In a tumultuous economic world, it can be tough to find stable global investments. Many companies have set up shop in Canada, one of the world’s leading economies and home of the Toronto Stock Exchange.
Canada offers many investment opportunities for Indians to grow their wealth. The best choice depends on your personal circumstances. Let’s explore investment strategies and opportunities in Canada for Indians.
Andriy Onufriyenko / GettyWhy Should You Invest?
Investing is a lucrative way to grow your wealth, and the global market is surprisingly accessible. Online banks, discount brokerages and automated investment providers make it easy for foreign investors to access Canadian investment opportunities. In fact, Canada is a central hub for global trade.
Each type of investment comes with its own risk and return expectations. Common forms of Canadian investments include:
- Exchange-traded funds (ETFs)
- Real estate
- Business franchises
- Bonds
- Stocks
- Mutual funds
Creating an Investment Strategy
The ideal investment strategy depends on factors that include risk tolerance and time frame. Identify your investment goal, such as growing a retirement fund or saving for a down payment on a house, to develop an optimal strategy. Long-term goals can handle fluctuating and high-risk investments, while short-term goals may necessitate a conservative approach.
Personal circumstances and risk tolerance also affect investment strategies. You might prefer a strategy with high cash liquidity and lower commitment investments, or you may have excess cash reserves to invest in high-risk and commitment opportunities.
Advantages of International Investing
International investment opportunities offer a few appealing advantages. In general, foreign portfolios offer greater portfolio diversification on a global scale. Access to emerging markets with varying risk-return profiles also means investors can take on greater risk for higher profits.
Additionally, investments in other currencies provide greater currency diversification. Stable foreign currencies can compensate for fluctuations if the value of domestic or other foreign currencies falls.
Investors can also obtain international credit, allowing greater investment leverage and returns and minimizing double taxation.
Canadian Trade Agreements
Experts agree that Canada should continue to rebound and grow in coming years as leisure and travel industries recover and export industries expand.1 Trade agreements also ensure that Canadian companies get preferred access to global markets and get a boost in economic competitiveness.
For example, the Canada-European Union Comprehensive Economic and Trade Agreement ensures 98% of EU tariffs are duty-free for Canadian goods.2 An additional 1% of tariff lines will be phased out over the next few years. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership also gives Canadian companies preferential access to key markets in Asia and Latin America.3
Why Grow Your Wealth With Canadian Investments
Strong international demand is quickly growing the Canadian economy, with 6.1% growth in 2021 and 3.8% in 2022.4 Canada’s marginal effective tax rate, which is the estimate of the level of taxation on new business investments, stands at 13.7% as of 2022, the lowest in the G7 and below the average of the Organisation for Economic Co-operation and Development (OECD).5
Other factors such as political stability and low corruption make Canada an appealing investment opportunity.6 Canada also has one of the safest banking systems in the world, with five banks ranked among the World’s Safest Banks.7
All-In-One Exchange Traded Funds
An ETF is an investment fund composed of stocks and other assets that track a certain underlying index. The value of an ETF is related to the total value of the assets it contains, so it may shift throughout a single day. The risk level of an ETF can be low, depending on the risk of the assets it contains. ETFs are highly liquid, however, meaning you can access your cash quickly if needed.
All-in-one ETFs are fully managed for investors for a fee, similar to mutual funds. Some of the top such all-in-one ETFs include:
- Vanguard Growth ETF portfolio
- BMO Conservative ETF Portfolio
- iShares Core Balanced ETF Portfolio
- Horizons Balanced Tri ETF Portfolio
Equity, Gold and Other ETFs
Other ETFs, such as the Vanguard FTSE Canada All Cap ETF or the Horizons S&P/TSX 60 Index ETF, are geared towards assets within the Canadian economy. Many investors also look to the iShares Gold Bullion ETF or Horizons Enhanced Income Gold Producers ETF, which are commodity ETFs that focus on gold as their principal asset.
Canadian bank ETFs, such as the BMO Equal Weight Banks Index ETF, focus on banking stocks across Canada’s strongest banks. Other ETFs worth considering across other assets include:
- iShares Core Canadian Short-Term Bond Index ETF
- Horizons Active Canadian Dividend ETF
- BMO Canadian Dividend ETF
Principal Residence Property Investment
Buying a primary residence is not just a place to live, but also a popular long-term investment strategy. In 2020, Canadian and foreign investors bought a record 551,000 residential properties.8
Real estate investments can be high risk since you’re making a large investment into a nonliquid asset, but they can offer equity growth and big returns in a favorable housing market.
As a bonus, the Canadian Revenue Agency exempts you from capital gains tax when you sell a principal property.9
Rental Property
Buying and renting out either residential or commercial properties is also a great investment strategy. Earn income from your investment with monthly payments from tenants, then use that income towards the property mortgage or other investments.
Investing in a Canadian rental property requires a more hands-on approach from the investor, meaning you’ll either have to be involved in the property management yourself or hire someone to communicate with tenants, maintain the property and collect rent.
Property Flipping
Property flipping is another lucrative real estate investment option in Canada. It involves buying a property, increasing its value through improvements and repairs and then selling it for substantially more than you paid for it.
This strategy comes with some risks and obstacles. Some homes may appear to need only minor cosmetic improvements but may later reveal major and costly issues. The market may also shift to favor buyers by the time you’re ready to sell, either forcing you to accept lower offers or hold out for another market shift.
Real Estate Investment Trust
Real estate investment trusts or REITs are companies that own, operate or finance income-generating properties. Unlike other types of real estate investments, Canadian REITs are traded like stocks and are highly liquid. They offer consistent dividends for investors for much lower risk, effort and commitment than other real estate investment options.
Almost 40 REITs currently trade on the Toronto Stock Exchange. Some of the best Canadian REITs include:
- Morguard REIT (TSX:MRT.UN)
- H&R REIT (HR.UN)
- First Capital Realty (FCR.UN)
- Summit Industrial Income REIT (SMU.UN)
Business Franchises
Nonresident or foreign investors may register a business franchise in Canada. The franchise business model is an attractive model to many foreign investors or Canadian newcomers since it comes with existing brand recognition, demonstrated business model success and franchiser-provided equipment.
Buying a franchise has both large upfront and ongoing costs. Franchise owners may deal with other disadvantages such as franchise standards and limited autonomy.
Some of the most popular and fastest-growing franchises include:
- Pet Valu
- Freshii
- Tim Hortons
- Booster Juice
- Boston Pizza
- Mr. Lube Canada10
Stocks
A higher-risk option than ETFs, stock investments are a volatile but potentially high-return investment option for Indians. Stocks involve more research and analysis than ETFs since your investments are concentrated in individual companies.
Investors can purchase stocks directly through the Toronto Stock Exchange, or they can find emerging companies on smaller Canadian exchanges.
With its history of natural resource exports such as oil, gas, lumber and minerals, Canada is a great place to invest in commodities. Some of the strongest dividend stocks in Canada include:
- Enbridge Inc. (ENB.TO)
- TransAlta Renewables Inc. (RNW.TO)
- Capital Power Corporation (CPX.TO)
- Canada Natural Resources Limited (CNQ.TO)
- Exco Technologies Limited (XTC.TO)
Maximizing Financial Growth Through Strategic Canadian Investments
Canada presents a diverse range of investment opportunities that can help Indians grow their wealth in a stable and globally connected economy. From real estate to stocks and ETFs to business franchises, the options are plentiful and can be tailored to individual risk preferences and financial goals. With a strong economy, political stability, and advantageous trade agreements, Canada remains a lucrative destination for foreign investors. By carefully considering personal circumstances and strategic goals, Indians can leverage these opportunities to secure long-term financial growth in this dynamic market.
