Canada has one of the world’s biggest economies and is recognized as one of the wealthiest countries in the world. Canada is a primary natural resources sector and has access to the North American market.
Investing in the Canadian stock market is the way to go now. These days, lots of Canadians are thinking about how to buy stocks in Canada. Buying stocks in Canada is one of the best ways to grow wealth in this generation.
Buying stocks was formerly an expensive and time-consuming undertaking, but the digital age has democratized it. As an investor, you are no longer challenged by inaccessibility because there are many choices for you.
Now you do not have to spend hours on your phone with your broker, pay enormous commission fees or research companies at the local library.
Instead, you can invest in stocks with robo-advisors, hire financial advisors and portfolio managers, or even manage your portfolio yourself using an online trading platform as a self-directed investor.
Now you can buy stocks in Canada from the comfort of your home at cheaper rates or for free when you use discount brokerages.
Investing in stocks is more effortless and now more affordable than ever. If you’re new to investing and wondering how to buy stocks in Canada, this article is for you. This article is a step-by-step guide on how to buy stocks in Canada.
In this guide, you will learn how to buy stocks in Canada, the best trading platforms in Canada, and different approaches to buying stocks in Canada.
How To Buy Stocks in Canada (A Beginner-Friendly Guide)
1. Determine your Investing Approach
The first step to knowing how to buy stocks in Canada is to determine your investing approach.
Investing and financial planning are no longer as it was before. There have been lots of drastic changes over the years.
Now, when you want to invest, you must first determine if you would be handling everything yourself, if you would be hiring a financial advisor, or if you would outsource the whole process to a robo-advisor.
Self-Directed Investing (DIY Investing): Thanks to the internet and financial press, financial information is easy to access, which makes self-directed investing an easy feat for most investors.
Do-It-Yourself (DIY) investing is a very cheap option. You can buy and invest with $0 commissions on most stocks and ETF trades.
However, it is a good fit for you only if you can put in the time to do your research and have the financial ability and discipline to constructing a winning portfolio.
If you are fond of quickly jumping in and out of positions, if you do not have a strong understanding of how the market works, and if you do not have the discipline to control your trading, then DIY investing is not for you. You should better hire a robo-advisor or a financial advisor.
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Robo-Advisor: This is another very affordable approach. Robo-advisors are automated platforms that use algorithms provided by users’ input to make investment choices. Robo-advisors are simple and inexpensive as they run at 0.25% of assets or less per year.
If you are new to investing and want to take a hands-off approach to investing, then a robo-advisor can be helpful. The automated deposits and investment capabilities of a robo-investor are perfect for new investors.
If you want to outsource your portfolio and do not need help beyond investing, robo-advisors like Moka, Wealthsimple, and Questwealth are perfect choices. They are designed to be stable and get you the right mix of investments.
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Financial Advisor: You might not want the services of a financial advisor because they charge fees of 1% of all your assets annually. But good financial advisors can help you with other things aside from investments like your personal finances, retirement savings, college savings, or life insurance.
If you need a good and certified financial advisor, you should go for a Certified Financial Planner (CFP). CPFs are bound by fiduciary duty; they are bound by duty to give you advice that will be profitable, even if it doesn’t earn them money.
It is advisable to use the services of a financial advisor if you are a skittish investor; they protect you from yourself and provide sound advice on tax and estate planning.
I have a couple of recommendable financial advisors with the right qualifications who can offer advice and guidance on anything related to your finances and not just investing.
If you do not want to outsource your investment to robo-advisors or hire the services of a financial advisor but would instead manage your investing by yourself, you should continue with the following steps.
2. Open a Brokerage Account
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There are online brokerage platforms in Canada where DIY investors can buy and sell stocks independently.
The fees for discount brokerages are cheap and affordable and require little know-how as their platforms are user-friendly.
In Canada, many discount brokerages are vying for your investment, and most offer the flexibility to manage your investments, low ETF management fees, and low or free commission trading.
Questrade: Offering low-cost trading in ETFs and stocks, Questrade is the best choice for new and experienced investors.
If you are looking for a customizable brokerage platform, access to advanced market data, and excellent customer service, then Questrade is perfect for you.
Wealthsimple Trade: This is the top commission-free stock trading platform in Canada. It is an excellent option for investing, with a $0 commission on ETFs trade or buying individual stocks.
Wealthsimple also offers DIY investors fractional share trading, giving them access to small portions of high-costs stocks like Apple and Tesla.
Qtrade Direct Investing: As an independent online brokerage platform, Qtrade offers trades in ETFs, stocks, mutual funds, and bonds. Qtrade also provides over a hundred commission-free trades.
$0 trading commissions
1 cent per stock; minimum $4.95 and maximum $9.95 per trade
$8.75 per trade and $6.95 for active investors
Protected by CIPF
Protected by CIPF and private insurance
Protected by CIPF
TFSA, RRSP and personal Investment account.
Personal Non-registered account, Margin, corporate accounts, RESP, TFSA and RRSP
TFSA, Margin, RRSP, RSP and Personal corporate Investment account
3. Determine your Investment Vehicle or Account
Now that you have decided to invest independently, you will need a direct investing account with any online brokerage platform you choose.
There are different types of accounts to consider; however, your choice depends on your investment goals. You need to decide between registered accounts like RRSP, TFSA, and RESP or non-registered accounts.
Registered accounts are unique. They are provided with tax-deferred or tax-sheltered status by the Canadian government. Non-registered accounts require taxes paid yearly on generated incomes as they do not enjoy the same tax-free benefits.
The majority of investors in Canada choose to open registered accounts. Below are some common types of accounts you should consider.
Tax-Free Savings Account (TFSA): Canadians over the age of 18 can open a TFSA account to set money aside tax-free all through their life. You can use this account to save short or long-term goals as its savings grow tax-free.
The only con is that there is a limit to how much you can deposit into a TFSA. The TFSA limit for 2022 is $6,000. But if you have accumulated some unused contribution room, you can definitely invest more than $6,000
TFSA accounts allow the investments of cash, bonds, mutual funds, securities listed on designated stock exchanges, and specific shares of small business corporations.
Registered Retirement Savings Plans (RRSP): Typically used for retirement savings, RRSP allows you to defer taxes on your money and investments to later in life.
While you get tax deductions on contributions, you will pay income taxes on withdrawals in retirement. But as your income later in life is likely to be lower, your marginal tax will be lower too.
Registered Education Savings Plan (RESP): This particular savings account is for parents who want to save for their child’s education. They can withdraw the money for post-secondary education.
Depending on your income, the Canadian government matches a maximum lifetime grant of $7,000 to a certain amount of your yearly contributions on the first $2,500 contributed into your RESP account.
Like the RRSP account, any income gained through the investments in the RESP accounts will be tax-deferred.
Non-registered investment accounts don’t have withdrawal penalties or contribution limits. However, they lack tax benefits. Two popular examples are Cash accounts and Margin accounts.
Cash Accounts: This type of account lets you buy and sell investments with cash available in your accounts. You can use cash accounts to save and trade various stocks on the North American markets.
You are good to go as long as you have enough funds in your investment accounts.
Margin Accounts: This type of account allows you to borrow money from your brokerage to buy investments. It gives your buying power a boost by leveraging value in your portfolio. You can borrow to make additional investments against values you already own.
However, Margin accounts are best suited for seasoned traders; because, along with the potential for great interest comes a flip side of increased exposure to losses.
4. Fund Your Account
Now that you have an overview of the types of investment accounts you can open, the next step is to fund your accounts.
Without money, there is no investing in stocks. Once you open your brokerage accounts, you must fund them. Different brokerage platforms have their account minimums.
If your brokerage permits fractional investing, you can start trading with as little as $1 in your investment account.
Fractional investing allows you to buy portions of individual shares in high-cost stocks like Amazon and Tesla. However, it is advisable to have at least $1,000 in your account to start trading in the stock market.
To fund your investment accounts, you can choose any method of funding; Lump-sum or Dollar-Cost Averaging (DCA).
Lump-sum funding involves sending funds to your investment accounts in one giant lump. You do not have to worry about always funding your accounts, as the money will always be there.
Dollar-Cost Averaging involves funding your accounts in smaller amounts on a regular schedule. It may be on a weekly, bi-weekly, or monthly basis.
However, automating your payments removes the need for you to bother about timing your funding and the market.
With DCA, you can start small and increase your contributions later. You are less exposed to risk during market downturns, as you do not have all your money in your investment account.
However, you will have to employ the power of consistency and time as they will be fundamental to your success. Trading consistently and over a long period of time gives you some return predictability and helps you figure out what parts are working and not working.
So, you had better start saving and investing wisely and on time as early as possible so that the power of compounding interest can give you impressive long-term gains.
Since by compounding your interests and staying long in the game, small amounts can grow into a substantial sum of money.
5. Determine Your Risk tolerance
You should look within yourself and determine what kind of investor you are.
Are you a conservative investor? Are you someone who wants to build a stock portfolio to achieve steady incomes, including dividends, while maintaining a lower level of risks?
Or are you an aggressive investor? Are you someone who wants to maximize returns by taking on high exposure to risk?
Not all stocks are for everyone; while growth stocks and penny stocks are for aggressive investors who can stomach the risk involved, dividend stocks are for conservative investors who prefer fewer risks but regular returns.
6. Pick Your Investment Strategy
No one jumps into the pool of investing without a strategy. Without a plan, you will likely make more emotional decisions instead of financial decisions.
I will advise you to pick a sound investment strategy; if not, you will end up far worse than if you had not invested. Here are some strategies to consider when investing.
ETFs: Exchange-Traded Funds are a group of funds that track the performances of a broad stock market index.
They might be the best way to start your investment journey as they have become trendy. By investing in ETFs, you receive the benefits of several stocks instead of an individual stock. As a new investor, you wouldn’t have to try and learn how to buy individual stocks before investing in ETFs.
Solid ETFs like Blackrock’s iShare Core S&P 500 and Vanguard’s FTSE Canada All Cap are excellent places to get started.
Index Investing: The index investing strategy allows you to buy an ETF or index fund that invests in the entire market. The lower risk option is more suited for newbie investors.
Buying an index fund like S&P 500 Index allows you to invest in 500 large companies on the Canadian, U.S., and international stock exchanges, thereby engaging the power of diversification.
This strategy is stress-free and reduces uncertainty and risk that may come with investing in some large companies within the stock market. You can avoid human errors and emotions, and your portfolio will do just fine as long as the market is doing fine.
The only downside to index investing is that it might be boring for some investors, but sometimes, boring is good so long as the returns are coming.
Growth Investing: If you are an aggressive investor and have a high-risk tolerance, then choosing a growth investing strategy is the way to go. Investing in growth stocks means you are investing in a small company with potential future growth.
Common sectors for growth investing include biotechnology and financial technologies. You should know that growth stocks do not pay dividends until they are mature, but they have the potential to return capital gains.
Dividend Investing: Dividends are certain payments taken from profits and shared with investors from the companies.
Unlike growth investing, dividend investing is a great way to get a passive income stream. Even when the market is rocky, steady dividend payments will come in. If you want a regular cash flow, you should opt for dividend investing.
Penny stocks: These stocks are small companies, and their shares are not easy to buy and sell. They have few investors and Trade over-the-counter through pink sheets.
To invest in penny stocks, you must be an aggressive investor and ready to handle significant volatility. Don’t engage in penny stocks if you cannot stomach the risks involved. It is not advisable to invest your whole portfolio into penny stocks, but 5% of your total portfolio is okay.
7. Research Stocks and ETFs to Buy
Once you have chosen your desired strategy, you need to take your time researching your investments.
While it is excellent to use Yahoo! Or Marketwatch websites to research stocks, you can also get a handful of stocks directly in your brokerage account.
Brokerage platforms like Wealthsimple and Questrade make stock data available to investors, but the stock prices lag 15 minutes behind the actual market data. So it is even better to use financial websites for your research.
When researching stocks to buy, you should consider the price, dividends, market and industry trends, stock performance, and future projections.
The most critical information is always shown in the summary section. You can also read further into the stock’s financials and view its official documents under “Investor relations” on their websites.
There are many stocks in Canada you can choose to buy. I have a list of recommendable stocks from popular companies like Vanguard and BlackRock.
8. Make Your Trades
After establishing your desired strategy and choosing your investments, you can go on to start your trades.
You should note that there are specified days and times for trading in the Toronto Stock Exchange and even the New York Stock Exchange.
You can only make trades during stock market hours, between 9:30 am and 4 pm EST from Monday through Friday. You can set up trades to be executed during market hours if you cannot trade during regular market hours.
When you trade, always take note of the stock prices, bid and ask prices, bid-ask spread, market, and limit order.
9. Optimize Your Portfolio
When you have set up your portfolio and your money is working for you in the market, you would have to do regular optimization to keep things running smoothly.
Once every year, you should rebalance your portfolio, automate the re-investment of dividends, and review your portfolio to ensure it aligns with your goals and risk tolerance. Doing these frequently would keep your portfolio optimized.
How to Invest in Stocks in Canada Using a Robo Advisor
Suppose you are still new to the investment market and are anxious to invest. In that case, it is best to start investing with a robo-advisor instead of jumping head-on into the investment market independently.
Robo-advisors use algorithms from inputs gathered from you to manage your investment portfolio automatically.
They decide how to help you invest your money and allocate your assets based on variables like your self-identified risk tolerance, time horizon, and financial goals.
They also take the responsibility of deciding how and where to invest off your shoulders.
When the performance of your portfolio deviates from your specified risk tolerance, robo-advisors automatically rebalance your portfolio.
Robo-advisors have very few restrictions on investment size. They are the ideal investment tools to use when starting your investment journey with less money to invest.
There are several popular robo-advisors here in Canada. Wealthsimple, Moka, and Questwealth are perfect examples.
How to Buy Stocks Through a Financial Advisor
If you have a large sum of money and do not know where and how to invest it, a financial advisor is perfect.
A financial advisor will help you assess your risk tolerance and investment goals and help build and execute your investment plans.
However, financial advisors are not accessible to everyone because you might need a minimum investment amount from $10,000 to $1,000,000 or more to get their attention.
Also, there are mutual funds and segregated funds with great historical performances that may be great to invest in. However, you may not be able to invest in them unless you go through a financial advisor.
An example is the Empire Life Class Plus 3.0 which is a great fund for retirement purposes.
If you do need the services of a financial advisor to manage your finances or investments, you can contact me to give you top-notch recommendations.
Best Places to Buy Stocks Online In Canada
Canadians looking to invest in the stock market are always wowed with a list of online brokers who offer nothing but the best.
Every online brokerage platform is unique, but we have picked the best among them all.
Questrade: Questrade online brokerage platform is one of the best for trading in Canada. It gives Canadians access to buy stocks in the Canadian stock market and on the U.S. stock market.
Its commissions are competitive, its user interface is excellent, and it offers a seamless client experience.
Wealthsimple: A good brokerage platform for beginners and passive investors, Wealthsimple offers a highly simplified platform for self-directed investors.
On its Wealthsimple Invest platform, it provides a robo-advisors managed solution, and on its Wealthsimple trade app, it satisfies the needs of traders with its excellent features.
Qtrade: Qtrade Direct Investing outshines its competitors with its user-friendly website and excellent client experience. Qtrade offers portfolio analysis tools and a more robust stock research center on its trading platform.
What is a Stock and How Does It Work?
A stock is a security representing a fraction of ownership, or equity, in a company. Stocks are held in brokerage accounts and traded in financial markets.
The stock also means security representing a partial ownership position in a corporation (publicly-traded company). It gives the stock owner the right to claim part of company proceeds and assets.
How Does it Work?
A stock is a security of an ownership interest in a publicly-traded company. This financial instrument represents proportional ownership of the company’s assets and earnings.
Trading stock involves buying and selling shares on the secondary market with the help of a stockbroker for a price determined by supply and demand. When one buys stock in a company, they buy a small part of the entire business.
Some key Concepts and Definition
Mutual Funds: Mutual funds are beneficial for you if you look for convenient and affordable access to professional management.
Mutual funds let investors pool their money in a fund with other investors. Qualified financial advisors manage the entire funds. It is an attractive investment option for many people.
Segregated Funds: Segregated funds also let investors pool funds together but include an insurance guarantee that can protect all of your original investment in a market downturn.
Conclusion on How to Buy Stocks in Canada
Learning how to buy stocks in Canada may seem like an impossible feat. But when you follow through with the steps in this guide, you will discover that it is not as difficult as you imagined.
With this step-by-step guide, you can get started with your investments today.
FAQs on How to Buy Stocks in Canada
Can I buy stocks online for free in Canada?
Yes. By using commission-free stock trading platforms in Canada like Questrade, you can purchase thousands of stocks listed on Canadian and U.S. stock exchanges for free.
How to buy stocks in Canada without a broker
You can buy stocks from companies like Coca-Cola directly without a broker. You can buy through direct stock purchase plans (DSPPs). However, there is no reason to avoid brokers since you can now open brokerage accounts online in minutes and even get commission-free trading.
How to buy stocks in Canada Scotiabank
Bank of Nova Scotia (Scotiabank) offers a brokerage platform called Scotia iTrade where it offers trading stocks ETFs, options, GICs, mutual funds, and bonds.
How to buy stocks for beginners
Buying stocks as a beginner investor is very simple and straightforward. Simply follow the steps outlined above and you can be good to go.
How to buy stocks in Canada TD
TD Bank offers a brokerage platform called TD Direct Investing and it was one of the very first stock trading platforms in Canada.
You can use the TD Direct Investing platform to trade stocks, mutual funds, ETFs, options, bonds, and IPOs.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
The primary purpose of Money Reverie is to help everyday Canadians make better financial decisions by providing up-to-date financial news and information, reports, product reviews, and government programs.