Is Now a Good Time to Start Investing in Canada? What to Consider

Here’s why now can be a good time to start investing in Canada and what to consider as you build a portfolio for the long haul.

Key Points
  • The iShares Core S&P/TSX Capped Composite Index ETF (TSX:XIC) offers a diversified entry into the Canadian stock market, covering over 200 holdings across various industries, making it an ideal foundation for long-term investment.
  • Before investing, ensure you can leave funds in the market for years, manage debt, and consider using accounts like a TFSA or RRSP for tax advantages, while starting with manageable amounts consistently.
  • Complementing an ETF with individual stocks like Canadian National Railway (TSX:CNR) can enhance your portfolio's growth potential through targeted investments in companies with strong competitive advantages and long-term viability.

If you’re wondering whether now is a good time to start investing in Canada, the answer is yes, provided you’re investing money you can leave in the market for years.

And with investments like the iShares Core S&P/TSX Capped Composite Index ETF (TSX: XIC), you don’t need to find one perfect stock before you can begin.

After all, there’s always a reason to hesitate. When stocks have rallied, it’s understandable to worry that you’ve missed the opportunity. And when they’re falling, waiting for conditions to improve can seem like the safer choice.

However, neither situation tells you much about whether you’re personally ready to start building a portfolio.

That’s why, rather than waiting for the market to look perfect, it makes more sense to understand what you can afford to invest and which investments can help you build wealth over the long haul.

Train cars pass over trestle bridge in the mountains

Source: Getty Images

What to consider before you start investing

One of the first things to consider is how long you can leave your money invested.

Stocks can fluctuate considerably in the short term, so money you’ll need for an upcoming expense should generally stay out of the market.

Furthermore, having an emergency fund and paying down expensive debt can put you in a much stronger position to invest consistently without having to sell stocks whenever an unexpected expense comes up.

It’s also worth considering which account to use. A TFSA allows your investments to grow tax-free, while eligible RRSP contributions can reduce your taxable income and allow your investments to grow tax-deferred.

Plus, you don’t have to make one massive investment to get started. Investing a manageable amount each payday or month allows you to build your portfolio gradually while reducing the pressure to choose the perfect day to buy.

Because once you have a plan you can consistently follow, investing becomes something you can keep doing through different market conditions, giving your money more time to compound.

Two Canadian investments to consider for the long haul

If you’re looking for a straightforward place to start, XIC gives you exposure to more than 200 Canadian holdings through a single investment.

It follows the broad Canadian stock market, giving you access to businesses across several industries without limiting your portfolio to one sector or only companies paying generous dividends.

That makes it a useful foundation for the Canadian portion of your portfolio, especially while you’re still learning about individual businesses.

However, as you become more comfortable researching stocks, you can also choose to put additional money into companies whose competitive advantages and growth potential particularly appeal to you.

For example, Canadian National Railway (TSX: CNR) is one of the most important transportation businesses in North America.

Its massive railway network connects Canada’s Atlantic and Pacific coasts with the U.S. Midwest and Gulf Coast, helping move everything from grain and energy products to manufactured goods.

That infrastructure would be incredibly difficult and expensive to replicate, giving CN Rail a significant competitive advantage.

Furthermore, it has opportunities to grow by attracting more freight to its network and improving how efficiently it moves those goods, allowing it to generate more earnings from the infrastructure it already owns.

In fact, CN Rail increased its adjusted earnings per share by roughly 45% between 2020 and 2025, showing the kind of earnings growth investors can benefit from when they give a high-quality business years to grow.

Demand can still weaken in the near term when the economy slows. However, its essential role in North American trade gives investors a reason to look well beyond the next quarter.

It’s also worth noting that XIC already owns CN Rail, so if you choose to own both, you’re increasing your exposure to the company. However, buying the stock separately allows you to put more of your money into a business whose long-term potential particularly appeals to you, while keeping the ETF as the diversified foundation of your portfolio.

And whether you start with an ETF or individual stocks, finding high-quality investments you understand and giving them years to grow can put you in a much better position to build wealth than continually waiting for the perfect opportunity to begin.

Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

How I’d Build $200 a Month in Tax-Free TFSA Income With Peyto Exploration & Development and Automotive Properties REIT

These two monthly-paying dividend stocks present compelling opportunities for income-seeking investors.

Read more »

ETFs can contain investments such as stocks
Dividend Stocks

This ETF Yields 3.4% and Pays You Monthly: It’s a Smart One for Retirement Savings

Here’s why this simple Canadian dividend ETF and its monthly payments make it an ideal investment for your retirement savings.

Read more »

Two senior friends playing beat tennis on sand tennis court
Dividend Stocks

I Found the Ideal Retirement TFSA Stock Paying 5.7%

An ideal retirement TFSA stock not only pays a high yield but must also have secure cash flows from a…

Read more »

House models and one with REIT real estate investment trust.
Dividend Stocks

An Ideal TFSA Stock for November, Paying 5.2% Each Year Into Your Retirement Fund

With a 5.2% dividend yield paid monthly, this Canadian stock could help you build a recurring retirement income stream while…

Read more »

man in bowtie poses with abacus
Dividend Stocks

How to Read a Payout Ratio in 60 Seconds

Understand the payout ratio and its significance. Learn how it helps assess dividend stocks in just one minute.

Read more »

earn passive income by investing in dividend paying stocks
Dividend Stocks

How to Set Passive Income Goals You Can Actually Reach

Setting passive income goals is easy, but it should be realistic as to how much you can really set aside…

Read more »

Doctor talking to a patient in the corridor of a hospital.
Dividend Stocks

I Found a Dividend Stock That Pays 4.6% Monthly Like an ATM

The Richards Group's monthly dividend yields 4.6%. The small-cap stock's high-margin healthcare pivot makes this passive income source an attractive…

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

A 5.7% Monthly Payer: How $10,000 Could Generate About $47 a Month

For investors who want monthly passive income without owning rental properties, Crombie REIT's 5.7% yield deserves a closer look.

Read more »