Investing is an excellent way to accomplish important goals, like buying a home or retiring comfortably. Regardless of whether you are a novice or have a thriving portfolio of stocks, bonds, mutual funds, or real estate, this article will help you stay informed on the best investment calculators and how to maximize your investment options to avoid common mistakes.
There are different types of investment in Canada; it all depends on your interest and long-term goal. Diversifying your investments helps you manage risk, so one or two bad investments will not affect your portfolio.
A quick guide to investment in Canada
Investment is a tough decision to make, as it involves risk and dedication. If you are debt-free and want to start building towards your future, you should consider investing now.
There is no one-way rule to investment. The allocation of percentages earned are not specific, hence the need to have a basic knowledge about how to calculate your investment. Below are some guidelines to facilitate your investment journey in Canada:
Invest in your retirement plans
What are your retirement plans? Unless you have other plans for your non-retirement goals, investing in your retirement is a great way to earn returns from retirement plan tax benefits.
Leverage on Tax-Free Savings Account (TFSA)
TFSA is a registered account in Canada that offers unique tax benefits. Interest earned in any TFS account is tax-free, so is any withdrawal made on the account. You can put either short-term or long-term money into TFSA. With a TFSA, you can have any savings or investment account. Investment accounts available on TFSA include cash, GICs, mutual funds, stock, and bonds.
Diversify
Diversify your investment, as the values of different assets in Canada don’t move in cycles. If you diversify correctly, your portfolio’s value will experience growth. Diversification is useful to an extent, but if you buy too many investments that can’t perform an annual review on them, then you’ve over-diversified.
Be Intentional About Your Investment
There are several investment options available in Canada, and it might be a tough decision to pick where to invest your money. Do not invest in what you don’t know. If real estate is where you’re confident and comfortable to invest, go ahead.
Do not follow the crowd towards funding an investment you know nothing about. Generally, be careful of putting all your funds in the same investment industry because you believe in the industry. Spread your tentacles to other low-risk investment options to maximize your gain/loss.
Automate Your Investment
There are different investment automating systems you can use to facilitate your investment in Canada. Automated investing allows people with little to no knowledge about the stock market and people who don’t have time to trade themselves to invest their money. You can take a risk survey when you open an account to find the right portfolio that suits your investment needs.
Invest Regularly
Even though there are no guarantees in investing, it is advisable to invest regularly, even if it is small. Many investment platforms in Canada allow you to transfer a transferring of a set amount of money monthly. You can leverage this and set it up in a way they can debit money from your account.
Types of Investment in Canada
- Stocks
If you can tolerate high-risk, then investing in stock might be a good option for you. There are currently several ways to enter the stock market in Canada. When investing in stocks, ensure to check the fees charged when you buy/sell shares. Others include:
- Bonds
- Exchange-Traded Funds (ETFs)
- Mutual Funds
- Real estate
- Cryptocurrency
- Registered Education Saving Plan (RESP)
- Tax-Free Savings Accounts (TFSA)
- Registered Retirement Savings Plan (RRSP)
The Simplest Way to Invest
Wealthsimple provides powerful financial tools to help you grow and manage your money.
Investment Account Suitable For You
As a first time investor in Canada, the kind of investment account you open is crucial. You should decide on the type of account you want to open before considering what investment option is available.
Since the significant goal of investing money is to make profits, it is advisable to take advantage of any account that gives you tax advantages. The tax advantage is like free money, and everybody loves free money. For workers with a steady paycheque, employer-sponsored retirement and pension plans seem to be the most convenient and tax-advantageous account.
The account type mentioned above allows money to be debited consistently from your paycheque. Retirement accounts are tax-deferred, which means any money you pay will not incur CRA tax for that year. Also, the funds will only be taxable years later when you withdraw it.
Another perk about employer-sponsored pensions that most companies match a certain percentage of your payment.
5 Best Investment Calculators for Canadians
Regardless of what you are saving for, you’ll be needing strategies and investment brokers to help your money grow. There are several investment calculators in Canada you can use to track your investment; below are the five best investment calculators for Canadians.
Retirement Calculators
A retirement calculator can come in handy to make your retirement comfortable. There are several retirement calculators available online; some are better than others. Click here to read our article on 401(K) in Canada.
The most effective calculators allow you to pitch different retirement scenarios, taking into account things that can affect how long your money will last. These models are put in place to help you invest accordingly.
Having your financial information will aid the use of these calculators. The retirement investment calculator below will simplify your income planning methods.
- Mawer Retirement Calculator
Mawer Retirement Calculator is suitable for individuals looking for reasonably priced mutual funds to invest in towards their retirement. The calculator is easy to use and can let couples add their spouse. A great perk of this calculator is that it allows users to add a retirement age below 50. It also has a feature that summarizes your result, making it easy to get an overview of your input.
Some of the pros of this calculator include:
- A separate account for a couple
- Gives estimation of your CPP/OAS
- Calculates your net worth at death
- Allows modification of income
- Yearly income table
- Allows addition of any extra source of income
The cons include:
- It does not recognize a house as an asset
- The yearly income table is less detailed
As seen above, the pros outways the cons; therefore, this calculator can serve its purpose.
- ESPlannerBasic
The ESPlannerBasic calculator allows variable taxation that can help users attain a greater tax efficiency. It also gives room for spouses who wants to plan different retirement dates.
It is advisable to read the process upfront before starting. Several planning models are available for you to choose from. Ranging from the free methods – Conventional or Economics, to the paid modes – Upside investing and Monte Carlo.
Some of the prominent features of this tool provide include:
- A separate input box for the assets of each member of a couple
- Different tax status for each asset inputted like after-tax, pre-tax, no-tax, etc.
- Automatic calculation of income tax based on your inputs
- Alteration – you can input variable inputs of expenses and income to account for momentary situations or projected future changes.
This tool’s downside is that you can only assume age 100 for life expectancy, and you can not state the payout type for a pension.
TFSA Calculator
A TFSA is a saving plan under the federal government. Income earned within this plan is tax-free. Under TFSA, there are several investment products like mutual funds, GICs, etc., you can choose from depending on your goals. An excellent tool to calculate your investment in any TFSA is:
You can use the tools mentioned above to know your balance in a pre-existing TFSA if you have any. You can also use it to understand the annual rate of return on your investment.
GIC Calculator
A guaranteed investment certificate (GIC) is a deposit investment sold by Canadian banks and trust companies. Most people purchase them for their retirement plans due to their low-risk fixed rate of return.
Also, it is to an extent insured by the Canadian government. When buying a GIC, you’ll have to deposit money in the bank for a fixed period. The fixed cash and principal then start accumulating interest until the investment matures. To calculate your GIC, below are some tools in Canada you can use:
On GICs, interest on terms with less than a year or longer is calculated daily on the principal amount. It can either be paid monthly, yearly or accumulated yearly and paid at maturity. Interests on less than a year are calculated daily on the principal amount and paid at maturity.
Investment Value Calculator
Achieving your long-term investment goal depends on several factors; it is not only limited to your investment capital and return rate. Inflation, taxes and your time horizon also play an integral part. The investment Value calculator helps you comb through these factors and determine your bottom line.
Regular Investment Calculator
You can use this rate of return calculator to evaluate what your assets might be worth in the future if you regularly contribute to your investment.
Regardless of what investment route you choose to ply, always consult with your financial advisor to put you through and recommend the most suitable for you.
