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07/27/2023

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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...

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.

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

logo

Up to 4.58% interest on balance*

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.

Bear in mind before you continue

Regardless of how you obtained the sum, the 50k CAD should be your money, not a debt. Never invest what you cannot afford to lose.

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.

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

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

logo

Up to 4.58% interest on balance*

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%

The S&P 500 index annual returns. Source: macrotrends.net

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. 

Note

Spotting a lucrative stock and putting all $50k in it might seem attractive, but investing everything in a single asset can have dire consequences. Diversify your portfolio across several assets to make the overall risk more manageable.

Pros and cons of investing in the stock market in Canada

Pros

Pros

  • High returns: Stocks have higher potential average returns than many other investment assets;
  • Liquidity: Investors can turn shares to and from cash quickly and without trouble;
  • Low barrier of entry: Many platforms like Interactive Brokers offer commission-free trading and no-minimum accounts when trading stocks, which allows investors to purchase shares for as low as several dollars;
  • Build long-term wealth: Stocks outperform most other investments in the long run. A potent portfolio with active management can accumulate lucrative returns.

Cons

Cons

  • Returns are not guaranteed: No investment is guaranteed to succeed. While stocks generally perform better than most other assets over an extended time, they are still susceptible to economic downturns;
  • No short-term gains: If you ‘sow’ stocks, they will take years to bear fruit. You cannot time the market with stock investment;
  • Volatility: Stock investors must have the mental fortitude to weather constant switches between soaring and free-falling prices; 
  • Time and effort investment: Stocks are an active form of investing, meaning they take time and effort to manage, e.g., regular fundamental and technical analysis.

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

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

logo

Up to 4.58% interest on balance*

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. 

Important

Be careful when you choose high-yield dividend stocks. Extraordinary dividend payouts can disguise problems in the company. Do a vitals check of its historical performance before you invest in these to confirm its financial success.

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

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

logo

Up to 4.58% interest on balance*

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

Pros

Pros

  • Diversification: Dispersing your investment across various industries and sectors by investing in index funds or ETFs is a great way of reducing the overall risk;
  • Low fees: Passive investment instruments like  index funds and ETFs require significantly fewer transactions, reducing trading and maintenance costs and fees;
  • Easy access: Investors can quickly and simply access the stock market using a platform like Interactive Brokers, regardless of their previous experience;
  • Liquidity: Index funds can be sold for cash quickly and easily;
  • Transparency: Index funds and ETFs are publicly listed on exchanges, which gives investors access to the relevant data of each stock in a fund; 
  • Convenience: Investing in a fund rather than in stocks individually significantly reduces money and time spent in the investment process;
  • Simplicity: Managing a passive asset like an index fund spares you from the emotional rollercoaster of swings in the price of individual stocks. Monitoring one fund is much simpler than checking individual stocks. 

Cons

Cons

  • Limited control: When investing in index funds and ETFs, you have no say over which businesses you invest in;
  • Volatility: The index funds’ performance closely follows their benchmark indexes. If the market starts free-falling, the index funds will go down with it;
  • Slow gains: The buy-and-hold strategy brings its returns in the long run, but it is a slow approach with limitations on the amounts you can obtain from your initial investment. The downside of low risk is lower potential returns.

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

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

logo

Up to 4.58% interest on balance*

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

Pros

Pros

  • High dividend yield: Canadian law requires these assets to redistribute at least 90% of income to stakeholders. These dividend yields are among the highest available to the general public;
  • Diversification: REITs allow a simple and easy portfolio diversification without adding any active management component;
  • Liquidity: In stark contrast to physical property, REITs are simply and easily bought or sold for money;
  • Solid returns: REITS can have high annual returns, higher even than those of the S&P 500;
  • Exposure to the real estate market: Investing in REITS provides access to the real estate market without the management chores associated with owning property.

Cons

Cons

  • Slow growth: As min. 90% of income is handed out as dividends, less than 10% of REITs income gets reinvested into business growth;
  • Interest rate sensitivity: REITs expand almost exclusively through external debt and equity capital, turning them very susceptible to increases in interest rates;
  • Sector concentration risk: REITs focusing on one sector become vulnerable to sector-specific occurrences. COVID-19 exemplified this in the hospitality sector in 2020. 
  • Tax-eligibility: REIT dividends are susceptible to taxes as regular income.

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

Best Crypto Exchange for Intermediate Traders and Investors

  • Invest in 70+ cryptocurrencies and 3,000+ other assets including stocks and precious metals.

  • 0% commission on stocks - buy in bulk or just a fraction from as little as $10.

  • Copy top-performing traders in real time, automatically.

  • Regulated by financial authorities including FCA and FINRA.

eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available.

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.

Crypto staking

Staking in crypto means lending your crypto to the blockchain’s transaction operations. In return, you get interest as a reward. Coins that rely on the proof-of-stake model, such as Ethereum and Cardano (ADA), allow staking crypto. Do the necessary research before you try your hands with it.

Pros and cons of investing in cryptocurrencies in Canada

Pros

Pros

  • High-risk, high-reward: As a volatile asset, cryptocurrencies have a potential for extreme surges in price in a short time;
  • Liquidity: You are able to exchange crypto for money 24/7;
  • Decentralization: The main advantage of crypto is its decentralized networks, or blockchains, that provides transparency and security advantages over classical financial methods;
  • Diversification: Cryptocurrencies can offer superb portfolio diversification.

Cons

Cons

  • Extreme volatility: Drastic shifts in price are regular with crypto, and subsequent drops may cause significant losses;
  • Regulatory risk: While decentralized, crypto is still enduring efforts for regulations by financial institutions. The results could reshape the course of their value; 
  • Security risks: Advanced security measures are needed to stop digital breaches, e.g., crypto wallets and digital security protocols; 
  • Fraud: As an unregulated market, the crypto industry is still witnessing high degrees of fraud, such as Ponzi schemes, fake initial coin offerings (ICOs), phishing, rug pulls, and pump-and-dump schemes. Learn how to avoid crypto fraud.

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.

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

logo

Up to 4.58% interest on balance*

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