How can I invest with little money?
1. Invest in stocks
You don’t need to be a wealthy Wall Street player like Gordon Gecko to invest in the stock market. Thanks to advances in FinTech, you can buy and sell stocks with very little money using your computer or mobile device. If you DIY invest with one of the best online brokerages, you’ll pay next to nothing in commission fees.
One option is to open an account with Wealthsimple Trade – the only discount brokerage in Canada that offers zero-commission trades. Using this platform, whether on mobile or on your desktop, you can buy and sell thousands of stocks and ETFs on major Canadian and U.S. exchanges without paying a dime in commission fees. Just download Wealthsimple Trade and click “get started.”
Start investing with Wealthsimple Trade.
Once you’ve funded the account, it’s off to the races. You can start trading with as little as $1. With just a few taps on your phone, you can search for and add assets to your “Watchlist” – a tool that allows you to “save” a particular asset to monitor its activity without purchasing it (similar to adding online purchases to a virtual shopping cart).
Plus, Wealthsimple Trade will reimburse an outgoing administrative transfer fee of up to $150 on investment account transfers valued at more than $5,000.
Another low-cost option is Questrade – a DIY trading platform that offers commission-free ETF purchases and the lowest trading fees in the market. To buy stocks it only costs $0.01 per share, with a minimum of $4.95 and up to a maximum cap of $9.95 per trade. You can use your mobile device or desktop computer to open a self-directed investing account with Questrade, and new accountholders who fund their account with at least $1,000 will get $50 in free trades.
After you’ve chosen which account type you want, select “Funding” and follow the steps to put money into the account. You’ll need a minimum of $1,000 in your account to start investing. Once the funds hit the account, you can start trading right away. If at any point you want to increase your available trading funds you can use Questrade’s Instant Deposit feature, which allows Visa Debit cardholders to quickly transfer up to $3,500 into a Questrade account.
Not sure what to buy? Investing in exchange-traded funds (ETFs) is a good way to build a low-cost, diversified portfolio while saving on the hefty fees charged by many Canadian mutual funds.
For expert top picks, take a look at The Best ETFs Canadian Loonies Can Buy.
Start investing with Questrade and get $50 in free trades!
If you’re a “noob” with no idea of what to do next, start with our Investing in Stocks 101. Or consider the alternative: investing with a robo advisor.
2. Let a robo-advisor find you the perfect low-fee ETFs
Robo-advisors are great if DIY investing seems too complicated for you.
No, you’re not hiring the Terminator as a wealth manager. Rather, a robo advisor is a digital investment service that can create and manage a personalized portfolio of low-cost ETFs for you. With a reputable robo-advisor like Wealthsimple, it takes just 15 minutes to open an account. It starts by answering an online questionnaire about your financial goals and risk tolerance.
Then, using computer algorithms, the robo-advisor will recommend a custom portfolio that’s tailored to you.
After your account is set up, link your external bank account and transfer funds into the account. There’s no minimum investment required with Wealthsimple, meaning that you can start investing with as little as $1. Once the account is funded, Wealthsimple takes care of the rest – including the work of creating and rebalancing your investment portfolio.
Get your investments handled for you with Wealthsimple.
3. Guaranteed income certificate (GIC) could be the ticket
If you can’t risk riding the stock market, a Guaranteed Income Certificate (GIC) is the perfect place to park $1,000. A GIC is considered one of the safest investments you can make, as it offers a guaranteed interest rate on your savings.
Your funds are typically locked-in for a term (e.g. between 30 days to 5 years), and as long as you don’t withdraw early, you’re guaranteed to grow your savings risk-free with a higher-than-average interest rate (usually 1.50% and up). Your GIC can also be held in both registered (e.g. TFSA or RRSP) and non-registered accounts.
Since GIC interest rates fluctuate constantly, shop around for the best GIC rates out there. I chose EQ Bank because it offers high-interest rates and a low minimum deposit of $100.
Your $1,000 is invested – now just sit back and wait for the GIC to mature. Once the term is up, you can reinvest it or put the funds back into your savings account.
4. Cryptocurrency is not so cryptic
If you’re adventurous, you could put $1,000 toward trading cryptocurrency – a digital asset class built on blockchain technology. Crypto trading carries a relatively low cost for entry, and above all, it can be very lucrative. For example, the value of one Bitcoin has skyrocketed from less than a cent in early 2010 to around $14,000 CAD today.
But before pulling the trigger, know that there’s considerable risk to trading cryptocurrency. For starters, it’s largely unregulated, which can invite sketchy behaviour on some trading platforms. And cybercriminals are constantly looking for ways to crack into your computer or mobile device and steal your coins, amounting to billions of dollars worth of crypto looted every year.
It’s also a highly speculative investment prone to bubbling and bursting. For instance, in 2018, the price of one Bitcoin fell from nearly $20,000 USD to around $4,000 USD. Yikes! Most recently, the value of Bitcoin has increased by more than 90% during the COVID-19 crisis; but there are a number of different cryptocurrencies out there, and it’s difficult to predict which will appreciate in value and at what time. If you want to avoid a a financial rollercoaster ride, keep one of our key cryptocurrency investing tips in mind: Start by investing a small amount of money into crypto rather than your entire life savings, and diversify the rest of your funds in a variety of other investment channels listed elsewhere on this page.
Whatever amount you ultimately choose to invest in crpyto, you can reduce your risk by buying and selling Bitcoin and Ethereum (the two largest cryptocurrencies) on Wealthsimple Crypto – Canada’s first regulated crypto trading platform in Canada. Unlike other crypto platforms, Wealthsimple Crypto doesn’t allow for “bring your own crypto” and stores crypto-assets in “cold wallets” at Gemini Trust Company – a trusted and regulated custodian that has $200M in cold storage insurance coverage. It’s one of the easiest and safest ways to trade cryptocurrency, and there are also no fees for trading within Wealthsimple Crypto.
Getting started is a cinch. First, download the Wealthsimple Trade app and answer an online questionnaire about your risk tolerance and knowledge of cryptocurrency trading. It will also share information about the risks of investing in cryptocurrency.
Once the account is funded, you can choose cryptocurrency to buy, enter the amount, and tap “confirm order.” Done!
Start investing with Wealthsimple Crypto and get a $25 bonus
5. Invest in your peers
How about using your $1,000 to help small businesses grow? Since big banks can be uber-conservative with their lending criteria, peer-to-peer lending platforms are popping up to allow everyday Canadians to invest in small businesses.
One of the leading disruptors is Lending Loop – Canada’s first fully regulated peer-to-peer lending platform focused on small businesses. There are two options for investing with Lending Loop.
The first is to use the “Auto Lend” feature. In less than 5 minutes, Lending Loop can build a customized plan to put your money to work, helping you earn a projected return of 5-8% per year on your investment. It works like a robo advisor: open an account and answer an online questionnaire about your risk tolerance, assets, and financial goals. Then, Lending Loop will make a recommendation on what plan best matches your goals. For me, it suggests that I go with the Balanced Auto-Lend Plan.
Or you can choose to manually invest. Once you’ve linked your bank account and funded your account, you can scroll the loan listings and decide where to invest. Lending Loop reviews each business and assigns it a “loan grade” (between A+ to E), making it easier to choose.
Either way, you will receive monthly payments with interest from the businesses that borrowed from you. It’s a win-win: you’re supporting small businesses while diversifying your investment portfolio and earning a fixed-income.
More: Lending Loop review
6. Stash your cash in a high-interest savings account
Need to keep your cash close and don’t want to wager any risk? Squirrel away your money in a high-interest savings account – a bank account that typically offers a higher interest rate than a regular chequing or savings account. You’re basically loaning money to the bank, and in return, you get a better-than-average interest rate on your deposits. Unlike a GIC, your money isn’t locked in and you can access it anytime (depending on the bank, it could take 24 hours or longer to cash it out).
EQ Bank’s Savings Plus Account is one of the best high interest savings accounts in Canada, partly because there’s no monthly account fee and the everyday interest rate is 2.50%* — which is many times more than what most banks pay. What’s also great is that the Savings Plus Account functions as both a chequing and savings account – through the app or your computer, you can pay bills, transfer money, and still grow your savings with an excellent interest rate. There are no everyday banking fees, free Interac e-Transfers®, and free day-to-day transactions.
You can open an account lickety-split. All you need is your Social Insurance Number, email address, and a Wi-Fi signal; then, just go to the EQ Bank website and follow the steps.
- Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.
7. Invest in real estate with a REIT ETF
$1,000 won’t go far in terms of buying property, but there are other ways to invest in real estate. Specifically, you could pool your money into a Real Estate Investment Trust (REIT) – companies that own and sell shares in income-generating real estate. The REIT generates rental income and distributes the profit after expenses to unit (or share) holders.
With this type of investment vehicle, you can invest in all kinds of real estate properties: from office buildings to malls to residential apartment buildings. While you’d likely need a hefty down payment to buy an income property, you typically only need less than $100 to invest in (and reap the benefits of) a REIT. Another bonus: skip the headaches of being a landlord.
There are many different types of REITs, but a solid bet is to invest in a REIT exchange-traded fund – a basket of REITs traded on the stock exchange. First of all, it’s a fast and cheap way to create a balanced, diversified investment portfolio with real estate holdings. It also saves you the work of researching and putting together a portfolio of REITs on your own. Lastly, a REIT ETF helps buffer the volatility of the stock market through diversification. You’re putting your chips down on the larger real estate market rather than on one company.
Getting started with REIT ETFs is easy. All you have to do is purchase trust units (shares) in a REIT ETF the same way you would purchase stock: through an online brokerage. Three top REIT ETFs in Canada to consider include the:
- iShares S&P/TSX Capped REIT Index Fund
- BMO Equal Weight REITs Index ETF
- Vanguard FTSE Canadian Capped REIT Index ETF
If you use Wealthsimple Trade, you can purchase REIT ETFs for free.
Get a $25 cash bonus when you open a Wealthsimple Trade Account
Tips for investing with little money
- Diversify, diversify, diversify: Don’t put all your eggs into one basket. Even with just $1,000, your best defense against volatility is to spread out your investments as much as possible.
- Know your risk tolerance: If you’re 20-something, time is on your side, and taking an aggressive (but balanced) investment strategy may make good financial sense. But if you’re on the verge of retirement, low-risk investments may be a better bet. Revisit your risk tolerance for an annual “tune-up” and ensure it matches your current reality.
- Take calculated risks: Designate no more than 5% of your portfolio towards speculative (aka riskier) investments, such as cryptocurrency or IPOs. That way, you’ve built in a buffer in case something tanks.
- Do your homework: Before taking the leap, read up on winning investing strategies: from value investing to building a diversified portfolio of low-cost index funds to avoiding a growth stock trap.
Final thoughts
You may not have a million bucks to invest, but that doesn’t mean it’s game over. The road to riches starts with building a balanced, diversified portfolio and $1,000 is enough to kickstart that journey. Once you get going, consider setting up an automated deposit or using a personal finance app to turbocharge your contributions. Bon chance!
FAQ
How much do I really need to start investing?
Not a lot. For some of the above investment opportunities, you can get started with as little as $1 (although that probably won’t go very far). If you can swing it, $1,000 is a good start.
What is the best option for beginners?
If you have no experience with investing, start with a robo advisor. It will not only design a personalized portfolio to match your financial goals and risk tolerance, but it will do the work of managing it using computer algorithms. The fees are also very low: Wealthsimple, for example, charges just 0.40% to 0.50%.
What's a safe investment option?
A GIC is a good place to start. Considered one of the safest investments in Canada, all you have to do is open an account, choose a term, and deposit the funds.
