Investing
Investing Basics
A simple introduction to how investing works, why people invest, and the concepts to understand before getting started.
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Investing in 30 seconds
Investing means putting money into assets with the expectation that they may increase in value, generate income, or both over time. Investing involves risk. Returns are not guaranteed.
Value may rise
Value may fall
Different purposes
Saving and investing have different jobs
Saving
- Typical purpose
- Shorter-term needs and stability
- Priority
- Accessibility and preservation
- Risk
- Generally lower, depending on product
- Examples
- Savings accounts and GICs
Investing
- Typical purpose
- Longer-term goals and potential growth or income
- Priority
- Potential long-term return
- Risk
- Values may fluctuate and losses are possible
- Examples
- Stocks, bonds, and funds
Potential purposes
Why do people invest?
Growth
Seek potential growth over time.
Income
Some investments may produce interest, dividends, or distributions.
Inflation
Pursue returns that may preserve purchasing power over long periods—without a guarantee.
Long-term goals
Retirement, education, financial independence, or other distant goals.
The building blocks
What can you invest in?
Cash & Cash Equivalents
Generally prioritize liquidity and stability rather than high growth. Examples include cash, savings products, and certain short-term cash-equivalent instruments. Risk varies by product.
Learn moreBonds / Fixed Income
A bond generally represents money lent to a government, corporation, or other issuer. Interest and principal repayment follow its terms, but interest-rate, credit, and default risks remain.
Learn moreStocks / Equities
A stock represents ownership in a company. Investors may benefit from price increases or dividends where paid, but share prices can rise or fall significantly.
Learn moreInvestment Funds
Mutual funds and ETFs pool collections of investments that may include stocks, bonds, cash, or combinations. A fund is not automatically diversified or low risk.
Learn moreOther investments
Real estate, commodities, and alternative investments also exist. They have distinct structures and risks and are outside this beginner overview.
Uncertainty and reward
Risk and potential return
Risk →
Simplified illustration only. Greater potential return often comes with greater uncertainty, but higher risk does not guarantee higher returns. Investments within one asset class can have very different risks.
Explore risk and return
Move the illustrative control to compare broad concepts—not products or portfolios.
Illustrative position
Values may fluctuate, and outcomes remain uncertain.
For illustration only. Investment risk cannot be reduced to a single slider, and investments within the same asset class can have very different risk characteristics. This is not a risk-profile questionnaire or investment recommendation.
Spread exposure
Don’t put everything in one basket
Concentrated
100%
One investment
Diversified
Diversification spreads investments across holdings, asset classes, industries, or regions instead of relying heavily on one investment. It can help manage certain risks, but does not eliminate investment risk or guarantee against losses.
When the money is needed
Time horizon matters
Time horizon is how long before you expect to need the money. Something considered for money decades away may not suit money needed soon.
Soon
Unexpected expense
Shorter term
Car purchase
Medium term
Home purchase
Longer term
Retirement
Hypothetical illustration
Investments don’t move in a straight line
Values can rise, fall, recover, and fluctuate. A decline does not automatically mean a permanent loss, but recovery is not guaranteed. Past performance does not guarantee future results.
Compounding
Growth can build on growth
When returns remain invested, future returns may be earned on both the original amount and previous gains. That is compound growth—but investment returns can also be negative.
Costs reduce what remains
Investment fees matter
Fund management expenses, advisory or account fees, trading commissions, and other product costs can reduce the return that remains with the investor.
Available
Understanding Investment Fees
A key Canadian distinction
A TFSA or RRSP is not an investment itself
TFSA
Registered account / plan structure
RRSP
Registered account / plan structure
TFSA and RRSP describe registered structures and tax treatment. What is held inside is a separate concept, and not every investment qualifies or is offered by every issuer.
Pause before purchasing
Before investing, ask yourself…
- 1.What is this money for?
- 2.When might I need it?
- 3.How much financial loss could I tolerate?
- 4.How much volatility am I comfortable experiencing?
- 5.Do I understand what I am buying?
- 6.What will it cost me?
- 7.How diversified am I?
Risk tolerance is your comfort with uncertainty; risk capacity is your financial ability to absorb loss. They are related but not identical.
Coming Soon
Risk Tolerance vs. Risk Capacity
Common pitfalls
Common investing mistakes
Chasing recent performance
Recent strong performance does not guarantee future results.
Putting too much into one investment
Concentration can increase risk.
Investing money needed soon
Market declines can happen at inconvenient times.
Ignoring fees
Costs reduce investor returns.
Buying something you don’t understand
Complexity does not automatically mean better.
Quick knowledge check
4 questions to lock it in
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Key takeaways
What you should remember
- Investing offers potential return but involves risk.
- Saving and investing serve different purposes.
- Asset classes have different characteristics and risks.
- Diversification can help manage—but not eliminate—risk.
- Time horizon matters.
- Investment values can fluctuate.
- Fees reduce investment returns.
- A TFSA or RRSP is a structure, not an investment itself.
- Higher risk does not guarantee higher returns.
Related topics
Keep learning
Available
Cash & Cash Equivalents
OpenAvailable
Bonds & Fixed Income
OpenAvailable
Stocks & Equities
OpenAvailable
Investment Funds
OpenAvailable
Understanding Investment Fees
OpenAvailable
Understanding Compound Growth
OpenAvailable
Understanding Inflation
OpenAvailable
TFSA Basics
OpenAvailable
RRSP Basics
OpenAvailable
Building an Emergency Fund
OpenAvailable
Compound Growth Calculator
OpenComing Soon
Risk Tolerance vs. Risk Capacity
Coming Soon
Diversification & Asset Allocation
Coming Soon
Dollar-Cost Averaging
Sources & last reviewed
Official references
- Last reviewed
- August 2026
- Primary sources
- FCAC, Canadian Securities Administrators, and Ontario Securities Commission investor education