There’s never been a better time to answer the question of what the best banks in Canada for investing are. More than ever before, there is a rapidly growing audience of investors around the world. People are looking for ways to make their money work for them and make decent gains in the process.
The problem is, not every investment company or bank is ideal for investment. This means you could end up losing hard-earned money by choosing the wrong investment partner.
This article aims to help you avoid this. We bring you the best banks in Canada for investing. With these banks, you are more assured of the safety and productivity of your capital.
Before we delve into our recommended choices, you may want to learn about what investment opportunities exist that you can take advantage of. You’d find this incredibly helpful.
Disclaimer: Rates and product offerings are always changing so this article might not reflect the current market situation. Please contact your financial advisor before making any financial decisions.
Investment Opportunities in Canada
1. Exchange-Traded Funds (ETFs)
The ETF is a mutual fund that allows you to buy many individual stocks or bonds in a single purchase. It tracks stock market indices like the S&P 500, various commodities, bonds, or a range of aggregated assets.
ETFs are traded on the stock exchange as standard stocks, and price changes are usually observed while trading. The most popular ETFs track stock market indices, but many different ETFs track commodities, forex and bonds between different assets.
Simply put, an ETF is a fund with different assets (stocks, silver, oil, securities, etc.). It divides the ownership of the entire asset pool into a single share ready to be traded in the form of common stock.
In addition to ETFs’ capital gains, investors benefit from profits distributed to the pool of assets of the underlying ETFs, such as dividends and interest rates. ETFs are a great alternative for those who want to invest for higher returns but have little financial knowledge.
With ETFs, you can invest in popular stock indices without having to worry about stock prices or individual company earnings.
2. Mutual Funds
A Mutual fund is basically a pool of various stocks and bonds combined into an investment portfolio. The fund managers assimilate the different assets into equities and calculate share price daily according to the evolution of each asset’s price in the pool.
The pool is a collection of different assets and as such, investing in a mutual fund tends to differ from stocks or bonds. Investors make money when shares in the pool generate dividends and interest payments on the funds.
The capital also appreciates when the fund is sold at a higher price, distributed by the fund to its shareholders. Mutual funds are best for those with large capital but do not know the financial world.
The funds are managed by fund managers who get paid even if the fund is lost.
Companies mainly issue them, government and local authorities (provinces/cities) to withdraw cash with prompt payment of interest at fixed rates. Primarily, bond issuers seek to get money by borrowing.
In return, they pay interest and the principal money after the time elapses. It’s basically like a loan deal. Bonds vary in length. Some are issued for six months, others five years and some Canadian bonds even for more than 10 years.
The longer the time, the bigger the interest rate. The time at which a bond matures is called the maturity date. On the maturity date, the bond issuer reimburses the full money to the bondholder.
There are two ways to get returns on investment in bonds:
- The first is the easy way to hold bonds to maturity while collecting interest payments and then the principal maturity. The timing of payment of interests on bonds depends on the issuer but is usually twice a year.
- Selling the bonds at a higher cost than what you paid for.
In the financial sector, a higher risk leads to a higher return and vice versa. Bonds are considered a less risky investment than the stock market because you receive your interests until the company stops paying.
The best assessor of a bond’s value is to use the standard set to bond by appraisers. Bonds with a higher rating pay lower interest rates and are sold at higher prices, while bonds with a lower rating offer a higher interest rate due to the risk of default.
Bonds are generally viewed as a safer alternative to the stock market. The returns on bonds are significantly lower than the stock market since they are considered less risky.
If you want to take fewer risks or invest heavily in the stock market, you should consider diversifying your portfolio by buying bonds.
Other ways to Invest in Canada
- Real Estate
- Tax-Sheltered Investments
- Registered Education Savings Plan (RESP)
- Tax-Free Savings Account (TFSA)
- Registered Retirement Savings Plan (RRSP)
Best Banks in Canada for Investing
In choosing our list of the best banks in Canada, we paid attention to what we call efficiency in operation. Generally, you should invest your funds with an entity with a track record of being efficient and consistent in making the right moves. Anything short of that and you may be playing a gamble with your money.
Obviously, we have also considered yields, market cap, and even dividends. The best banks in Canada for investing are:
1. Bank of Nova Scotia
Incorporated in 1832, the Bank of Nova Scotia (also called Scotiabank) is the 3rd largest commercial bank in Canada.
Aside from being among the top 5 banks in Canada, Nova Scotia is also one of Canada’s best digital banking banks. The Scotiabank offers rich features and perks.
This bank has its hands in various investment portfolios and has a rich and reliable reputation you can trust. They have a whopping 960 branches, well over 3,600 automated banking machines, and almost 2000 international branches.
SB makes most of its revenue from very high-quality and stable businesses, which helps stabilize cash flows.
With these in mind, investing in Scotiabank reduces your risk significantly. You can learn more about their investment options.
2. The Bank of Montreal
With investment options from tax-free savings accounts, retirement savings (RRSP), education savings, etc., the BMO boasts one of Canada’s best banks. BMO offers numerous options for investing that suit your specific needs and purpose.
BMO gives you features at standard rates and gives special discounts to students, seniors and the military. You will get the best banking experience from BMO’s online banking platform, with its intuitive interface having some of the best features.
The monthly fees of the Bank of Montreal are within the range of $4 to $30, depending on the kind of account you operate.
According to dividend earner, the Bank of Montreal has a market cap size of 49 billion and pays out a dividend yield of about 4.32%
Another bank that offers a range of investment options and discounted rates is the Canadian Imperial Bank of Commerce. The CIBC offers different kinds of accounts, tailored for individuals at different age ranges and careers.
CIBC has four business units, viz, Canadian Personal and Small Business Banking, U.S. commercial Banking and Wealth Management, Capital Markets, and Canadian Commercial Banking and Wealth Management.
CIBC has a growing customer base of over 11 million people, including individuals, corporate, and commercial clients, in Canada and the rest of the world.
The CIBC’s interest rates and banking fees are a little different from the others. It tends to meet seniors’ needs more, with up to five different account types for seniors, offering them a chequing account, premium credit card accounts, and US dollar account options.
Their market cap is at 38 billion, and the dividend yield is 5.27%. See CIBC investment options.
4. TD Bank
TD bank might not differ in terms of account types and investment options, but you will have an enjoyable experience with a very decent free savings account. TD bank offers one of the best customer service and financial advice.
Like the other banks on this list, TD bank has a long and illustrious track record in investment and overall banking success. They mainly operate through the following banking segments: U.S. retail banking, Canadian retail banking, and wholesale banking.
They have various products and services tailored to retail and small businesses, with over 25 million customers worldwide. Toronto Dominion Bank has a market cap of 100 billion and a dividend yield of 4.46%. Investment opportunities.
5. Royal Bank of Canada
The Royal Bank of Canada is one of the best banks in Canada for investing. It is one of the oldest banks in Canada. RBC has evolved with technological advancements.
If you need a reliable place to invest your money, Royal Bank ticks all the right boxes for us. They are a diversified financial services institution; this includes insurance, personal and commercial banking capital markets products and services, and wealth management.
With a market capitalization size of 117 billion, they are undoubtedly one of the world’s largest banks. Their dividend yield is at 4.11%.
With their investment options, you get a special fee waiver as perks and get a discount on the service charge. The RBC’s account options do not differ from others but still stands out in excellent service delivery and best rates on savings and investments.
Learn more about their investment opportunities.
Frequently Asked Questions
Are these banks excellent options for investment?
Yes, they are. We have carefully made these selections for you to choose from. However, it would help if you did your due diligence by learning more about anything and everything. It also helps to have a professional guide you.
How much money should I invest?
This is entirely up to you. If you have the funds and are willing to invest, you can go ahead to do so. But, as a general rule of thumb, don’t invest more than you can afford to lose. Although these are great choices, you would agree there is always some form of risk in every investment.