Investing basics: TFSA, RRSP and index funds

Last reviewed October 23, 2026

Saving vs investing

Savings are safe but grow slowly. Investments go up and down, sometimes a lot, but over long periods they’ve grown much faster than prices. Investing suits retirement and other goals years away; savings suit your emergency fund and near-term plans.

Stocks, bonds and funds

What	You own	Typical behaviour
Stocks	A small part of a company	Highest long-run growth, big ups and downs
Bonds and GICs	A loan to a government, company or bank	Steadier, lower long-run growth
Index ETF	A slice of every company in an index	The market’s return, minus a small fee

All-in-one ETFs hold Canadian, US and international stocks, and bonds, in one fund and rebalance for you. They’re a simple way to start.

Why fees matter

Many Canadian mutual funds charge an MER (management expense ratio) of 1.5% to 2% or more a year; broad index ETFs often charge 0.25% or less. Over 30 years, a fee that’s 1.75% higher can leave you with more than a third less. See index funds vs picking stocks.

Try it: how investing growsMove the sliders to see what regular investing adds up to.

Each month$300

Years30

Yearly return6%

After 30 years you’d have

$301,355

You put in$108,000
Growth$193,355

Start ten years later and you’d have $138,612: $162,742 less, though you’d only put in $36,000 less.

Returns aren’t guaranteed and vary from year to year. This assumes the same return every year, before fees and tax.

Which account to use

Account	Best for	2026 limit
TFSA	Almost anyone: growth and withdrawals are tax-free	$7,000 of new room, plus unused room
RRSP	Retirement, especially on a higher income	18% of last year’s earned income, up to $33,810
FHSA	Saving for a first home	$8,000 a year, $40,000 in total

A rough order: take any employer RRSP or pension match first, then use your FHSA if you’re buying a first home, then your TFSA, and your RRSP if your income is higher. See RRSP vs TFSA.

Risk and staying the course

Markets have fallen 20% or more many times and recovered from all of those falls so far, though sometimes over years. The biggest risk is selling in a panic. Investing a set amount every month, whatever the market does, takes the guesswork out.

Getting started

Have an emergency fund and no high-interest debt.
Open a TFSA or RRSP with a discount brokerage or a robo-adviser.
Choose a broad index or all-in-one ETF.
Set up an automatic monthly contribution, and leave it alone.

Frequently asked questions

How do I start investing in Canada with little money?

Open a TFSA at a discount brokerage or robo-adviser, choose one broad, low-cost index or all-in-one ETF, and set up an automatic contribution, even $50 a month. Many brokerages have no minimum and charge no commission on ETF trades.

Is a TFSA an investment?

No, it’s an account. Inside it you can hold savings, GICs, ETFs, mutual funds or shares, and whatever they earn is tax-free. A TFSA holding only a savings account grows much more slowly than one holding investments.

What is an MER?

The management expense ratio: the yearly cost of a fund, as a share of what you have in it. It’s taken out of the fund’s returns, so you never see a bill, which is why it’s easy to overlook.

Are my investments protected if my brokerage fails?

If it’s a member of CIPF (the Canadian Investor Protection Fund), the investments in your account are protected up to set limits if the firm goes bust. CIPF doesn’t protect you from the market going down.

What is a GIC?

A guaranteed investment certificate: you lend money to a bank for a fixed term, often 1 to 5 years, at a fixed rate. Your money is safe, and covered by CDIC at member institutions, but it grows more slowly than stocks over the long run.