If investing feels intimidating, this hands-off strategy was built for people just like you

For years, many Canadians did exactly what they were told: save diligently, avoid risk and keep money “safe.” Then inflation surged, housing costs exploded and grocery bills climbed faster than paycheques. Suddenly, playing it safe didn’t feel safe at all.

If your money is sitting still, it may already be losing ground.

Learning how to invest isn’t about chasing hot stocks or becoming a day trader. It’s about protecting your future — and giving your money a fighting chance to keep up with the cost of living.

The good news? You don’t need a finance degree, a six-figure portfolio or perfect timing to become a smart investor.

Why investing matters more than ever

Keeping money in cash can feel comforting. High-interest savings accounts are guaranteed, predictable and easy to understand. But they come with a hidden cost: inflation. Canada’s inflation rate averaged 3.9% in 2023 and remained above the Bank of Canada’s 2% target for much of 2024, eroding purchasing power for households across the country (1).

By contrast, Canadian equities have historically delivered long-term returns that outpace inflation. The S&P/TSX Composite Index has returned roughly 9% annually over the past 30 years, including dividends (2).

That gap matters. Money that grows faster than inflation builds real wealth. Money that doesn’t — shrinks. As investing author Andrew Hallam has long argued, the biggest risk for most Canadians isn’t market volatility. It’s doing nothing.

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When should you start investing?

The best time to invest was years ago. The second-best time is today. Why? Compounding.

Compounding is what happens when your returns start earning returns of their own. Even modest contributions can snowball over time. According to Vanguard Canada, an investor who puts away $500 a month earning 6% annually could accumulate more than $500,000 in 30 years — without increasing contributions (3).

Time does more of the heavy lifting than talent, timing or luck.

What should Canadians invest in?

There are many investment options, but most smart, long-term investors stick to a few core building blocks:

• Stocks — ownership in companies, offering growth and dividends but higher short-term volatility
• Bond — loans to governments or corporations that provide income and stability
• Funds — baskets of stocks and/or bonds that reduce risk through diversification

For most Canadians, the simplest and most effective option is low-cost index investing, typically through exchange-traded funds (ETFs). ETFs track entire markets instead of trying to beat them — and they do it cheaply.

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Active vs. passive investing: The fee problem

Canada has some of the highest investment fees in the world. The average actively managed mutual fund in Canada still charges around 1.8% to 2.2% annually, according to Morningstar (4).

That may not sound like much — until you realize fees compound in reverse. Morningstar estimates that a 2% annual fee can eat up nearly 40% of an investor’s lifetime returns. Low-cost ETFs, by contrast, often charge 0.05% to 0.25%, leaving more of your money working for you.

The couch potato approach

The couch potato strategy is one of the most proven — and least stressful — ways for Canadians to invest over the long term. It’s built on a simple idea: you don’t need to beat the market to succeed; you just need to capture market returns at the lowest possible cost. And more than likely it's converted more investors to the passive investing approach to building wealth than most other strategies.

The aim of the Couch Potato approach (and any passive investing strategy) it not to predict which stocks will soar or when markets will fall; instead, the couch potato investor owns a little bit of everything and stays invested through good times and bad.

The couch potato approach aims to:

• Beat inflation over time
• Reduce risk through diversification
• Minimize fees
• Remove emotion from investing decisions

It accepts a key truth backed by decades of research: most investors — including professionals — fail to consistently outperform the market after fees.

The classic “couch potato” strategy still works — but it’s even simpler now. Instead of juggling multiple funds, many Canadians now use all-in-one asset allocation ETFs, such as:

• VEQT / XEQT — 100% equities
• VGRO / XGRO — growth-oriented (80% stocks, 20% bonds)
• VBAL / XBAL — balanced (60% stocks, 40% bonds)

These funds automatically diversify across Canada, the U.S. and global markets — and rebalance themselves (5). For hands-off investors, this is about as simple as investing gets.

How much money do you need to start?

Less than you think. Much less. Many online brokerages let you open an account with as little as $100 — and some, like Wealthsimple, only require $1 to fund and activate a trading account. According to Wealthsimple, nearly half of its Canadian users started investing with less than $1,000 (6).

Consistency matters far more than starting size.

Robo-advisors vs. DIY investing

For investors interested in getting started but uncomfortable with the idea of consistent, principles-based investing, consider starting using a robo-advisor account. Robo-advisor portfolios are constructed using an investment methodology, with trades executed automatically using that philosophy.

Robo-advisors remain a strong option for Canadians who want structure and discipline, since they do the following:

• Build diversified ETF portfolios
• Automatically rebalance
• Encourage steady contributions
• Remove emotional decision-making

Robo-advisors helps reduce or eliminate behavioural mistakes — panic selling, market timing and abandoning plans. Given that these reasons remain the biggest reason DIY investors underperform (7), this makes robo-advisors a strong tool in the toolkit of a smart investor. It also means that for many Canadians, paying a small management fee is worth it in order to avoid costly investing mistakes.

The good news is many robo-advisors have no minimum investment, and most discount brokerages allow ETF purchases with just the price of one unit — often under $50.

How to get started investing — without overthinking it

If you want maximum simplicity:

• Open a robo-advisor account
• Set up automatic contributions
• Choose a risk level you can stick with

If you want more control:

• Open a discount brokerage account
• Buy one diversified ETF
• Invest regularly and rebalance occasionally

Either path beats sitting on the sidelines.

Bottom line

You don’t need perfect timing, insider knowledge or a large balance to become a smart investor. You need:

• Time
• Low costs
• Discipline
• A plan you can live with

Inflation isn’t waiting — and neither should you.

Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Statistics Canada (1); TMX / RBC Capital Markets (2); Vanguard Canada (3); Morningstar Canada (4); Vanguard Canada (5); Wealthsimple (6); Dalbar Quantitative Analysis of Investor Behavior (7)