Higher-risk investments can often feel like a roller coaster ride. Sure, you have the potential for high returns, but you can also suffer significant losses if you are forced to withdraw your money after an investment has lost value.

For Canadian investors, finding safe investment options with high returns is the key to a balanced portfolio. In this article, we will explore some of the safest investment options in Canada, offering security along with decent returns.

8 Safe Investment Options In Canada

The following investments offer varying degrees of safety for investors. Most, not all, investment options are guaranteed by their issuer, and in some cases, the principal is protected by the Canada Deposit Insurance Corporation (CDIC) up to $100,000 or more.

1. High-Interest Savings Accounts

High-interest savings accounts (HISAs) are an excellent option for Canadians looking for a place to store their short-term savings. Generally, the best high-interest savings accounts are offered by online banks, who can pay higher interest rates, partly due to lower overhead costs.

That said, most Canadian financial institutions offer HISAs, including credit unions and big banks. Before you open a high-interest savings account, make sure it includes CDIC coverage. For more information, check out our list of the best high-interest savings accounts in Canada.

2. High-Interest Savings ETFs

Some online brokers offer exchange-traded funds (ETFs) that focus on high-interest savings. For example, the Horizons Cash Maximizer ETF (HSAV) and Purpose High-Interest Savings ETF (PSA) offer cash-like returns while providing overall market exposure. They may also be eligible for tax-free savings accounts (TFSAs). Note that not all online brokers offer these products.

3. Guaranteed Investment Certificates

A Guaranteed Investment Certificate (GIC) is a safe investment guaranteed by the issuer. Unlike savings accounts, money held in a GIC is locked in for a predetermined period. Cashable GICs can be redeemed without a penalty, but regular GICs must be held to maturity, or a penalty is charged.

GIC terms can range anywhere from 30 days to 5 years in length, and you can purchase them from most Canadian financial institutions. Online banks and credit unions usually offer the most competitive GIC interest rates.

While GICs don’t offer the same liquidity as high-interest savings accounts, GIC interest rates are typically higher than savings accounts. As with savings accounts, the principal balance of GICs is covered by the Canada Deposit Insurance Corporation (CDIC).

If you’re in the market for a GIC, shop around to find competitive GIC interest rates among various financial institutions.

4. Government of Canada Treasury Bills

Government of Canada Treasury Bills (T-bills) are considered to be one of the safest investments in Canada, as the federal government guarantees them. You can purchase T-bills directly through most banks in Canada, and they can be held in both registered and non-registered investment accounts.

T-bills work differently than GICs in that they don’t pay interest. Instead, the investor buys the T-bill at a discount and redeems it for a higher price at a later date. The yield is the difference between the purchase and redemption amounts.

For example, if an investor purchases a $1000 T-bill for $925 and sells it back at par value ($1000), their yield will be $75.

5. Money Market Mutual Funds

Money market funds invest in short-term, high-quality debt securities such as government bonds and corporate bonds. While money market fund balances are not protected by CDIC insurance and are not guaranteed by the issuer, they are considered low-risk investments and may provide slightly higher returns than traditional savings accounts.

The main advantage of money market funds is liquidity. Your money is never locked-in, and you can usually access your funds within 1-2 business days. You can purchase money market funds through an online brokerage or an investment advisor.

6. Bonds

Bonds, specifically government bonds, are often considered among the safest investments in Canada. While their principal is not guaranteed, these fixed-income assets provide regular interest payments and are generally perceived as low-risk.

Corporate bonds, which large corporations issue, are deemed to be higher risk than government bonds, but they also pay a higher yield. To reduce your bond risk profile, diversify your bond investments. An easy way to do this is by purchasing a bond mutual fund or ETF.

7. Fixed Annuities

Fixed annuities are a type of insurance contract that provide guaranteed income payments over a specified period, making them a relatively low-risk investment option. In Canada, they are most often issued by insurance companies.

While fixed annuities can provide a stable source of income, they tend to be highly illiquid and have high fees. Before you commit to purchasing a fixed annuity, consult with a financial planner or other investment professional to ensure it’s the right investment option for you.

8. Dividend-Paying Stocks

While stocks are not considered safe investments (their values fluctuate, and they are not guaranteed), there is a category of stocks that tends to be considered more stable than the overall stock market.

Dividend-paying stocks represent shares in companies that consistently pay a portion of their earnings to shareholders as dividends. Although not entirely risk-free, well-established dividend-paying stocks can be reliable options for those seeking regular income. In Canada, well-known dividend stocks include big banks, telecommunications, and utility companies.

To lower your risk with dividend stocks, make sure to diversify your holdings and research companies thoroughly before investing.

Where To Invest Your Safe Investments

Safety investments are designed for investors who either have a short investment time horizon or are very conservative by nature. In other words, you should avoid holding safety investments in a retirement savings account.

Most of the lower-risk investments I’ve covered in this article are more suitable for an emergency fund or other short-term savings goal. Others, like GICs, are suitable if you want to maximize your return while keeping your principal protected.

Consider opening a Tax-Free Savings Account (TFSA) for your safe investments. Introduced in 2009, the TFSA allows Canadians to save and invest in various assets (e.g., stocks, bonds, ETFs, GICs, cash savings) while avoiding taxes on the interest, dividends, and capital gains earned. Just make sure you don’t exceed your annual TFSA contribution limit.

Final Thoughts On The Safest Investments In Canada

As you can see, there is no shortage of safe investment options in Canada. And with the recent rise in interest rates, many safe investments are paying generous returns. At the time of this writing, you can earn 5% or more on GICs from several financial institutions.

But while GIC returns are more attractive than they’ve been in over a decade, don’t limit your options. If liquidity is a top priority, you may be better off with a high-interest savings account. Remember that your investment choices should align with your financial goals and risk tolerance. Keep exploring available options and make informed decisions that are right for you.

FAQs

What investments should I avoid?

High-risk investments that most investors should avoid include penny stocks, cryptocurrencies, and highly-leveraged products. If you are investing in one of these asset classes, limit your exposure to a small percentage of your portfolio and never invest more money than you can afford to lose.

Remember, it’s important to thoroughly research any investment and consult with a financial advisor before making any decisions.

Which Canadian mutual funds offer high returns with low risk?

Aside from money market funds, mutual funds are not considered safe investments. But some mutual funds focus on providing some potential for income or capital appreciation with low to moderate levels of risk.

For example, the TD Canadian Bond Index Fund aims to track the performance of a broad Canadian bond market index, providing diversification and reducing risk.

The RBC Canadian Dividend Fund invests in a diversified portfolio of established Canadian companies that have a history of paying dividends, which can provide income and potential capital appreciation to your portfolio.

Where can I invest a large sum safely while maximizing returns in Canada?

For large-sum investments, you could consider Treasury Bills (T-Bills), which are issued by the Federal government and have guaranteed returns. T-Bills are a very safe investment option and can be held in both registered and non-registered investment accounts.

You can purchase them directly from most banks in Canada. While they won’t earn high returns, your money is better off in a T-bill than sitting in a standard chequing or savings account.

Where is the safest place to keep money in Canada?

One of the safest places to keep your money is in a bank account at a reputable financial institution, which provides deposit insurance for up to $100,000 or more through the Canada Deposit Insurance Corporation (CDIC).