Canada is at a bit of a crossroads. With Mark Carney potentially stepping into leadership, the federal government will need to navigate a long list of challenges: revised immigration targets, tariff threats from the U.S., interprovincial trade friction, and a housing crisis that still shows no sign of letting up.
But here’s the thing: no matter how Carney and the Liberal party fare, your investment strategy doesn’t need to be reactionary. Over the long run, political and economic variables rise and fall. What matters more is that you invest consistently and stick with it through good and bad.
So if you’ve got $5,000 burning a hole in your pocket, resist the temptation to spend it on short-term pleasures. Your future self will be glad you paused and made a smart decision. Here’s how I’d invest $5,000 wisely in today’s Canadian market.
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Prioritize my TFSA
When it comes to choosing where to put your money, there’s no shortage of registered accounts vying for your attention – whether it’s the Registered Retirement Savings Plan (RRSP), First Home Savings Account (FHSA), or the Tax-Free Savings Account (TFSA). Each has its perks, but nine times out of ten, I’d prioritize the TFSA.
Why? Because the TFSA offers unmatched flexibility. You can withdraw money at any time, for any reason, with zero tax penalties. Plus, anything you earn inside the account, whether it’s dividends, capital gains, or interest is completely tax-free.
No restrictions on how you invest, no income limits to worry about, and no penalties for early withdrawals. And best of all, the contribution room you use comes back the next calendar year after a withdrawal, so you’re not permanently locking yourself out.
For 2025, you’ve got $7,000 in new TFSA contribution room. If you put in $5,000 now, you’ll still have $2,000 of room left over to use later. But personally, I’d invest it as soon as possible, because a dollar invested today is worth more than a dollar tomorrow.
Invest in Canadian stocks
If I’m using my TFSA, I want to make sure I’m getting the most out of it. Canadian stocks offer two key benefits that U.S. stocks don’t. First, there’s no 15% foreign withholding tax on dividends when held in a TFSA. Second, you don’t need to worry about currency exchange risk, which can eat into your returns if the loonie weakens.
That’s why I like the iShares Core S&P/TSX Capped Composite Index ETF (TSX:XIC). This ETF gives you exposure to basically the entire Canadian stock market, from the largest blue-chip companies to smaller firms.
It tracks the S&P/TSX Capped Composite Index, which is market cap-weighted with a 10% cap on any single stock, so no one company dominates the portfolio. Naturally, it is heavy in financial and energy sector stocks.
Best part? It charges a rock-bottom 0.06% management expense ratio. On a $5,000 investment, that’s only about $3 a year in fees. You’d be hard-pressed to find a cheaper way to buy the entire Canadian stock market in one move.
