How to Invest $50k in Canada [2023] | 5 Best Strategies

Summary: This guide will present the five best strategies for investing $50k CAD in Canada. Furthermore, it will provide the pros and cons of each method, what to consider before investing, and our recommendation for the most suitable brokerage service to invest in Canada with – Interactive Brokers.

Before you start investing

You should do a couple of things before you spend any money on investing. For a higher chance of a successful investment, you must establish a solid, burden-free financial position. To achieve this, you should:

• Create an emergency fund: Emergency funds act as a safety net that covers unexpected expenses such as medical bills, home repairs, or sudden career changes. Having three to six months of living costs stashed away with the fund should be enough to allow you to invest comfortably;
• Pay off high-interest debt: High-interest debt brings more expenses than a successful investment can bring in profits. Before investing, clear out all remaining credit card, payday, and other loans. In addition to lowering risk, it will improve your income. Low-interest debts like mortgages do not threaten investing, so you do not need to prioritize them.

Once you fulfill these two criteria, you can begin with your first investment with a higher chance of success.

Best ways to invest $50k in Canada

Money is best spent when it can earn you more, so investing is one of the best ways to spend 50k CAD. With a thought-out strategy and close adherence to guidelines, you can enlarge the initial sum or create a comfortable savings account. Ultimately, every approach comes with its benefit, and there is no single best strategy for investing. Your choice will depend on your personal preferences.

Let’s dive into the most effective ways to invest $50k in Canada:

1. Stock market;
2. Dividend stocks;
3. Index funds and ETFs;
4. Real estate — REITs;
5. Cryptocurrency.

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1. Stock market

In this section: How to invest $50k in the stock market in Canada?

Investment type: Long-term growth

Risk Level: Varies

Recommended broker: Interactive Brokers

Historically, the stock market has been one of the best-performing assets in the long term, beating other investment instruments like bonds, commodities (such as gold, silver, and oil), and even property development. 

While stocks have a significant long-term value growth, their price tends to have chaotic swings when looking at individual short periods. In other words, their annual returns average out to favor investors, despite the years when the price fails. For example, the famous S&P 500 index witnessed a growth of more than a quarter at +26.89% in 2021, only to drop -19.44% the following year. However, since it was established in 1957, the S&P 500 index has maintained average annual returns of 10.21%. 

That said, stocks are hazardous assets due to the market’s volatility. The unstable nature of the price of stocks is not for the faint of heart, and investors have to be comfortable with the high levels of risk. If that is too risky for you, other options on this list will suit your style more. 

Pros and cons of investing in the stock market in Canada

2. Dividend stocks

In this section: How to invest $50k in dividend stocks in Canada?

Investment type: Long-term growth and passive income

Risk Level: Varies

Recommended broker: Interactive Brokers

Unlike regular stocks, dividend stocks pay out a portion of the company’s profits to all shareholders as dividends. Putting some of your $50k into dividend stocks is a simple way to establish a source of passive income that you are free to spend or reinvest.

You can spot the best dividend-paying companies by stably increasing dividend payments, which signals the profitability and financial health of the business. Besides growing dividends, you should also look for good historical performance, free cash flow, and the company’s economic trajectory.

The finest dividend stock has an increase in both the stock price and dividend payouts. Consider reinvesting back into these to benefit from compounding returns. 

3. Index funds and ETFs

In this section: How to invest $50k in index funds and ETFs in Canada?

Investment type: Long-term growth

Risk Level: Low (varies between funds)

Recommended broker: Interactive Brokers

Index funds and exchange-traded funds (ETFs) are investing instruments that copy the performance of a market index, such as the S&P 500. Rather than competing with the target market, the fund follows in its financial footsteps. 

Standing for a straightforward method to diversify portfolios cheaply, index funds and ETFs can efficiently spread your investment across hundreds of companies. This helps you balance the investing risks and offers exposure to various markets via a single access point.

ETFs and index funds are long-term investment instruments with a passive approach. Investors often pursue a buy-and-hold strategy, which takes time to give results but requires little to no time and effort to manage. 

In Canada, the most popular and tracked indexes are:

• BMO S&P/TSX Capped Composite – the largest Canadian companies trading on the Toronto Stock Exchange (TSX);
• iShares S&P/TSX 60 – the 60 largest stocks by market cap traded on the TSX;
• FTSE Canada All Cap – small, medium, and large Canadian stocks by market cap.

You might also consider investing in the three most broadly tracked indexes in the US, which are:

• The S&P 500;
• Dow Jones Industrial Average;
• Nasdaq Composite.

Pros and cons of investing in index funds and ETFs in Canada

4. Real estate (REITs)

In this section: How to invest $50k in REITs in Canada?

Investment type: Long-term growth, passive income

Risk Level: Medium

Recommended broker: Interactive Brokers

Traditional property purchasing as a means to invest is widely recognized in society. However, many investors are reluctant to purchase physical property due to various factors, including the chores of management, upkeep, hands-on involvement, and the recent 2022 market crash.

REITs (real estate investment trusts) are a suitable alternative to owning physical property. They give access to the market without the hassle of property management. In short, REITs consist of businesses that hold, sponsor, or maintain income-producing real estate throughout different industry sectors. Major exchanges publicly list these assets, allowing you to freely invest in them.

Additionally, the Canadian legislature requires REITs to hand out at least 90% of their taxable income to shareholders annually, turning these trusts into a desirable passive income source for investors.

Pros and cons of investing in Canadian real estate through REITs

5. Cryptocurrencies

In this section: How to invest $50k in cryptocurrencies in Canada?

Investment type: Alternative investment, diversification

Risk Level: Very high

Recommended broker: eToro

If you are comfortable with higher levels of risk, consider investing in cryptocurrencies. Several methods involving crypto investing can deliver profits, like buying individual coins, such as Bitcoin (BTC) or Ethereum (ETH), and directly investing in companies dealing with crypto or blockchains, e.g., Coinbase (NASDAQ: COIN) and Roblox (NYSE: RBLX).

It cannot be overstated that cryptocurrencies are highly volatile and thus a risky investment: before you invest in crypto, you should be aware of the associated dangers. As a relatively new asset and due to ongoing regulation efforts, their prices are extremely unstable and prone to abrupt changes. We have all heard of millionaire-making stories about crypto, but it has also been the downfall of many. If this does not deter you, investing in cryptocurrency can bring you incredible profits.

Pros and cons of investing in cryptocurrencies in Canada

How to safely invest $50k in Canada — things to consider

Besides earning money, your top priority should be to keep it safe. To ensure this, maintain the following:

• Diversify: Risk control is better in an extended portfolio with different types of financial instruments. Diverse portfolios limit risk and minimize your losses during undesired outcomes;
• Spread out your purchases: Purchasing in lump sums affects the market and causes turbulences, making prices worse for you. Consider relying on the dollar-cost averaging (DCA) method instead.
• Stay wary of fraud: Fraudsters roam through every market. Stay ahead of novelty scam tactics, false websites, and forged documents. Check with the Financial Consumer Agency of Canada (FCAC) if something feels wrong.

Conclusion

If done correctly, your initial investment of $50k in Canada can multiply and deliver even more. The key take from this guide is to clear all high-interest debt before investing, maintain security, pick your financial asset according to your investment style, and keep a diverse portfolio. 

After you reach your financial goals and earn a more significant sum, check our $100k or $300k guides. If you wish to try yourself with a smaller sum, consider investing $20k, $5k, or even $500. 

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 $50k in Canada

How to invest $50k in Canada?

The optimal way to invest $50k is to spread it along various financial sectors and assets, such as stocks, index funds, REITs, and cryptocurrency.

What is the best way to invest $50k safely?

The answer depends on age, risk aversion, personal style, and financial goals. In any case, remember to diversify your portfolio and repay all high-interest debt beforehand.

How to invest $50k for passive income in Canada?

You can gain passive income sources by investing $50k in Canada via index funds, dividend stocks, REITs, and staking on cryptocurrency.