenue Agency (CRA) sees crypto assets as commodities. As such, they are subject to the same tax rules as, for example, precious metals.

How to invest effectively

When investing $25,000 (or any sum, for that matter), it is important that you assess your financial status and goals. You can start by determining:

• End goals: Each investment goal requires a unique strategy, so be sure you have a clear idea about what you want to achieve with your investments;
• Time horizon: The same applies to your time frame: saving some money for a new car is not the same as planning your retirement, and they require a different kind of risk tolerance;
• Risk tolerance: Risk tolerance is essentially your ability to cope with adverse market movements. If you can’t deal with potentially stressful price fluctuations and losses, try investing in something like bonds. If you can handle it, stocks might be a better option;
• Asset liquidity: Asset liquidity boils down to how easily you can convert the asset into money. Real estate, for example, is harder to sell than something like gold.

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

FAQs about the best way to invest $25k in Canada

What is the best way to invest $25k in Canada?

The best way to invest $25k in Canada is to spread your capital across various financial instruments, such as stocks, bonds, etc. 

Where to invest $25k in Canada?

To invest $25k, it is recommended that you open an account at an online exchange platform such as Interactive Brokers.

How to invest $25k passively in Canada?

The best way to invest $25k in Canada passively is to buy bonds or index funds.