Where and What Should I Invest In

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Luisa Rollenhagen

Luisa Rollenhagen is a journalist and investor who writes about financial planning for Wealthsimple. She is a past winner of the David James Burrell Prize for journalistic achievement and her work has been published in GQ Magazine and BuzzFeed. Luisa earned her M.A. in Journalism at New York University and is now based in Berlin, Germany.

When it comes to investing, the sheer range of options can feel a bit overwhelming for newcomers. It’s like going grocery shopping for the first time in a foreign country: What exactly is in this bright colorful box labelled “bonds”? Is that even something you want to be buying? You’re seeing other people pick up big bundles of stocks, but you’re unsure whether that’s not just a recipe for losing money. And although you’re really squinting to find an English translation on the packaging, you still haven’t found the exact difference between these so-called “ETFs” and “mutual funds.” Help!

How to decide what to invest in

Once you have a sense of your options, it's not so hard to figure out the 'what' of investing.

Long-term versus short-term goals

First off, before you start loading your shopping cart and simply hoping for the best (don’t do that), it’s important to do a little self-reflection and nail down what your financial goals actually are. Are you trying to save up for a trip? Build up an emergency fund? Basically, are you saving up for something that will probably happen in the next five years, or need quick access to your money in case of emergency? Then you’ll probably want to put your money into a high-interest savings account or something like a savings investment account, where you’ll be able to access it quickly when you need it.

If, on the other hand, you’re looking to build wealth over a long period of time—say, ten years or longer—, and you don’t need the money you’ll be putting toward that growth right away, then investing is probably a good strategy for you. This is particularly true if you’re saving for something big down the line, such as retirement. If you leave your money alone and reinvest the interest that you accumulate, you’ll benefit from compounding, which will grow your money at a much higher rate than it would if it were just sitting in a savings account.

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Risk tolerance

Then there’s the question of risk. How much risk are you willing and able to take on? If you’ve got $10,000 saved up, but in three years time you’re going to need that money for your daughter when she starts at university, then your risk tolerance on how to deal with that money is probably pretty low. So it’s better to once again save that money somewhere where it accumulates a decent interest without exposing it to risk.

However, if you have $5,000 lying around and have an emergency fund set up and know you won’t need to touch those five grand anytime soon, that’s an ideal situation for you to invest that money. Keep in mind, investing money is always associated with risk. You can reduce your risk by investing in funds or bonds more heavily than in stocks and by diversifying your investments, but you’re still investing. That means that past performances of markets are no indication of future performance, and that there’s always the risk, no matter how small, that you may end up with less than you started with.

Diversify, diversify, diversify

This is why diversification is so important! Let’s go back to the foreign supermarket. You see a shiny box labelled as something you can’t understand, but there’s a picture of some sort of biscuit on it that looks cool and sweet and yummy, so you fill your shopping cart with just those shiny boxes. As you tear one open and bite in, you’re quickly filled with consternation as you realize you just bought ten boxes of what appears to be dog biscuits in the liver flavor variety. Congratulations.

If you had diversified your shopping by putting a selection of different things in your cart, you wouldn’t be left eating foreign dog biscuits on the sidewalk after spending all your money on them. Instead, if you had just bought one box in addition to other things, you wouldn’t be too bummed out that one box ended up being doggy snacks, because you have plenty of other snacks to try out.

The same goes for investing. If one part of your portfolio doesn’t perform well, it won’t tank all of your money because you’ve spread your eggs across many baskets, in terms of what kinds of investments you’ve purchased and in what industries you’ve invested in. That way, you’re spreading out the risk and not relying too heavily on any one stock or industry.

Diversifying your portfolio means picking investment assets from a wide field of industries, which is often a pretty laborious and daunting task, especially for someone who’s not an expert. So how do you ensure you’ve got a diversified portfolio? One way to take the guesswork out of it and save yourself some time and money in the process is to use a robo-advisor.

A robo-advisor will, with the help of an algorithm, put together a diversified portfolio for you that corresponds to the level of risk you’re willing to take on. As the market changes, the robo-advisor will make adjustments to your portfolio to ensure that you’re still diversifying your investments and investing at a risk level that you’re comfortable with. Because a robo-advisor also charges way lower fees than an actual investment advisor, you’ll also be able to start investing much sooner instead of waiting to have enough capital stored up to be able to pay for an advisor. This way, you can start investing that much sooner. As to what you should be investing in….

What should I invest in

Although in popular culture investing is usually associated with investing in stocks, there are plenty of things you can invest in, and they all have certain advantages and disadvantages, including the fact that there’s always a certain amount of risk involved with any investment you make. Here are all the assets you can invest in:

1. Stocks

Simply put, stocks represent an ownership in a company. If you buy a stock from a company, you become a shareholder, which means you also might receive dividends. Companies that issue stock need to be listed on the stock market, so that investors can trade shares.

Benefits: The main benefit of stocks is that they have a great potential for high, long-term growth. Blue-chip companies listed on the stock market have a proven history of return on equity, which means that the company has been able to generate profit from its shareholders’ investments. Stocks are particularly popular among investors looking for long-term investments, since stocks held for longer periods of time (15+ years) have great potential for growth.

Disadvantages: With great potential comes great risk, unfortunately. Stocks are pretty risky, since their value depends on a company’s performance on the stock market, which can be pretty volatile, especially in the short-term. A company’s performance is dependent on many factors that can be hard to predict, such as the new release of a product that turns out to be faulty, an internal scandal, or by political events happening in the country where it’s based. Therefore the past performance of a stock is no guarantee of its future performance. How much of your portfolio is comprised of stocks depends on how much risk you’re able to take on. If you’re saving for a long-term goal that’s perhaps 20 years away, leaning more heavily on stocks could be a good way to grow your money over time. But if you’re already in retirement and living off of your investments for income, you probably shouldn’t be relying on stocks for day-to-day consistency.

2. ETFs

Exchange Traded Funds are the darling of the diversification preacher, and for good reason. While a stock represents a part of a single company, an ETF represents a slice of an entire market, including all the companies that are trading on that market. So you’re getting fractional shares of a bunch of companies, although ETFs are not just limited to stocks.

Benefits: The huge benefit of ETFs are their built-in diversification and their low costs. Since ETFs are basically bundles of stocks or bonds, they will already include shares from a wide variety of industries, companies, and sectors. Because they also don’t need to be managed by a fund manager who’s charged with picking stocks to include in a fund, ETFs are way cheaper. They usually charge an annual fee of around 0.05% to 0.25%, and online investment platforms and robo-advisors do away with commissions and high investment minimums.

Disadvantages: ETFs don’t allow you to choose what companies or sectors you want to invest in, because they represent broad swaths of the market. So if you’re looking to focus more specifically in one market area, such as the tech industry, you won’t be able to do so with ETFs.

3. Bonds

A bond is a kind of loan agreement issued by a company or even a government. When you invest in a bond, the bond issuer usually takes that money to spend on increasing a company’s operations or, if it’s a government, to take on new projects such as building infrastructure. Bonds usually also have an end date, by which the original loan amount must be paid back. Meanwhile, bonds accumulate interest which are then paid back to the bond holder as well.

Benefits: Bonds are often considered to be the safest and most stable investment and are recommended for offsetting the volatility of stocks in a portfolio, although not all bonds are equally safe. They do offer a steady interest rate, which is why they’re often cited as great investment choices for retirees who can’t afford to subject their income to the volatility of the stock market.

Disadvantages: First off, not all bonds are created equal. Bonds issued by companies with a bad credit history offer higher interest rates, but there’s also the risk that the company could default and not be able to pay back your original loan. Government bonds are considered more stable, but also have lower interest. Bond prices are also subject to general interest rates, so if rates fall bond prices rise and vice versa. This means your bond portfolio could lose value as rates rise.

4. Real estate

Investing in rental properties can be done by either buying into real estate investment trusts, which are like mutual funds for commercial real estate, or by doing it IRL—either buying property for the purpose of renting it out or fixing up and reselling property.

Benefits: One of the main benefits of investing in rental property is the potential for steady income generated from the rent of the property. Another benefit from buying property for rental purposes is the tax benefit that’s generated from the investment, including being able to write off expenses incurred for maintaining the property and not subjecting the rent to a self-employment tax. Another benefit? Real estate can be used as a hedge against inflation. When prices go up, so does the rent that’s charged, which insulates you against the effects of inflation. The value of real estate also usually appreciates over time, which is why it’s a popular investment choice.

Disadvantages: Just like with any other investment, real estate is also vulnerable to market fluctuations, and past performance is no guarantee of what the future will hold. If you’ve purchased a property for renting or flipping, another disadvantage will be the continuous maintenance costs you’ll have to pay for, as the property will require repairs and paid amenities.

5. Mutual funds

Mutual funds are kind of like ETFs, except that they’re usually actively managed by a fund manager, and consist of a range of stocks and/or bonds bundled up in a portfolio. The fund manager is in charge of buying and selling securities, and determining what assets go into the mutual fund.

Benefits: Just like with ETFs, a mutual fund ensures that you have diversification built into your portfolio. You have access to a diversified portfolio without having to do the difficult and often imprecise work of purchasing assets and constantly monitoring them, since the fund manager does that work for you.

Disadvantages: One of the main problems with a mutual fund is that they can get quite expensive, since the fund is being managed for you. Investors have to pay a number of fees, including annual fees and sales charges, that’ll be due no matter how the fund performs. And as is the case with ETFs, you have no real control over what goes into the fund.

6. Automated investing provider

Also known as robo-advisors, an automated investing provider will do exactly what the name suggests: automate the creation of a portfolio, usually consisting of ETFs, and invest a certain, predetermined amount of money each month, and rebalance as needed.

Benefits: The most obvious benefit is that you don’t really need to do anything apart from set up an account and answer some questions about your financial goals and risk tolerance. And because everything is automated, you skip out on all the fees associated with managed accounts.

Disadvantages: As is the case with ETFs, you can’t really control what areas the automated investing provider invests in because it’s, you know, automated.

6. The New Kids on the Block: Crypto and Weed

Unless you’re my 96-year-old grandad, you’ve probably heard of cryptocurrencies before, and obviously you know that all the cool kids are talking about investing in weed companies as the next big thing. We can’t tell you whether that’s true or not (no one can), but it’s definitely a thing, and you can invest in both crypto stock and the stock of weed companies trading in markets like NASDAQ and the NYSE.

Benefits: As with most new, exciting markets, there’s a lot of potential for growth. Although the hype around cryptocurrencies has died down a bit, crypto stock is still seen as a viable into an optimistic, young, and growing market. The same goes for the cannabis industry. As more and more states legalize weed, the industry is growing rapidly, and more and more investors want to join the party.

Disadvantages: As is the case with most “new, exciting markets,” it’s better to be very cautious. Certainly go ahead and invest, but don’t place a lot of stock (ha, sorry) in these companies suddenly making you a multimillionaire overnight. There’s a lot of speculation around these industries, as they’re still very young, and speculation is the enemy of the sound investor. There’s a lot of risk involved with uncertain and unproven industries, including the risk that it’s a bubble and might burst at any time. So invest small amounts that, if you lose them, won’t hurt too much.

7. Gold

That sounds decadently old-fashioned, doesn’t it? Investing in gold, like you’re a pirate or something. But actually gold has been a tried-and-true asset for investors for a reason. It’s considered a tangible asset that’s been a measure of wealth for centuries, has maintained its value while other securities such as paper currencies have declined, and is often part of a well-balanced portfolio. Plus it’s pretty.

Benefits: Gold is considered to be a good protection, or hedge, against inflation. The price of gold tends to rise when inflation rises, which means that it’s a good way to offset any losses incurred because of rising prices. It’s also a commodity that maintains its value during times of financial and geopolitical uncertainty, which is why it tends to be an investment favorite during times of crisis. Another benefit of investing in gold is that it’s in finite supply, which means that there will always be demand for it as it’s traded around.

Disadvantages: In comparison to stocks, gold doesn’t yield dividends, which doesn’t make it as attractive for many investors. The price of gold is also volatile in the short term, which means that it’s not a good investment choice for someone who’s looking for short-term gains. Another issue with investing in gold is that it’s usually associated with higher fees, especially when dealing with gold coins (because of storage issues). At the end of the day, gold really only earns you money when you sell it, and that means you’ll have to take on the risk that the selling price might be lower than what you bought it for.

8. Cash or Savings

Another popular option? Put that extra money that you have lying around in a savings account, or keep it on hand as cash. While we don’t recommend this as your primary strategy, there are some instances when this is a good idea.

Benefits: Having cash on hand or having it stored in a savings account means that you have instant liquidity. The minute you need that money for something, bam, it’s there. That’s probably the greatest advantage of storing money in cash or in a savings account. Short-term goals—such as a vacation—or emergencies are the perfect candidate for this kind of investing strategy, although going so far as to call it investing might be a bit of a stretch.

Disadvantages: Inflation. Let’s say inflation is growing at 1.5%, and you put your money in a savings account that has an interest rate of 0.5%. That means that inflation is growing faster than your money, meaning that your cost of living is outpacing the investment growth, which means you’re actually losing money. That’s why keeping money in cash or in savings is not a viable long-term strategy.

Where should I invest?

Once you know the what, it's time to figure out the where. Here are some of your options.


As mentioned before, robo-advisors are a popular choice among newbie investors unsure of where to start (or unable to afford high management fees), and among investors who don’t have the time or the energy to pore over market performance stats and research individual companies to pick out for a balanced portfolio. With the help of an algorithm, the robo-advisor creates a balanced, personalized portfolio for you with the help of low-cost ETFs, and even sets up automated recurring deposits and dividend reinvestments to ensure your money grows continuously.* *

Brokerage or investment platform

Most investing is done either through a brokerage or investing platform, which allows you to carry out the investment through an account you’ve opened there (a robo-advisor is a type of investing platform, for example). Depending on the level of service you choose (whether you pick and manage the portfolio or whether it’s managed for you), a brokerage account will incur more fees than robo-advisors, including commission for trades, annual fees, and/or charge for additional access to data, financial advice, and educational resources. Some trading platforms, on the other hand, don’t charge you for any of this.* *

Financial planner

The financial planner is like the white-glove service of stocks trading. It’s usually quite expensive, but there’s a reason for that. A financial planner personally helps manage your money and will develop a portfolio for you, as well as in some cases manage it for you. You’ll usually have to pay a flat fee, commission, and perhaps consultation fees and fees priced at the percentage of assets under management. So before you choose this route, it’s important to know exactly how much you’re paying for and whether it’s worth it for you, since fees can really eat into investment gains if you don’t plan carefully.

Has all this talk about investing made you keen to get started? Still have questions? We’re here to help. Wealthsimple will help you plan for your financial future and get you acquainted with the ins and outs of investing, all at a low cost and with professional financial advice. Sign up here to get started.

Last Updated April 29, 2019

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