Most Canadians never stop to consider when low risk investments are the most appropriate use of savings versus when higher-risk long-term investments are the better route.
The truth is that most Canadians choose their investment by “gut feel.” You likely don’t need me to tell you, that’s not an ideal process. When choosing between higher risk and low risk investments, it’s important to consider your personal goals and risk tolerance.
Personally, I think that if you need your money in the next five years, then you should be looking at investments guaranteed by the Canadian Deposit Insurance Corporation of Canada (CDIC) such as high interest savings accounts or GICs.
The flip side of that is that if you’re looking at building wealth for retirement or another goal more than five years into the future, then you may want to take another look at the best long term investments for Canadian DIYers.
The list below of the best low risk investments in Canada right now is aimed at folks looking to save money for a downpayment, get the most out of a vacation savings account, or are looking to purchase a car in the next couple of years.
There’s obviously more than one type of low risk investment, and while they have several things in common (such as low volatility), there are subtle differences between the various products, so make sure you compare “apples to apples” when selecting the best option for yourself.
Best Safe Investments Compared
When most people look for the best low risk investment opportunities available to them, they define risk as the possibility of losing part or all of your capital (the initial sum of money that you put into an investment). I think that’s a reasonable definition. Long story short – most people don’t want to lose their hard earned money!
Here’s a quick chart outlining the various low risk options available to Canadian investors. Keep in mind that returns can vary from month to month, especially with any investments that follow the stock market and don’t offer a guaranteed return.
| Investment Product | Risk Level | Average Returns | Best Source |
| HISAs | Guaranteed by government | 4% | EQ Bank |
| GICs | Guaranteed by government | 4.30% | EQ Bank |
| T-bills | Guaranteed by government | 3.25-4.15% | Qtrade |
| Money Market Funds | Returns are not guaranteed | 2.77-3.24% | Qtrade |
| Corporate Bonds | Returns are not guaranteed – but are safer than stocks | Varies | Qtrade |
| Government Bonds | Guaranteed by government | 3.40-4.13% | Qtrade |
| Annuities | Guaranteed by law | Varies | Insurance professionals |
| Low risk stocks | Returns are not guaranteed | Varies | Qtrade |
High-Interest Savings Accounts (HISAs)
A high-interest savings account (HISA) is the safest investment, but also has the lowest return. HISAs are typical savings accounts, but with higher interest rates. Keep in mind that the word “high” is relative.
Big banks offer dismal interest rates of 0.1-0.5% on their savings accounts, so your best bet is to look at digital banks with no-fee accounts. The best high-interest savings account in Canada is the Personal Account from EQ Bank, which offers 4% interest and has zero fees. You can learn more about this account and other offerings from EQ in our EQ Bank Review.
PROS:
- A much higher interest rate than typical bank accounts
- Easy to take money out of your account (a good choice for keeping money accessible in the short term while still earning interest)
- No fees if you pick the right bank
CONS:
- Significantly lower interest rates than other investment options
- Banks can change the interest rate they offer
GICs
Guaranteed Investment Certificates (GICs) are secured investments. You’re basically lending money to the issuer for a set time period, at which point you’re guaranteed to get your full investment back. In the meantime, you’re guaranteed regular payments of interest on your loan.
GIC interest rates are either fixed (they’ll stay the same no matter what) or variable (they’ll shift depending on the Prime interest rate). Fixed-rate GICs are a safer investment option because interest rates could fall, taking your variable GIC rates with them. And as of the start of 2024, that’s not a risk you want to take.
EQ Bank offers fixed GIC rates of up to 5.50%. You can read more about EQ Bank GICs and other GIC rates in Canada in our list of the Best GIC rates in Canada for 2024.
PROS:
- No fees
- Your deposit is CIDC insured
- Decent returns
- Fixed rate GICs are protected from market fluctuations
CONS:
- There’s a minimum investment
- If you hold your GICs in a non-registered account, any earnings will be taxed
- Your money is tied up until your GIC reaches maturity—you can’t pull it out early, no matter how badly you need it
Treasury Bills
Treasury bills, or T-bills, are loans to the Canadian government. They’re well known as safe investments because the government is near-guaranteed to pay back its debts. Canadian T-bills are sold at a discount and then redeemed at maturity at their face value. They don’t pay interest in the meantime, but when it’s time to redeem them, you’re guaranteed a profit.
While T-bills are lower yield than many other low risk investments, they have the benefit of being guaranteed by well-established central banks.
T-bills are easy to buy through your Canadian online broker. Qtrade, our preferred online broker, charges $1 per $1000 for T-bill purchases, from a minimum of $24.99 to a maximum of $250.
PROS:
- Extremely low risk investments
- Guaranteed profit
- A range of maturity lengths
- Easy to purchase through an online broker
CONS:
- Minimum investment of $1000
- No dividends or interest payments
- Money is locked in for the length of the bill
Money Market Funds
Money Market Funds are low risk mutual funds that contain high quality, short term money market securities like Government of Canada Treasury Bills, debt instruments, or cash equivalents.
Although money market funds aren’t insured, they’re very safe because they contain very safe underlying securities. However, like any mutual funds, they incur a management fee, which can significantly reduce their returns.
You can purchase Money Market funds from discount brokers such as Qtrade or Questrade, or from a Big Bank discount broker like BMO Investorline.
In 2023 we saw a very similar investment to money market funds hit brokerages. The idea is still to invest in a short-term, ultra-safe asset, but in this case it’s not 3-6 month Treasury Bills, but rather high interest savings accounts. Several ETF companies introduced a product known as a cash ETF.
The basic idea behind these products is to pool together large amounts of money from Canadian investors (through ETFs you can buy and sell on a stock exchange) and then negotiate great high interest savings account rates. For more information check out my article on the Best Cash ETFs in Canada.
PROS:
- Highly liquid
- Stable fixed-income investments
- Many money markets pay dividends
CONS:
- Management fees (MERs) eat into investment earnings
- Minimum investments generally start at $100
Bonds
Buying a bond is essentially lending money to the seller for a set time period in exchange for regular interest payments. They’re like GICs, only without the CDIC insurance.
Now, it’s important to understand two things about buying bonds as a low risk investment:
1) There is a massive range of bonds. An investor can buy bonds in anything from the clean water authority down in Florida, to bonds issued by massive companies like Apple. The vast majority of Canadians only really need to understand bonds from very safe entities like provincial/federal governments, or maybe the most stable companies such as Bell.
2) It is very rare these days for an investor to buy a single bond simply because the mechanics are quite cumbersome. Canada savings bonds used to be a popular investment, but even those are more difficult now. Instead, when most people want to invest in bonds they use a bond ETF. You can see which bond ETFs I like best if you check out my best ETFs in Canada article.
Agencies like Moody’s and Standard and Poor’s monitor the quality of bonds and assign grades to help investors make informed decisions.
Bonds can help protect your portfolio against stock market declines but this is not guaranteed either, as folks who owned bonds in 2023 can attest.For a more in-depth look at different fixed income options, check out my article on bond ETFs vs High Interest Savings Accounts vs GICs.
PROS:
- Stable, fixed income
- Have a rating system to help you determine quality
- Can offset stock value losses
CONS:
- Risk level varies widely (do your research)
- More affected by national interest rates than stocks are
- Some unconventional bonds are harder to sell
Annuities
Annuities are slightly different from most low risk investments on our list. An annuity is an insurance contract in which you pay a set sum in exchange for regular payouts in the future. Payment for an annuity either occurs in one lump sum or set monthly premiums during an accumulation period.
Annuities are designed specifically for retirement-age investors and aren’t appropriate for everyone. During the accumulation period, the money you invest is illiquid and can’t be withdrawn without financial penalties. However, once the payout period begins, your income is guaranteed, either for a set amount of time, or for life, depending on your choice of annuity.
An annuity can be a solid addition to a low risk portfolio, but they’re not for everyone. To learn more about the ins and outs and whether they’re right for you, check out our article on Investing in Annuities.
PROS:
- Guaranteed future payments
CONS:
- Money is inaccessible until the payout period begins
- May require a large amount of cash to purchase
- Annuities involve a number of commissions and fees
- Annuity income will be taxed if they’re not held in a registered investment account
Low Risk Stocks
The phrase “low risk stocks” can be a bit of a misnomer. Obviously, some companies are more stable than others, but in saying that, it doesn’t always mean that their stock prices are immune from volatility. Just ask Bell (BCE) investors who thought they were getting a low risk investment over the years how that’s looking at the moment as their share price is down 10% this year (and much more than that over the past few years).
Now, if I had to pick some mature businesses that I believe are low risk Canadian stocks, I would look at utilities, banks, and shares of other companies that pay out relatively high dividend yields. Even more so than the yield however, I’d be looking at the track record of dividend increases over the past several decades.
I achieved financial independence at a young age, thanks in part to being able to stay the course when times were tough in the markets. I weathered those storms because I had concrete conviction in my portfolio of dividend-paying stocks. You can check out my updated list of the Best Canadian Dividend Growth Stocks and my Dividend Kings List.
You’ll find boringly simple companies such as:
- Canadian National Railway (CNR)
- Fortis Inc. (FTS)
- Emera (EMA)
Over the years, I’ve really benefited from my personal relationship with Mike Heroux, and his unique platform for Canadian dividend investors called Dividend Stocks Rock. You can read my full review of Dividend Stocks Rock for more information.
PROS:
- A reliable income stream
- Low risk stocks are unlikely to fluctuate as much as more volatile stocks
- Preferential tax treatment
CONS:
- Dividends can get cut – just ask the folks who have invested in Algonquin Power & Utilities. That said, careful selection can minimize these risks.
Myth: Sitting in Cash is a Low Risk Investment Opportunity
Let’s first all agree that simply storing large cash sums in a safe (or under the mattress, or in a low-interest chequing account) is not an option. Sure, the dollar amount will never go down, but the value of that cash will be eroded by inflation (each dollar is worth less over time). Idle money loses its purchasing power. Simply storing cash may sound risk-free, but it’s actually a strategy that guarantees loss.
We might have an image of Scrooge McDuck diving into a pool of money as the pinnacle of wealth, but he’s actually a poor money manager. He wasted the vast growth potential of all his money by keeping it locked away in his mansion!
Money must be invested to at least maintain – or better yet, grow – its purchasing power.
The “cash is trash” truism was never proven to be so true as in 2023 when we saw your purchasing power decrease massively (sometimes close to 1% per month) due to inflation. While inflation doesn’t look to be as much of a burden in 2024 as it has been the past couple years, it’s still staying stubbornly high. I don’t know about you, but I personally don’t intend to see 3%+ of my net worth inflated away this year because I had cash sitting in a big bank chequing account.
How to Avoid Losing Money on Investments
The best way to avoid losing money on investments is to have a long time horizon and a diversified portfolio that has balanced portions of high risk investments and low risk investments/instruments.
High risk investments earn you high returns over the long term and the low risk investments can be used for short term savings, for waiting out temporary stock market volatility, and for providing stable returns to smooth out volatility in other parts of your portfolio.
The high risk investments like stocks require longer time horizons because stock market returns can fluctuate a lot year over year. Even though they can dip into negative returns and lose money for a year or two, history shows us that if you stay the course, you’ll see average positive returns over time.
People have different risk tolerance and different investment time horizons. So everyone has their own unique balance between high risk investments and low risk investments. Be aware of your investment needs and make sure that your portfolio reflects them.
When to Buy Safe Investments and When to Take More Risks
Low risk investments are ideal for people who are reluctant to start investing at all because of the inherent risk. If this is you, and if stock market fluctuations keep you up at night, then by all means, build an entirely low risk portfolio. Just be aware that while your investments are unlikely to go down the drain, they’re also unlikely to see gains of more than 2%.
If you’re looking at a longer timeline for your investments (say 5 years or more), then you’re better off adding a bit more risk to your portfolio. Your year-to-year returns may be all over the place, but in the long run, you should see steady growth and higher returns than a low risk portfolio.
The state of the market itself can also be a factor. In a bearish market, it can be wise to look for comparatively low risk investments, especially if you’ll need to access your money before too long. In a bullish market you can allow yourself to take a few more risks (and ideally reap the rewards). The best choice for you ultimately depends on your personal risk tolerance and your financial goals and timeline.
Are There Really Safe Investments in Canada with Good Returns?
If you’re looking for the magic “silver bullet” of a solution that combines a low risk investment with sky-high returns – then you’re probably out of luck.
Risk and short-term return are tied at the hip. If there was ever a low risk investment that could guarantee high returns, so many investors would pour into it – thus negating the need to offer high returns. It’s kind of an “investing gravity” in that it’s like a law of nature.
That said, investors looking for low risk investments in Canada do have a range of options.
EQ’s high-interest savings account that lets you get 4% on your cash – while being able to access it whenever you want is a pretty darn good deal. In fact, it’s about 2,000% better than what a chequing account at a big bank will get you.
The other option I like right now as we head into the summer of 2024 is the one-year GIC. You can check out the various GICs that EQ has available, but given that I think we might be seeing higher interest rates for longer than most think, the one-year option stands out.
If you understand the tradeoffs of investing in stocks (also called “shares” or “equities”), then you might want to check out my article on investing in wide moat stocks for more options in regards to safe-ish stocks.
No investment is entirely risk-free, but it is possible to manage risk effectively. Canadians have various options for low-risk investments, but it’s important to recognize that risk levels vary across a spectrum.
If you anticipate needing your funds within the next three to five years, it’s really best to look at a GIC. It’s crucial to acknowledge, though, that the ideal low-risk investment offering guaranteed high returns is a myth.
