Investing in the stock market can be a wild ride with lots of ups and downs — even in the best of times. The Canadian stock market is no exception. Some stocks have dipped considerably because of lost revenues while others have soared, giving way to the best Canadian stocks.

In view of the current economy, Canadian investors have much to consider when deciding how and when to buy stock. You can buy stock in companies that have taken a big dip and make money as the economy rebounds. Or you can buy into those companies that are already headed upward if you feel confident that their growth will continue for the long term.

The biggest thing to remember? Do your research! The stock market can change quickly. No crystal ball will tell you what’s in store or how the markets will perform. The best thing you can do is make informed decisions. But just keep in mind that picking stocks does come with risks.

To help you out, let’s take a look at some of the highlights from a variety of sectors.

What are the best Canadian stocks to buy?

Researching stocks before investing is key. Especially for those of us who are not financial experts. When deciding on the best Canadian stocks to buy right now, look at the company rankings by analysts. Pay attention to when companies have earnings announcements that could bump the stock higher – or see it drop sometimes dramatically lower. Read as much as possible about the sector and the stocks that you are investing in.

If you are looking for short-term profits from the best Canadian growth stocks, buying rising star stocks may be your best bet. But be aware that break-out stocks need careful monitoring to ensure they continue to boom — not a bust.

Finance, gold, and energy sector stocks are among the top Canadian stocks to buy, representing significant percentages of the market. Canada’s technology sector is also on the rise, with a few home-grown stocks also worth considering.

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Financial sector stocks

Investing in sectors that have a strong stock performance history provides realistic expectations of future gains. One of the most survivable sectors is finance.

Canadian banks and other finance companies have weathered prior financial crises and prospered. They have established their long-term value and can add stability to your investment portfolio.

Despite the current economic strains of potential defaulted mortgages and small business bankruptcies, the banks will go on. You want to have at least part of your portfolio in a sector that should rebound relatively quickly — especially following the COVID-19 pandemic. These stocks also pay out dividends to shareholders which is an added incentive for investment.

Some of the top-performing banks in Canada, including ‘The Big 5’ are:

• National Bank of Canada (TSX:NA)
• Toronto-Dominion Bank (TSX:TD)
• Bank of Nova Scotia (i.e. Scotiabank) (TSX: BNS)
• Royal Bank (TSX:RY.TO)
• Canadian Imperial Bank of Commerce (i.e. CIBC) (TSX:CM)
• Bank of Montreal (BMO) (TSX:BMO)

Gold and energy sector stocks

Gold stocks tend to be the go-to investment for times of market volatility. It’s also a good way to diversify your portfolio. Canada has a number of home-grown companies from which to choose the best Canadian gold stocks. Green energy stocks are also a big presence on the Canadian stock market. Here are three stocks that have shown strong performance:

• Kirkland Lake (TSX:KL) This mid-sized gold producer had an amazing 10-year return of 6730%. The stock price is showing good improvement after a shaky year, with $255 million in earnings, an increase by 26% (year-over-year).
• B2Gold (TSX:BTO) is a low-cost gold producer, making it a safe long-term holding. It also pays an attractive dividend, with a yield of over 3.53% (as of November 2023).
• Enbridge (TSX:ENB): Serving Canada and the US as the largest energy infrastructure company in North America, Enbridge does energy generation, distribution, and transportation. Enbridge is a dividend-paying stock which makes it appealing as a stable growth investment.

In the gold and energy sectors, you can also consider gold ETFs and renewable energy stocks. For gold ETFs, of our top recommendations is iShares S&P/TSX Global Gold Index ETF (TSX:XGD), giving investors very targeted exposure to global producers of gold and other products.

For renewable energy stocks, one of our top picks is Algonquin Power & Utilities (TSX:AQN.TO). Not only is it a dividend stock that’s great for a new investor, it has a diversified portfolio of regulated utilities and renewable power assets.

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Tech and software company stocks

The COVID-19 pandemic has impacted everything from how we shop to how we work to how our children learn. A new normal is beginning to emerge, where remote working is much more prevalent. In fact, Canada’s leading software company Shopify announced in 2020 they will be a “digital-by-default” company.

In this new era of remote connection, companies that provide digital services and enterprise software are expected to see high demand. The tech world is all about digital transformation across the board, and these companies are at the forefront.

• Shopify (TSX:SHOP): A true Canadian success story, Shopify is at the very top of the Canadian stock market. The company offers an e-commerce platform primarily to small and midsize businesses. The firm has two segments: subscription solutions and merchant solutions, and the company has continued to thrive year-to-date. Despite slips at the end of 2021, it’s still considered a stock well-positioned for the long-term.
• Constellation Software (TSX:CSU): Constellation Software Inc is a Canada-based company that develops and customizes software for the public- and private-sector markets, focusing on consolidating the market. In terms of Canadian tech stocks, Constellation is considered tops for growth — up 12,000% over the past 16 years.
• CGI Group (TSX:GIB): CGI Group is a Canada-based IT-services provider with an embedded position in North America and Europe. With a market cap of $26.66 billion, CGI’s net earnings grew 22.5% over 2020.
• OpenText (TSX:OTEX): OpenText grew out of a technology project involving the Oxford English Dictionary at the University of Waterloo in 1991. It’s now a diversified company with a variety of software platforms covering content management, analytics, storage, etc. So, basically, business essentials! Despite single-digit growth, it’s still a good value stock to have in your portfolio.

What are the top 5 Canadian dividend stocks?

The dividend yield is the percentage result you get when dividing the current yearly dividend payment by the share/unit price of an investment. It’s a good indicator of how well a stock is doing and how well rewarded you will be for investing in a particular company. They’re also good to have in your portfolio during a downturn.

Using dividend yield to compare results, here are Canadian companies we consider to be some of the best Canadian dividend stocks to buy and hold (data correct as of November 2023):

• Enbridge Inc. (TSX:ENB.TO), with 7.56% yield
• CIBC (TSX:CM.TO), with 6.52% yield
• Keyera Corp (TSX:KEY), with 6.06% yield
• TransAlta Renewables (TSX:RNW), with 7.62% yield
• Granite REIT (TSX:GRT.UN), with 4.59% yield

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What are the best Canadian stocks to buy and hold?

Looking at the past decade of performance, among the best Canadian stocks to buy and hold are:

• Dollarama (TSX:DOL): Who would have guessed that a company selling general merchandise through discount retail stores would be a strong stock play? Selling inexpensive goods and a name that Canadians are very familiar with, Dollarama’s stock growth of over 1000% over the past decade is impressive. This is a stock that is likely to be a good performer over time.
• Brookfield Asset Management (TSX:BAM.A): As Yahoo Finance explains, this stock is a great all-around portfolio staple, giving investors exposure to a variety of alternative assets. It can also be put into the above list of dividend stocks since it has a history of delivering strong returns.
• Financial sector stocks: As discussed earlier, stock purchases in Canadian banks and established financial companies typically provide a stable, long-term investment.

Canadian stocks with strong value 

Well-known investor Peter Lynch advises in his book One Up on Wall Street that you can invest just as well as a professional. He believes that people paying attention to products and services in their daily lives can help them make good investing decisions.

This is especially true when unusual events or market shifts are happening. For example, at the beginning of the COVID-19 pandemic, home food delivery services and end-of-life service providers were seeing increased business. 

Here are two Canadian stocks considered a good value in the current economy.

• Corus Entertainment (TSX:CJR.B) Considered one of the cheapest Canadian stocks around, this entertainment company did take a hit from the pandemic. It has, however, been reducing its debt levels. Bonus: It pays a pretty solid dividend of 13.19%.
• WELL Health Technologies (TSX:WELL) After an initial boost from the COVID-19 pandemic, this stock is well-positioned for growth through 2022. A big spotlight is currently on the sector, especially with respect to telehealth, so if WELL can increase its market share, it could bring big returns.

What other categories of stocks should I invest in?

When looking for the best Canadian stocks to buy now, it pays to consider the current economic challenges. Financial and energy stocks are evergreen, but what sector or business could actually benefit from the current market dynamics?

Off the top, the real estate sector shows potential. While the housing market gets a lot of headlines, real estate investment trusts (REITs) are a good opportunity, with coast-to-coast infrastructure projects lined up.

How can I reduce my investment risk?

It’s hard to assess company valuations when the stock markets move as fast as they do. Analyst reports can help you assess whether companies are undervalued and therefore are expected to do better going forward. Or a stock might be rated as very overvalued, having had a big run during the current crisis that could level off fast.

Look at how companies were doing before the COVID-19 pandemic. Were their earnings strong and were they in a good position to pay out dividends? If a company had strong fundamentals going into the crisis, it may be better positioned on the other side of the pandemic.

One method to mitigate your risk is to spread your investment over time. Do you want to put all your available funds into the market at this volatile time? Or do you just want to dip a toe in the water for now? Dollar-cost averaging may be the answer. That means investing a set amount of money in the market over a period of time.

For example, let’s say that you have $24,000 you want to put into the market. If you invest $2,000 each month for a year then if stocks take a dip you only lose some of your $24,000 investment at any given time during the next year. And your investment has the opportunity for recovery over time beyond that one-year horizon.

Of course, the evergreen advice still applies: diversify. (And do your research!)

Going forward with confidence

There are many things to consider as you build your portfolio with the best Canadian stocks. Whether you manage your own investments or rely on a professional advisor, being well informed goes a long way.

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