Investments in Canada are rising, or so they say; the positive outlook for the Canadian market leads to more investments. However, these investments are well-concentrated in stocks, bonds, and equities.
Most investors invest on a global scale and tend to overlook investment opportunities found in their own backyard. However, when was the last time you visited the headquarters of Apple in California?
Have you met Tim Cook and his supporting staff to understand the future growth potential of the company and then try and deduce your findings down to the potential company performance and where the stock might be heading?
This is where your local expertise holds an advantage and comes into play. Knowing your own backyard and the businesses that exist in that realm provides you an added advantage that the globally minded investors simply won’t have.
Investing locally has a multitude of advantages beyond just knowing the physical space that they operate in. Let’s take a deeper dive into a term not commonly found—locavesting.
The rise of locavesting
Local businesses are the essential backbone of a city’s economy. The income generated by these businesses locally is recycled back into the local community. Local investments grow tax base and build an expanding community of investors.
If we take a closer look, it creates a domino effect. When a community starts to sell ideas and open business opportunities, there will be job openings, demand for product and services, transportation, and the trickle-down effect continues from there. In the long run, domestic investments will expand to positively impact the national economy’s growth.
Local investment opportunities in Canada
Canada is a dynamic country and in each city holds investment opportunities just waiting for the spotlight. Young and old businesses from different sectors have been actively seeking local investors that would help them grow and create more stable jobs.
There are plenty of local businesses that have great potential to stimulate growth and diversify the economy. There are investment cooperatives that help these businesses as well as equity crowdfunding and angel investors. Anyone can invest in local businesses through RRSP and TFSA eligible shares utilizing the right investment vehicle.
5 potential local investments
While many investors often tend to focus on major blue chip investment opportunities, there are many potential businesses that would thrive provided the opportunity to grow.
- Real Estate – There is still a huge demand for commercial real estate and multi-family homes. Canada started strong in the first quarter of this year and is predicted to finish at record-breaking rates. Investors should carefully consider the demands for university housings or dorms, condos, and healthcare centers. In terms of location, one should complete their own due diligence on the underlying economic fundamentals supporting the real estate investment. To get your research started in terms of location, MoneySense Magazine has completed some of this background for you.
- Tourism – Canada’s tourism is also flourishing as it is one of the primary-setters in the economy. Inviting more investors will immensely boost not just the country’s tourism but also provide more jobs and local businesses in the entire community.
- Technology – Canadian tech investment is on its record-breaking high from the first quarter of 2018. Investing in locally-made tech businesses translates to supporting these startups in need of capital for future expansion.
- Cleaning Services – With the expansion of real estate investments across Canada, the resulting demand for cleaning services is also rising. Investing in cleaning services doesn’t require much knowledge and experience; you only need to understand the cleaning needs of the commercial sector. This industry’s financial profit report has immensely increased to 91.2% since 2016.
- Courier Services and Warehousing – If you are located in urban areas, you might have suspected a rise in demand for delivering goods with the trepid rise in e-commerce activity. Investing in this industry will not just answer the demand for logistics but also provide potential business growth. According to the 2016 report conducted by the Canadian Government, this sector witnessed a dramatic 84.9% increase in financial profit.
Advantages of locavesting
Although Canada has attracted a large amount of foreign direct investors (FDI) in recent history, as a Canadian investor you are positioned to take advantage of local investment opportunities that are likely to be overlooked by these foreign investors. Investment opportunities that might not surface to a global scale are typically poised to reap greater returns for investors.
By means of local investments, small to medium businesses are now changing the market scheme, giving more room for economic growth and trickling down the positive impact to local residents through:
- Equal Wealth Distribution – Local Investing can gradually reduce the poverty rate through the development of a wide array of employment opportunities in local economies. This further perpetuates demand for real estate across residential, commercial and industrial sectors.
- Stable Employment – More local businesses flourishing means more jobs. With great support from the government and investors, local businesses can create long-term income and permanent positions.
- Community Development – With a rise in local employment, the local tax base will grow to afford opportunities for the local community to expand its infrastructure in the form of recreational centers, public transportation, parks, schools and other efforts.
Canadian investors often overlook local investments. There is a growing trend moving in the direction of funding local startups. Investors are expanding their awareness of local businesses that they can participate to improve the local business opportunities while reaping a healthier profit compared to investing in a company on the other side of the world.
Location, location, location is a phrase we commonly hear from the real estate community. Putting that lesson into practice in your investment objectives is a step forward in mitigating your risk and expanding your potential income.
By being aware of local real estate trends not only in your city but also in your province and perhaps even on a wider scale your country, an investor can be better positioned knowing their own backyard.