If you’re ready to start investing, ask yourself a few key questions first. Know what your goals are, your risk tolerance, and how to protect yourself from fraud.
On this page you’ll find
Why invest?
There’s a difference between saving and investing. Both involve putting money aside for the future. Typically, investing can help you build wealth to reach larger financial goals.
Investing involves using your money to earn income or profit. Often this is done through buying investment products, or other assets that have the potential to increase in value, such as real estate. Combined with responsible spending, saving and borrowing, investing is an important part of preparing for your financial future.
Compared to saving, investing often offers a better chance at returns that are higher than the rate of inflation. If you just put money in a savings account, eventually that money could have lower purchasing power. That’s because the interest earned in a savings account is often lower than the rate of inflation. If your savings aren’t keeping up with inflation, then over time your money will not go as far. Investing offers the potential for higher returns that can help you accumulate wealth faster; however, it also involves more risk than saving.
If you’ve already established a savings habit, you’re comfortable putting aside money for your future, and you can manage some level of risk, investing may be right for you. The sooner you start, the more time you’ll have to navigate the ups and downs of the market. And the more time you’ll have to let compound interest work in your favour.
What are key considerations when you’re ready to start investing?
Starting to invest isn’t just about how much money you have available. There are a few other things you should consider, including:
- Your cash flow. Ensure you have a clear sense of your monthly cash flow or budget, so you know how much you have available to save and invest each month.
- How much you owe. If you have high interest debt, it may make sense to pay this down before investing.
- How much risk you can tolerate. The risk-return relationship is important for any investor. Generally, the higher the potential return of an investment, the higher the risk. But there is no guarantee that you will get a higher return by accepting more risk. Risk tolerance is personal, so it’s good to know yours before you commit to an investment.
- What you’re investing for. Having a clear goal in mind can help you decide how much you’ll need to save, when you’ll need it, and what type of account to put it in. There may be a registered savings account that aligns with your goal, and saves you taxes.
- Whether you’ll need access to your money. Cash and bank accounts are very liquid. That means it’s fairly easy to get your money out when you need it. Investments tend to be less liquid than bank accounts. Consider different investments for different time horizons, and make sure your emergency fund can cover sudden expenses if needed.
- What kind of investing help you might need. Getting advice can take many forms. Consider the different types of advisors and whether one might meet your needs. If you decide to use an online advisor, understand how that differs from an in-person advisor relationship.
To understand how investments can rise or fall in value, learn more about how the stock market works.
What types of investing accounts are there?
There is more than one way to open an investing account. The type of account — or accounts — you hold will depend on your goals. There are several kinds of registered savings accounts that allow you to invest or save your money with tax advantages. There are also different types of non-registered accounts that allow you to invest in stocks, often by working with an advisor.
Registered saving and investing accounts
In Canada, there are several types of registered accounts that can hold different types of investments as well as savings deposits. These accounts can also help you save for specific goals. One thing these accounts have in common is that they are tax-sheltered. This means your savings will grow tax-free while the money stays in these accounts.
Registered savings plans include:
- Tax-Free Savings Account (TFSA) – Saving and investing, for any type of goal.
- Registered Retirement Savings Plan (RRSP) – Saving for your retirement.
- First Home Savings Account (FHSA) – Saving for your first home.
These are just a few of the types of registered accounts available in Canada for saving and investing. Withdrawals from TFSAs are not considered taxable income, so you won’t pay tax on money you take out of the account. However, for most other registered accounts, the money is considered taxable when it is withdrawn.
To open an investing account in Canada, you must be the age of majority in your province. In Ontario this is 18 years old. You must be 18 years or older to open a TFSA or FHSA. While there is no minimum age to open an RRSP, you must earn income in order to build contribution room.
Registered savings accounts such as TFSAs and RRSPs can hold different types of investments, such as Guaranteed Investment Certificates (GICs), mutual funds, Exchange-Traded Funds (ETFs), or stocks. Not all types of investments can be held in registered accounts. Learn more about different investment types.
Investment account with a broker or advisor
If you want to invest in stocks, you will need to open an account with an investment firm. This can take the form of:
- Cash account – Where you pay with cash.
- Margin account – Where you borrow to invest. Investments bought on margin cannot be held in a registered account. Learn more about buying and selling stocks.
You can open investing accounts and manage your portfolio with the help of an advisor. Working with an advisor in person can offer personalized support to manage your goals. You can also open an investing account online using an online advisor.
There are differences in the kind of products and services available when working with advisors in person or online. Learn more about the differences between online advisors and traditional advisors.
How do fees impact your investments?
It’s common for investments and investing accounts to come with some amount of fees. Common fees include mutual fund fees, ETF fees, RRSP fees and RRIF fees, for fund management and account administration. There are also fees for sales and commissions, or other fees depending on the type of asset you are investing in.
Each kind of fee is paid in exchange for a different type of service. But fees can also add up fast and reduce your investment returns over time. As an investor, learn about the fees you’re paying and also any penalties associated with early withdrawal of your investment. Make sure to review your account information and track your investment costs on a regular basis.
Learn more about where to find information about your investment fees, and about total cost reporting requirements that will be in effect in 2026.
What tax implications are there for investing?
When you grow your money through investing, you’re accumulating wealth. This is considered growth in income, which can be taxed. Canadians are obligated to declare income each year when filing taxes. This includes income earned from investments or savings interest, unless the money is held in a tax-sheltered account.
If your investments are held in one of the registered savings plans (above), you may not pay taxes on the investments until the funds are withdrawn.
If you hold your investments in a non-registered account, it’s likely you’ll pay tax on your investment income. This will depend on the type of investment, the tax laws, and your overall income. Learn more about investors and tax.
What does it mean to check before you invest?
Generally, anyone selling securities, offering investment advice or acting as an investment fund manager must be registered with their provincial securities regulator. Before you buy a new investment, check before you invest. Make sure the investment dealer is registered and qualified to sell you the investment you are considering. If you’re investing using an online platform, check to see that the platform is registered. You can also check if they have had any disciplinary actions taken against them.
Your advisor is required by securities law to know your financial situation, investment objectives, knowledge, experience and risk tolerance. Your advisor will have you fill out a new account application form and possibly a separate “know your client” form.
Also make sure to watch out for the key signs of investment fraud. For example, if someone is trying to sell you an investment and promises high returns with little or no risk, chances are it is too good to be true. Don’t feel pressured to buy if the investment is not right for you – you can take time to think it through. Learn more about how to spot the signs of investment fraud.
Summary
Follow these key steps to get started with investing:
- Know your cash flow, budget, and how much debt you have.
- Know what you’re investing for, and when you’ll need the money.
- Be aware of how much risk you’re willing to take on.
- Understand what kind of help you may need from an advisor.
- Consider whether to hold your investments in a registered account, or in a non-registered account.
- Check the fees before you buy, and keep up to date on your account information.
- Know the tax implications for the investments you choose.
- Check registration before you invest.
- Watch out for signs of investment fraud.
