Where to Invest $100k in Canada [2024] | 5 Strategies

Summary: In this guide, we will investigate where to invest $100k CAD in Canada, five effective strategies for potential investors, what to consider before you start investing, as well as our recommendation for the most suitable broker in Canada: Interactive Brokers. 

Before you start investing

It’s crucial to establish a solid financial foundation before you start investing. For this reason, ensure these two factors are satisfied first:

• Create an emergency fund: Having an emergency fund can offer a valuable financial buffer for unexpected expenses such as a medical bill, car repair, or job loss. A good rule of thumb is to save enough to cover three to six months of living expenses;
• Pay off high-interest debt: High-interest debt (e.g., credit card debt and debt from other loans, such as payday loans) can quickly eat into your savings due to compounding interest. Before you invest, try to pay off these debts. Not only can this free up money for investing, but it also can reduce the overall risk of your financial situation. Low-interest debts such as mortgages or auto loans, on the other hand, do not need to be repaid before you start investing. 

After these conditions are met, you can start exploring investment opportunities with a solid financial foundation, increasing your chances of long-term success.

Where to invest $100k in Canada

Whether through a sudden windfall or savvy saving practices, you have an extra $100k on hand but don’t know what to do with it. The keyword in this scenario is extra. We’re proceeding on the assumption that this $100k of surplus cash truly is just that – surplus and that you are free from any pressing liabilities and have managed to meet the requirements mentioned earlier. 

And while there is no one-size-fits-all solution to investing this money, there are various options. Ultimately, your goal in finding the best way to invest $100k is to choose the financial instrument (or combination of instruments) that is right for you. 

Factors like your age, risk tolerance, investment timeframe, and financial goals will all significantly shape your decision. And understanding who you are as an investor can help you adjust your method as you age and your financial goals evolve.

Below you will find our pick for the four best ways to invest $100k:

1. Stocks;
2. Dividend stocks;
3. Index funds;
4. Physical real estate; 
5. REITs.

Now, let’s dive deeper.

1. Stocks

Investment type: Long-term growth

Risk Level: Varies

Broker to consider: Interactive Brokers

Disciplined investing in the stock market over decades is generally the most effective way to build long-term wealth and has, over the past century, outperformed other types of investments, including bonds, real estate, precious metals like gold, silver, and platinum, commodities like oil, or collectibles like wine. And though returns can fluctuate from year to year, if investors reinvest their profits, they may even see compounding gains, which only grow more handsome as time passes.

For most individuals, adopting a buy-and-hold investing strategy can be the simplest way to navigate the stock market’s inherent price volatility. However, it’s crucial to remember that your investment choices should align with your financial needs and risk tolerance. If you anticipate needing your invested funds at a specific point in time or are uneasy with the unpredictable nature of investing, make sure to adjust your investment decisions accordingly. 

2. Dividend stocks

Investment type: Long-term growth and passive income

Risk Level: Varies

Broker to consider: Interactive Brokers

Allocating a portion of the $100k to dividend stocks could also be a sound strategy for generating passive income. Dividends represent a percentage of a company’s profits that are distributed to its shareholders, typically in the form of cash. This income can then be reinvested or utilized as additional income.

Top-tier dividend-paying companies are often those that regularly increase their dividend payouts over time, signaling growth and robust financial health. To determine which companies are most likely to increase their dividends, investigate the company’s fundamentals, such as free cash flow and historical dividend payout ratio, as well as various technical metrics. 

A company demonstrating an upward trend in both its stock price and dividend payouts can yield substantial investment returns over extended periods. Remember, though, to reinvest the dividends into your portfolio, effectively compounding your investment returns.

3. Index funds

Investment type: Long-term growth

Risk Level: Low (varies between funds)

Broker to consider: Interactive Brokers

Index funds represent a type of mutual fund or exchange-traded fund (ETF) that seeks to mirror the performance of a specific financial market index, such as the S&P 500. Instead of trying to outperform the market index, the fund seeks to match its performance as closely as possible.

By investing in an index fund, investors can enjoy broad diversification at a low cost and a general reduction in risk as they gain exposure to hundreds to thousands of different securities through a single fund. Consequently, index funds are often perceived as a safer investment choice relative to individual stocks.

In fact, the most successful investor of the 20th century, Warren Buffett, has often said that most investors, both retail and professional, would be better off with indexing; in one of his famous investing quotes, he stated:

“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.”

4. Physical real estate 

Investment type: Long-term growth and diversification

Risk Level: Medium

Investing $100k in real estate can be a strategic move toward building significant wealth. With such a sizable investment, you have a variety of options: you could make a downpayment on your own home, on a rental property, or potentially use it to buy a fixer-upper for house flipping: 

• Homeownership is a significant form of investment that allows you to build equity over time while enjoying the benefits and stability of a place of your own. Potential appreciation in the property’s value can contribute to an increase in your overall net worth. However, while investing in your home can help you build wealth over the long haul, after property taxes, maintenance costs, and insurance, average annual returns are far less juicy than expected;
• If rental properties are your preference, the steady monthly income can create a reliable cash flow, while potential property appreciation could boost your long-term net worth. However, being a landlord also requires effort and time in managing and maintaining the property; 
• Finally, house flipping could yield high returns if you can accurately identify undervalued properties in up-and-coming neighborhoods, though, like rental properties, flipping takes lots of work, including renovation work as well as learning to identify up-and-coming neighborhoods that will allow you to sell at a premium.

Whichever method you choose, remember that real estate investments require careful due diligence and an understanding of the market conditions to maximize potential returns.

5. REITs

Investment type: Long-term growth and passive income

Risk Level: Medium

Broker to consider Interactive Brokers

If the prospect of property management, upkeep, and overall hands-on involvement in real estate sounds overwhelming, investing $100k in real estate investment trusts (REITs) could be an appealing alternative. 

REITs provide a way to invest in real estate without the associated labor of property ownership or management. These trusts, traded like stocks on major exchanges, are companies that own, finance, or manage income-producing real estate across a variety of property sectors. 

Moreover, REITs are mandated by law to distribute at least 90% of their taxable income to shareholders every year, making them particularly attractive for income-focused investors looking for passive income sources. 

Overall, if you’re looking to gain exposure to real estate without the accompanying burdens of direct property ownership, REITs present a compelling option for your $100k investment.

In conclusion 

As you decide where to invest your $100k, stay focused on building wealth for the long term. The good news is, with this chunk of change in your pocket, a wide array of choices open up for you, from diving into the stock market to getting a slice of the real estate pie.

Nonetheless, before you put that money to work, take care of the basics, like paying off any existing high-interest debts or building an emergency fund.

Lastly, remember to think about how much risk you’re comfortable taking on and what you want to achieve financially, then put together a solid game plan before you start investing. If you play your cards right, you might find yourself figuring out how to invest $1 million sooner than you think.

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

FAQs about where to invest $100k in Canada

Where to invest $100k in Canada?

Your best option for investing $100k is to spread it across various financial assets, including stocks, index funds, and real estate.

Where to invest $100k to make $1 million in Canada?

Whether you have a shorter or longer window for growing your $100k to $1 million, it’s essential to diversify your holdings. That said, riskier investments with higher annualized returns, such as stocks or REITs, will probably get you there faster than investments in safer low-yield savings products or government debt instruments.

What is the best way to invest $100k safely in Canada?

The best way to invest $100k safely will depend on your age, risk tolerance, investment time horizon, and financial goals. However, a well-diversified portfolio will combine several financial instruments with various risk levels. Additionally, ensure you have paid off any high-interest debt and have built an emergency fund before you start investing.

How to invest $100k for passive income in Canada?

There are various options for investing $100k for passive income, including index fund investing, dividend investing, and investing in REITs.

How to invest $100k in real estate in Canada?

There are various methods with differing risk and liquidity levels for adding real estate exposure to your portfolio, including making a down payment on your own home, acquiring rental properties for steady cash flow, flipping houses for short-term profits, or investing in REITs for diversified passive income.