Want to find out what the best low-risk investments in Canada are? Check out this list of options to help your clients protect and grow their wealth
Low-risk investments can offer your clients a way to protect their capital while still earning modest returns. These investment options are especially important for clients nearing retirement or managing cash reserves. They can also be great options for those who are simply looking to preserve wealth with less exposure to market volatility.
In this article, Wealth Professional Canada will explore a range of low-risk investments that you can recommend to your clients. We’ll talk about how each option works as well as possible drawbacks that your clients should expect. If they value stability over high returns, choosing from this list of low-risk investments might strengthen their long-term plans.
Low-risk investments in Canada
Here is a list of low-risk investments that your clients can choose to include in their portfolios:
- high-interest savings account
- low volatility fund
- annuities
- guaranteed investment certificates
- dividend-paying stocks
- money market funds
- treasury bills
- corporate bonds
Let's thoroughly discuss each one below:
1. High-interest savings account
A high-interest savings account (HISA) works just like any other traditional savings account. However, it has the added benefit of giving higher interest on your clients’ deposit. While a HISA isn’t strictly an investment, it has some merits and is worth considering when recommending low-risk investments to your clients.
Why invest in a high-interest savings account?
For one, HISAs are easily accessible since they’re offered by financial firms, including digital banks. Opening an account is also quick. Your clients can finish the process in minutes through a secure mobile app. Most have no minimum deposit and minimum balance required either.
Your clients will likely never lose money on a HISA as well. This is because their deposit is insured up to $100,000 by the Canada Deposit Insurance Corporation (CDIC).
Watch this video for more:
Do you have clients who are interested in making one or more high-interest savings accounts part of their portfolio? You can introduce them to some of these competitive HISA offerings by reputable banks and financial institutions across the country.
What is the lowest risk investment in Canada?
Investors can treat HISAs as parking spots for near-term goals because the risk of loss is almost zero. As such, we can say that this investment type has the lowest risk on our list.
2. Low volatility fund
A low volatility fund is a pooled investment that targets equities with historically lower price fluctuations. These funds often focus on sectors that tend to hold value better in periods of market stress.
Most low volatility funds are structured as exchange-traded funds (ETFs), offering liquidity and lower fees compared to active mutual funds. Although this vehicle has more risk compared to a HISA, it's still a safer option compared to investing in an index fund on the stock market.
Why invest in a low volatility fund?
A low volatility fund offers a way to participate in the equity market with reduced exposure to major price swings. Its defensive tilt can help cushion losses in downturns while still providing dividend income and long-term capital appreciation.
This investment is best for clients looking to moderate portfolio risks while still maintaining growth potential.
3. Annuities
Fixed annuities are commonly used in retirement planning to convert a portion of accumulated savings into a predictable income stream. Payouts can be structured to last for a fixed period or for life. These can also be based on single or joint lives.
Annuities can be purchased using:
- non-registered funds
- Registered Retirement Savings Plans (RRSPs)
- Registered Retirement Income Funds (RRIFs)
- other registered plans
Many insurers require a minimum investment amount, usually starting around $50,000, depending on the provider and product structure.
Why invest in annuities?
Annuities reduce longevity and sequence-of-returns risk by delivering stable, regular income regardless of market performance. For clients without employer-sponsored pensions, annuities can help create a reliable baseline for retirement income.
Customization options like guaranteed periods and joint payouts can also align with your clients’ needs.
4. Guaranteed Investment Certificates
In a Guaranteed Investment Certificate (GIC), your clients’ capital virtually has no risk. Unfortunately, this less risky investment has low liquidity. The good news is, the longer the term, the higher the earnings. The terms of a GIC can range from 30 days to ten years.
Not only is a GIC guaranteed to earn at a fixed rate, but it also enjoys protections like those of savings accounts. The CDIC guarantees GICs amounting to at most $100,000. So even if the financial institution holding your clients’ GICs fails, they’ll still get their money back.
Why invest in GICs?
The “G” in GIC doesn’t mean “guaranteed” for nothing. At the end of the term, a GIC deposit matures, and investors can withdraw from the principal and the earnings—and this is guaranteed. What's more, there are no penalties when collecting the principal and earnings once a GIC matures.
Here’s how your clients can maximize their GICs:
If the money is withdrawn prematurely, the account holder might need to pay a penalty. Worse, they might lose interest in earnings. Here are some downsides to this low-risk investment:
- investing in GICs isn’t advisable if your clients need money
- investors must leave their money untouched to maximize its earnings
- your clients could lose out on other wealth-generating opportunities like mutual funds while their money is locked in a GIC
5. Dividend-paying stocks
This is one of the more dependable investments when it comes to equities. Dividends are declared as a fixed amount per share; yield varies with share price. Regardless of whether the share price rises or falls, these stocks will issue dividends.
Why invest in dividend-paying stocks?
Dividend-paying stocks have been shown to perform better than non-dividend-paying stocks in a bearish market. During these periods, stocks that pay dividends see their value decline less, while other stocks across the board experience sharper reductions in value.
In addition to their resilience, dividend-paying stocks offer two kinds of returns: regular income from dividends and capital gains on the stock price.
Possible drawbacks
Still, this low-risk investment can have some disadvantages like:
- being riskier compared to the other low-risk investments in this list
- depending on the performance of the stock market, dividends might not be as high as investors would like
6. Money market funds
Money market funds are another investment that even savvy investors might gravitate towards, as they are the low-risk sort. They’re a type of mutual fund that holds high-quality, short-term debt like:
- commercial paper
- bankers’ acceptances
As this type of low-risk investment has high liquidity, many seasoned investors prefer to invest here as a way of storing cash. It’s also a good alternative to investing in the stock market.
Why invest in a money market fund?
Money market funds are safe and reliable. They’re less risky in the sense that they don’t drastically lose value over time. Another advantage is that some of them are offered and managed by the biggest banks in Canada.
Check out this video to learn more:
7. Treasury bills
Treasury bills or T-bills are short-term debt instruments issued by the Government of Canada. They are sold at a discount and mature at face value, with the difference representing the investor’s return.
Because they’re backed by the federal government, T-bills carry virtually no credit risk. As such, they’re a low-risk investment that can also be considered as one of the safest fixed income securities available in Canada.
T-bills are available in both primary and secondary markets and can be purchased directly or through investment dealers. They are commonly used for capital preservation and short-term cash management in both institutional and retail portfolios.
Why invest in treasury bills?
Since T-bills provide a predetermined return, they’re an ideal tool for clients who need high security and liquidity. Their short maturities also help reduce interest rate risks. Income is taxed as interest in non-registered accounts, but T-bills can be held in registered plans.
8. Corporate bonds
A bond is a form of obligation to pay off debt. Investors who buy corporate bonds lend money to the firm that issued the bond. Companies use bonds for business activities like upgrading facilities and funding expansions.
In return for the money lent by investors, the company makes a legal commitment to pay interest on the principal and to repay the principal at maturity.
Why invest in corporate bonds?
Corporate bonds can be relatively low risk if issued by large companies that are also stable and profitable. Your clients can choose bonds with terms of a few years to maturity as a way of offsetting the risk of changes in the interest rate.
To decrease the risk of company defaults on bonds, advise them to choose high-quality bonds from reputable companies. Either that or purchase funds that are invested in a diverse bond portfolio.
The risk-return tradeoff in investments
What’s the concept of risk-return tradeoff in terms of investments? This simply states that the potential returns of an investment are directly proportional to its risk. The higher the risk, the higher the return. Conversely, the lower the risk of an investment, the lower its returns.
How to get 10% return on investment in Canada
To target that level, your clients must accept higher volatility and the possibility of capital loss. Common choices include:
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Broad-market equity ETFs: The S&P/TSX Composite delivered long-run average total returns of eight percent.
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Dividend-growth stocks: These can push returns higher than the index, though prices still fluctuate.
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Private credit, mortgage investment corporations (MICs), or direct real estate limited partnerships: With these investment types, your clients’ yields can exceed 10 percent, but liquidity is limited. Plus, default risk is also higher.
No strategy can guarantee a stable 10 percent. Still, if your clients are disciplined when building their portfolio, they’ll have better chances of achieving that target over a full market cycle.
Are low-risk investments right for your clients?
Low-risk investments are ideal for clients who want to protect their capital while earning steady, predictable returns. These products can support short-term goals or even act as a buffer during market downturns. Low-risk investments can also provide reliable income for retirement.
Low-risk investments can be your clients’ way to reach their financial goals with managed expectations and sound advice. If you want to be an effective financial advisor, you need to help your clients find the right balance between growth and security. Ask about their risk tolerance so that you can match them with the best options available.
Whether your clients are cautious investors or simply need a place to park funds temporarily, low-risk investments can add stability to any portfolio.
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