Maple News reports that investing is a key pillar of building long-term financial security in Canada, especially for newcomers who are beginning a new chapter in life. In Part 2 of our Investing 101 series, we explore the core investment accounts and financial products available to help immigrants grow their wealth wisely.
Before diving into the types of accounts and products, it’s crucial to understand that investing allows your money to work for you. Unlike traditional savings, which offer minimal growth, investing over the long term can provide higher returns and help you achieve personal and family goals—from buying a home to funding education or planning for retirement.
One of the most beginner-friendly ways to start investing in Canada is through registered plans, which are government-recognized accounts offering valuable tax benefits:
– The Tax-Free Savings Account (TFSA) lets you contribute post-tax income and grow your returns tax-free. Funds can be withdrawn anytime without penalties.
– The Registered Retirement Savings Plan (RRSP) is designed to build retirement savings. Contributions are tax-deductible, and investments grow tax-deferred until withdrawal.
– The Registered Education Savings Plan (RESP) helps parents save for their children’s post-secondary education, with additional grants provided by the government.
– The Registered Disability Savings Plan (RDSP) supports long-term financial planning for Canadians with disabilities.
– The Registered Retirement Income Fund (RRIF) acts as an income source in retirement and is typically created by converting an RRSP at age 71.
– The First Home Savings Account (FHSA), introduced in 2023, blends features of both RRSPs and TFSAs. It allows tax-deductible contributions and tax-free withdrawals when used to buy a first home.
Once these accounts are set up, newcomers can explore a variety of investment products to build a balanced portfolio:
– Guaranteed Investment Certificates (GICs) are low-risk and provide fixed returns over a set term.
– Mutual Funds pool investors’ money into a diversified basket of assets, managed by professionals—an ideal entry-point for new investors.
– Exchange-Traded Funds (ETFs) offer similar diversification as mutual funds but trade like stocks, often with lower fees.
– Stocks give investors partial ownership in companies with potential for high rewards but also come with greater risk.
– Bonds are fixed-income investments that provide regular interest payments and are considered more stable compared to stocks.
A diversified investment approach spread across different asset classes and account types can help reduce risk while building wealth gradually. Maple News encourages all newcomers to learn about investment strategies and seek professional advice to make informed financial decisions.
Investing isn’t a sprint—it’s a marathon that requires patience, informed decision-making, and regular contributions. By understanding Canada’s unique investing landscape, immigrants can begin charting a secure and prosperous financial future.