Investing money is a great way to build your wealth over time. It can also help you stay ahead of inflation in many cases. If you have an extra $1000 or have saved up $10,000 — or even $100,000 — you have plenty of options for investing.
Our guide will explore how to invest different amounts of money, but also help you make the right investment decisions.
Table of contents
- Is it better to save your money or invest it?
- Why invest your money?
- Factors to consider before investing
- Questions to ask yourself before investing
- How to invest $1000, $10,000 or $100,000
- Investing calculators
Is it better to save your money or invest it?
While we know investing can be a great way to build your wealth over time, there are also some risks. Because of this, many people wonder if it is better to invest or simply save their money in a bank account where it is safe from potential losses.
Saving your money is good, and everyone should have some emergency savings available. Investing is generally a better idea for those looking to see their money grow over time. See, most savings accounts only offer a relatively small return because of lower interest rates. These often lag far behind inflation.
Simply put, investing helps you grow your wealth quicker. It will generally leave you way ahead of those who simply saved without investing at all. Sure there is a risk, but if you invest the right way, you can minimize this risk.
Why invest your money?
There are many reasons why it is a good idea to invest your money. First of all, investing can help you reach your financial goals, whatever they may be. This might be to eventually own a home, raise a family, buy a boat, or make enough to travel the country in an RV. There are certain strategies and plans you can utilize and adopt that are perfectly in line with your plans.
In a similar vein, investing can set you up for success in retirement. Starting early enough can help you save enough to do the things you want and go where you want to go. Some investments are also able to help shelter your money, grow your money, and protect it from inflation. Investing simply helps you keep more of your money, and this is never a bad thing.
Related Reading: How Much Money Do I Need To Retire In Canada?
Where to invest your money
Now you know some of the many reasons to invest your money, where should you aim to invest it? Well, there is no shortage of options to consider, whether you want to invest $1000 or $100,000. You just need to weigh the pros and cons of each option in order to make an informed decision.
In many cases, it is a good idea to begin with tax-sheltered accounts like a TFSA or RRSP. A TFSA (or Tax-Free Savings Account) allows your money to grow tax-free, as you do not need to pay any tax when withdrawing the money from your investments.
On the other hand, an RRSP (or Registered Retirement Savings Plan) provides you with a tax deduction but requires you to pay taxes on the money when you withdraw it. Both are wonderful tools and you should be taking advantage of them as a Canadian investor.
Fully maximized these tax-sheltered options? (More on contribution limits here and here!) You can now look to a non-registered investment account. These are, in turn, subject to taxation.
What can you invest in within this assortment of accounts? Your options include:
- Individual stocks
- Mutual funds
- GICs (Guaranteed Investment Certificates)
- REITs (Real Estate Investment Trusts)
Each option has its benefits, drawbacks, costs, and risks. Always do your homework before deciding which is right for you!
Finally, an increasingly popular investment choice — or simply a curiosity for many — is cryptocurrency. Between Bitcoin, Ethereum, or any of the other altcoins that have been created and released, cryptocurrency does offer the potential for very high returns.
However, be aware that cryptocurrency is often incredibly volatile, and can be a very risky investment. It is just as likely that your investment will bottom out, so only invest what you are comfortable with losing, just in case.
Factors to consider before investing
First and foremost, you need to learn more about investing in general. Research and education are crucial to make sure you choose wisely and understand what you are getting yourself into. Don’t rush yourself, and always take time to decide what is best for you and your family. While you could learn how to turn 1k into 5k, you could also lose it all, so be careful and do your research.
What else should you consider before investing $1000, $10k, or $100k? Here are four factors to keep in mind.
Different people will have different goals, which, in turn, means different investment strategies. You want to ensure the strategy you employ and the investments you make are able to help you reach those goals.
Next, your investment horizon is definitely a factor you need to think about. Some people have decades to invest. For example, those at the beginning of their careers. Others are getting closer to their goals, like retirement.
The more time you have to invest before you actually need the money, the more risk you can take. Generally speaking, you likely won’t need this invested money for many years.
Speaking of risk, your level of risk tolerance is also a factor to think about. Some people are comfortable rolling the dice and trying to hit a home run with individual stocks or crypto. Others prefer index funds or ETFs for their consistent growth over time.
Professional vs DIY
Last, but certainly not least, you need to think about whether to invest on your own or work with an investment advisor.
You can take the DIY route, but experts often have more knowledge and experience, and can steer you in the right direction. Make a list of the pros and cons of each to help you ultimately decide the right option for you.
Related Reading: Building A Balanced Portfolio
Questions to ask yourself before investing
While this guide might have you very excited to start investing and dive in head first, you need to ask yourself a few things before you do so. These will help make sure you are prepared for investing and aren’t putting yourself at risk or in financial harm.
Are my high-interest debts paid off?
Before ever investing money, it is generally a good idea to make sure any high-interest debt that you have is completely paid off.
If you invest your money and make 6% interest, but fail to pay off your credit card debt with 20% interest, your money isn’t working as much as it could. The amount extra you are paying to cover the 20% interest simply isn’t being matched by the 6% you are generating from your investments.
Do I have an emergency fund?
While many investments are safe, there is always risk involved. As a result, you never want to put all of your money into investments.
You need some funds that are safe and can be easily accessed quickly in the case of an emergency. The amount varies, but you should generally have an emergency fund that can cover three to six months of expenses.
How to invest $1000, $10,000 or $100,000
Different levels of money come with a range of investing recommendations. Above all, make sure you take your time, do your research, and consult a financial advisor if you have questions.
Can I start investing with $100?
While many people think they need a ton of money to begin investing, that couldn’t be further from the truth. Even if you only have $100, you can begin investing without a problem. There are plenty of ways to invest small amounts and it is a perfect place to start.
Over time, you can slowly increase your investment, but there is nothing wrong with starting by purchasing a single stock or making a small investment in a mutual fund or ETF. Everyone starts somewhere, and investing $100 is infinitely better than investing nothing.
How to invest $1,000
There are several ways you can invest $1,000 to improve your life and grow your wealth.
If you haven’t already, you can pay off some high-interest debt or start an emergency fund to prepare for life’s many twists and turns.
If you don’t need the funds for a long time or if it’s earmarked for a specific purpose in the future, one option is to open a GIC. Your investment stays safe while it matures, and you benefit from monthly, bi-annual, annual, or at-maturity interest payouts.
Working with $1000 to invest is a great start, but it’s still a fairly low amount in the grand scheme of things. As such, it’s a great amount to start passive investing via a robo-advisor like Wealthsimple or Questrade. Through these platforms, you can invest in reliable low-cost ETFs or index funds — good options for beginners with $1000 ready to invest.
How to invest $10,000
Maybe you’ve received an inheritance, insurance payout, or a really great bonus from work. No matter how you slice it, having $10,000 to invest definitely opens more options!
If you’ve maxed out your TFSA and/or RRSP for the year, you can use this amount of money to invest in your home or even yourself. For example, making improvements to your home to increase its value, or taking online courses to make yourself more employable and valuable at work.
One fairly new and really unique way of investing $10,000 is through peer-to-peer lending or P2P. Through a platform like goPeer or Lending Loop, potential (and credit checked) borrowers connect with investors for personal, small business, debt consolidation, or car loans. Investors can get high returns, depending on the risk level they decide on, yielding steady passive income.
Finally, alternative investments like REITs when you have this amount of money are also a good idea, and can certainly help you diversify your portfolio. Of course, you can also continue investing in assets like stocks, mutual funds, and GICs, as well!
How to invest $100,000
Obviously, if you have $100,000 ready to invest, your options are vast!
For starters, you can invest in any of the above if you so choose — as long as your debts are cleared and TFSA/RRSP is funded. Remember: cover the basics first!
Rewinding even further, it would be wise to consult a professional if you happen to end up with such a windfall. They’ll be able to walk you through your goals and advise you on possible strategies.
Branching out, this amount of money can act as start-up capital for a business that can gain you a significant return, or allow you to purchase or invest in real estate.
You can also simply buy a large number of stocks and bonds that you feel are good investments. Also, with a large investment like this in something like dividend stocks, you would see a good amount of passive income every month or quarter.
Your financial services professional can absolutely show you the types of returns you may see on an investment. Using a financial planning calculator, however, lets you see for yourself how investing even $1000 can pay off. In most cases, it’s simply a matter of plugging in the numbers.
Calculator.net offers a great investment calculator that shows you how your decisions and efforts impact your investment plans. Get Smart About Money has a calculator that shows how your investments grow over time, building your wealth. Finally, the Bank of Canada’s financial planning calculator shows you the effects of inflation on your investments and your savings.
Related Reading: The Best Financial Planning and Retirement Calculators
Investing is a wonderful way to grow your wealth over time and set yourself and your family up for a better future. Whether you only have $100 to invest or $1000 or $100,000, we hope that this guide has been able to help you learn a little more about how to invest intelligently and effectively.