Your guide to long-term investing: investments & strategies to build wealth and stay ahead
Updated: December 19, 2024
In your 20s or 30s, investing for the next 20, 30, or 40 years can feel overwhelming.
You're not alone — saving for the future often takes a back seat to immediate needs. But long-term investing is key to retiring, funding your child's education, or achieving other big financial goals. These strategies will help you stay focused, invest wisely, and build a secure financial future.
Create a balanced portfolio of great long term investments
To get solid long-term returns, it’s important to diversify your portfolio with a mix of stocks and bonds spread across industries, regions, and sectors. Diversification means that when some investments struggle, others can help balance things out.
Think of it like real estate — if you buy in just one neighbourhood and prices drop, you’re out of luck, but investing in multiple areas gives you a safety net. The same idea applies to your overall portfolio: spreading out your investments reduces risk and increases your chances of success.
Example portfolios by risk level
Focus: Preserving capital while generating steady income with minimal volatility.
1. Equities (30%)
- Domestic Stocks (15%): Canadian dividend-paying ETFs (e.g., iShares Canadian Select Dividend Index ETF - XDV).
- International Developed Market Stocks (10%): U.S. low-volatility ETFs (e.g., Invesco S&P 500 Low Volatility ETF - SPLV).
- Emerging Market Stocks (5%): Small exposure to emerging markets for slight growth potential.
2. Fixed Income (65%)
- Government Bonds (40%): Canadian government bond ETFs (e.g., iShares Core Canadian Government Bond Index ETF - XGB).
- Corporate Bonds (25%): Investment-grade corporate bond ETFs (e.g., BMO Corporate Bond Index ETF - ZCB).
3. Alternative Investments (5%)
- GICs or money market funds: For ultra-low-risk, liquid investments.
Key features:
- Focused on stability and income
- Reduced exposure to equities to minimize market risk
- Ideal for risk-averse investors or those nearing retirement
Example allocation for a $100,000 portfolio:
- $15,000: Canadian dividend ETF
- $10,000: U.S. low-volatility ETF
- $5,000: Emerging market ETF
- $40,000: Government bond ETF
- $25,000: Corporate bond ETF
- $5,000: GICs or money market funds
1. Equities (70%)
- Domestic stocks (30%): Canadian equity index funds or ETFs (e.g., iShares S&P/TSX 60 ETF).
- International developed market stocks (25%): U.S. large-cap ETFs (e.g., Vanguard S&P 500 ETF) and international ETFs (e.g., iShares MSCI EAFE ETF).
- Emerging market stocks (15%): ETFs focused on growth in emerging economies (e.g., Vanguard FTSE Emerging Markets ETF).
2. Fixed income (25%)
- Government bonds (15%): Canadian government bond ETFs (e.g., BMO Aggregate Bond Index ETF).
- Corporate bonds (10%): Investment-grade corporate bond ETFs.
3. Alternative Investments (5%)
- REITs (Real Estate Investment Trusts): Exposure to real estate for diversification (e.g., Vanguard Real Estate ETF).
- Commodities or Gold ETFs: Hedge against inflation and market volatility.
Key features
- Diversification: Spreads investments across regions and asset types to reduce risk.
- Risk balance: Equities provide growth, while fixed income offers stability.
- Low fees: Use ETFs or index funds to keep costs minimal.
Example allocation for a $100,000 Portfolio
- $30,000: Canadian equity ETF
- $25,000: U.S. and international equity ETFs
- $15,000: Emerging market ETF
- $15,000: Government bond ETF
- $10,000: Corporate bond ETF
- $5,000: REIT or gold ETF
Focus: Maximizing growth potential by emphasizing equities and alternative investments.
1. Equities (90%)
- Domestic stocks (35%): Canadian growth-focused ETFs (e.g., BMO S&P/TSX Capped Composite Index ETF - ZCN)
- International developed market stocks (30%): U.S. large-cap growth ETFs (e.g., ARK Innovation ETF - ARKK)
- Emerging market stocks (25%): Aggressive exposure to high-growth markets (e.g., iShares MSCI Emerging Markets ETF - EEM)
2. Fixed income (5%)
- Short-term bonds (5%): Minimal allocation to high-yield bonds or short-duration bond ETFs
3. Alternative investments (5%)
- Cryptocurrencies or Commodities (3%): Exposure to Bitcoin ETFs or gold
- REITs (2%): Real estate exposure for additional diversification
Key features:
- Heavy focus on equities for growth.
- Minimal fixed-income allocation for risk management.
- Ideal for younger investors with a long time horizon and high risk tolerance.
Example allocation for $100,000:
- $35,000: Canadian growth ETF
- $30,000: U.S. large-cap growth ETF
- $25,000: Emerging markets ETF
- $5,000: High-yield bond ETF
- $3,000: Bitcoin or gold ETF
- $2,000: REITs
Summary of the portfolio models
| Portfolio type | Equity allocation (e.g. stocks) | Fixed income allocation (e.g. bonds) | Alternative investments (e.g. crypto) |
|---|---|---|---|
| Low risk | 30% | 65% | 5% |
| Balanced | 70% | 25% | 5% |
| High risk | 80% | 5% | 5% |
Start building your portfolio
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| Go to Wealthsimple | Go to Questrade | Go to Qtrade |
Make adjustments over time for long term investing
- Age-based adjustments: As you approach retirement, gradually reduce equity exposure and increase fixed income (e.g., shift to 50% stocks, 50% bonds).
- Rebalancing: Check your portfolio annually and rebalance to maintain your target asset allocation.
If you're uncomfortable with DIY investing but want a diversified portfolio that does the work for you, look at some of the best robo advisors in Canada.
Robo-advisors like Wealthsimple, Moka, and Questwealth are revolutionizing the way Canadians invest by offering simple, low-cost solutions for building diversified portfolios.
These platforms cater to a wide range of investors, from beginners to those seeking a hands-off approach to managing their money. By leveraging automation and expert management, these robo-advisors help Canadians achieve long-term growth and reduce risk, making investing accessible and stress-free.
Some of our favourite robo advisors
| Moka | Wealthsimple | Quest Wealth (managed investing at Questrade) |
|---|---|---|
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| Moka simplifies investing by rounding up everyday purchases and investing the spare change into a diversified portfolio of low-cost ETFs, while also offering features like socially responsible investing and multiple savings goals. | Wealthsimple takes a similar hands-off approach, automatically creating and managing personalized portfolios with low fees and a beautifully designed app | Questwealth offers more customization for cost-conscious investors who prefer a slightly active approach to their investments. |
| Visit Moka | Visit Wealthsimple | Visit Quest Wealth |
RRSP, TFSA, FHSA & RESP – Pick the right account to maximize taxes over time
Registered accounts—like a tax-free savings account (TFSA), registered retirement savings plan (RRSP), registered education savings plan (RESP), and first home savings account (FHSA) — are great tools for long-term savings, offering tax advantages and compounding growth. You don't pay annual income tax on investment earnings and those earnings compound over time.
But you need to choose the right registered account for your situation.
- To prioritize, start by maximizing your TFSA, which lets you grow and withdraw funds tax-free, making it ideal for short- and long-term goals.
- Once you’re regularly contributing — ideally maxing out — your TFSA, consider an RRSP for retirement savings, especially if your income is higher, as it offers immediate tax deductions and the contribution room grows and carries over year over year. .
- If you’re saving for a home, the FHSA provides flexibility — even if you don’t buy a home. You have until you're 71 to meet first-time buyer criteria or aou can transfer unused FHSA funds into your RRSP or registered retirement income fund (RRIF)
- And finally, an RESP is key for saving for your child’s education, with added government contributions and the option to repurpose it for their future if they don’t attend school. Nothing like getting started early with investing to hit retirement goals earlier.
Each account serves a purpose, so focus on what aligns with your goals.
Minimize fees is essential to long term investing success
Many Canadians don’t realize that when they invest, their fees are often “baked-in” to the investment, meaning a percentage comes off the top of their earnings to pay the financial institution, fund manager and/or advisor handling their accounts.
Minimizing your investment fees is a simple yet effective way to boost their returns.
So, how do you lower fees? Choose the right kind of funds. Index funds and exchange-traded funds (ETFs) are much cheaper than paying for expensive mutual fund fees because they don’t require a manager to pick assets for the fund actively. Instead, these types of funds hold all the stocks or bonds in a particular market index and match the performance of the market as a whole.
Related: Best ETFs in Canada and ETF vs. mutual funds
Passive investing in index funds and ETFs, often called a “couch potato” approach, is a low-effort strategy that consistently delivers better returns than most actively managed funds. This reassures us of the difficulty of beating the market, even with minimal effort.
Related: Passive vs active investing and couch potato portfolio
Anyone can purchase index funds or ETFs independently (just get one of the best brokerage accounts). Still, if you’re looking for no-brainer ease and convenience, an online brokerage or a robo-advisor can create and maintain a portfolio of these low-cost funds.
The earlier your start, the faster long term investing becomes retirement
The key to successful investing? Start as soon as possible. Why make this a priority when all the costs of adulting — housing, food, student loan repayments, etc. — may already stretch you thin? Because of math.
The mathematical argument to start early
The magic of compounding means that a single investment of If you invest $1,000 in 2025, it could grow to $7,612 by 2055 (assuming a modest annual rate of return of 7%).
- But if you wait 10 years to invest that $1,000 with the same rate of return, you’d have less than $3,870 by 2055.
- If you wait 15 years, your total drops to $2,759.
By starting immediately, you’d have nearly double the amount compared to waiting 10 years, and almost three times as much compared to waiting 15 years.
The magic of compounding rewards time more than anything else — no strategy beats the gains of early investing.
Keep calm investing for the long run
Buy low and sell high is the golden rule of investing, yet even the most experienced investors seem to forget it during market volatility.
When the market plummets, panicked investors start selling off holdings when they're low in value, not high, locking in their losses.
When investing for the long term, it's crucial to keep in mind that short-term market fluctuations shouldn't be a cause for panic. Instead, view market dips as an opportunity to purchase investments at a discount, taking advantage of a "sale" on your desired assets.
By the way, the couch potato approach builds in the buy low/sell high rule through periodic rebalancing of your portfolio.
Say your portfolio has an asset allocation of 60% stocks and 40% bonds, based on your risk tolerance. If the stock market dips, the value of your stock and bond holdings might wind up being 50%-50%. To rebalance and achieve your preferred 60/40 split, you'll have to buy some stocks (now priced lower) and/or sell some bonds (now priced higher). Neat, right?
Most robo-advisors will automatically rebalance your portfolio once a year or at other predetermined intervals, ensuring your emotions stay out of your long-run investment decisions.
That’s my long term investing plan and I’m sticking to it
Stay the course once you've decided on a diversified investment portfolio that works for you.
- Tune out any buzz about a hot stock tip.
- Ignore your neighbour who recommends their "money guy" with promises of outrageous returns.
- Don't try to outperform or "time" the market, chances are you'll end up with a below-average rate of return.
That being said, if you experience a major life change that affects your risk tolerance and investment goals, it's crucial to revise your long-term investment strategy.
For example,
- As your child approaches university age, the time to stay invested in an RESP or other education fund has almost run its course. If you don't change your investment plans, you could end up losing a significant amount of money if the market dips right before you need to sell those investments to pay for your child's tuition and other education-related expenses.
- As you age, It's a good idea for parents to transition to a more conservative portfolio of fixed-income assets, such as short-term bonds, to minimize risk as they approach retirement.
- As your income fluctuates, due to promotion, a higher income might allow you to take on more risk or contribute more to your registered accounts. On the flip side, a drop in income might require scaling back contributions or shifting to a more conservative portfolio.
Being cautious and attentive to these potential risks is key to your financial strategy.
The bottom line
Learning how to invest long-term can seem overwhelming when you start.
But if you follow these easy long-term investment strategies, you’ll soon be on your way to being a successful investor.
Starting early, contributing regularly, using a robo-advisor to lower fees and minimize your involvement, and staying the course during tumultuous times are all fundamental investment strategies that are certain to help build your nest egg.
Before you know it, you’ll have an impressive portfolio to support your golden years.
FAQ
Tamar Satov, an award-winning writer and editor, specializes in personal finance and parenting. Her work has appeared in Report on Business Magazine, Maclean’s, MoneySense, and other top Canadian publications, making complex topics relatable and actionable.
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