Are you interested in buying stocks but have no idea where to start? You aren’t alone. With the proliferation of online retail investing platforms, Canadians have unprecedented access to directly investing in the stock market themselves. Still, the information on how to do so safely and effectively has not kept up with these platforms.
How to buy stocks in Canada
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Why you can trust us
The team at WealthRocket only recommends products and services that we would use ourselves and that we believe will provide value to our readers. However, we advocate for you to continue to do your own research and make educated decisions.
Fortunately, buying stocks isn’t hard, and once you have a little know-how, building your well-balanced portfolio takes only a few minutes. Here’s everything you need to know about buying stocks in Canada.
How to Buy Stocks in Canada
First, let’s start with the most obvious question: How do you buy and sell stocks? To buy stock in a company, you’ll need to use a brokerage firm or a registered independent broker.
This brokerage firm could be an online company like Wealthsimple, a human stockbroker, or a financial planner. If you are looking to buy stocks yourself, you can do so through an online discount brokerage.
Different Types of Stocks
When you buy a stock in a company, you are purchasing a share of ownership. As an owner, you are entitled to a portion of the company’s profits. The more shares you buy, the more significant your stake of ownership is in the company, and the more substantial your share of profits.
Most publicly traded companies have vast numbers of shares, so even if you buy quite a few shares, your overall ownership percentage will still be very small.
There are two primary types of stocks that corporations issue:
- Common stock shares are stocks that you buy at a price set by the market. When you buy this type of stock, you’ll make a profit when the price of a stock appreciates or when you receive dividend payments if that is something this stock offers. Common stockholders can vote at shareholder meetings.
- Preferred stock has a higher claim on dividends than common stockholders. They usually do not offer voting rights. Preferred stocks blend elements of stocks and bonds, which makes them appealing to some investors.
Wealthsimple
- Account Fees 0.4%-0.5%
- Minimum Deposit $1
- Asset Types Bonds (government and corporate), Real Estate, ETFs, Gold, Mutual Funds, and Currencies
Where Should I Keep Stocks?
Before you buy stocks, you’ll need to decide where you want to keep them.
As a Canadian, you have the option of investing in two of the registered accounts available: Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs).
If you’re not sure which one is the right choice, here’s a quick primer:
- RRSP: Gives you a tax deduction when you contribute, but you pay taxes on withdrawals except in specific circumstances. There is a limit on how much you can contribute (called your contribution room).
- TFSA: Unlike the RRSP, there is no deduction when you contribute, but you can also withdraw your funds at any time, tax-free. You get $6,000 in contribution room per year starting when you turn 18, and if you withdraw funds, you get that contribution room back in the following tax year.
Both accounts are tax-sheltered by the government, which means you will not pay taxes on growth in these accounts, whether from dividends, capital gains, or interest.
If you aren’t sure whether to start investing in an RRSP or TFSA, a good rule of thumb is that a TFSA is a good option if you have a lower income, while an RRSP makes sense for higher-income earners.
You can also use a non-registered account to invest. Still, you’ll have to pay taxes on any growth within this account, which is why experts recommend you use your RRSP or TFSA first until your contribution room is maxed out for each registered account before investing in a non-registered account.
Different Approaches to Buying Stocks
Beyond the different types of stocks, there are several different approaches to purchasing stocks in Canada. Here are some strategies you can use:
- Index investing is a strategy that is the most beginner-friendly and involves buying between one and four exchange-traded funds (ETFs). ETFs are a diversified bundle of stocks traded on a stock market index, like the S&P 500 TSX. You can build a diversified portfolio of stocks and bonds covering Canadian, US, and International markets using just a handful of ETFs.
- Dividend Investing involves building up a diversified portfolio of stocks that issue dividends. These dividends can then be reinvested back into your portfolio, boosting your returns. A good strategy is to buy blue-chip dividend stocks. These stocks are very stable and will continue to issue dividends even during an economic downturn.
- Growth Investing is best left to seasoned investors, but growth investing is the strategy of investing in stocks that you think are likely to grow significantly in the future. As the growth stocks rise, so will the value of your portfolio. The risky aspect of this strategy is that good research is required to pick stocks that will increase in value. Not all stocks will, and some may even plummet. For this reason, it’s smart to limit growth investing to 10% of your overall portfolio.
Online Brokerages Available in Canada
If you are interested in placing bukfying stocks (also known as placing market orders) yourself, the easiest way to do so is through an online brokerage.
An online brokerage is a platform that lets you buy stocks without having to go through a financial advisor or broker.
The fees associated with an online brokerage account is very low, and you can invest in a variety of stocks within your registered or non-registered accounts.
Typically, online brokerages let you open an account, link your chequing account, make transfers, and then make stock purchases directly from their platform.
Some common online brokerages in Canada are:
1. Questrade
Cost to use: $0.01 per share, minimum $4.95 per trade, and maximum $9.95 per trade
Minimum account size: $0 to open, $1,000 to start investing
Questrade was one of Canada’s original online brokerages and allows Canadians to buy and sell Canadian and US stocks and ETFs manually through their platform. The platform is streamlined and easy to use, and Questrade offers many different types of tools to evaluate whether a stock is a good buy or not.
Questrade
- Account Fees $0
- Minimum Deposit $1,000
- Asset Types Stocks, Options, Bonds, ETFs, Mutual Funds
- OTC stock fees $0.01 per share, min $4.95, max $9.95; free ETFs, selling costs $0.01 per share
2. Wealthsimple Trade
Cost to use: Unlimited commission-free trading
Minimum account size: $0
Wealthsimple Trade is the direct investment arm of Wealthsimple, which is better known for its robo advising service that invests your money on your behalf for low fees. Wealthsimple Trade is a great trading platform to start for beginner investors because it offers you free trading of Canadian and US stocks and ETFs, so you won’t have fees eating into your returns. You can make your purchases from a streamlined user interface that connects seamlessly with your bank account. Wealthsimple Trade is also fully functional as a mobile app.
Wealthsimple
- Account Fees 0.4%-0.5%
- Minimum Deposit $1
- Asset Types Bonds (government and corporate), Real Estate, ETFs, Gold, Mutual Funds, and Currencies
3. Qtrade
Cost to use: $8.75 and $6.95 stock trades and 100+ free ETF trades
Minimum account size: $0
Qtrade is a lesser-known but high-quality online brokerage that allows you to trade stocks using their online trade interface. Qtrade is not the cheapest online brokerage but specializes in giving you the research materials you need to make informed trading decisions. You can purchase stocks, ETFs, and even mutual funds in real-time through this platform.
Qtrade
- Account Fees $25/quarter
- Minimum Deposit $0
- Asset Types Stocks, ETFs, Mutual funds, Bonds, options
Receive up to $150 per transfer request when you transfers-in $15,000 or more using “SUMMERBONUS2024“ (can be combined with Cashback + Free Trades Offer)
• For new investors: “Get up to 5% cash back + $150 sign-up bonus + free trades.”
• For affluent investors: “Get 1% cash back on $25K+ funding, plus a $150 sign-up bonus and free trades.”
- Funded amount: $1,000-$4,999 and receive $0 cashback + $150 sign-up bonus + free trades
- Funded amount: $5,000-$24,999 and receive up to $250 cash back (up to 5%) + $150 sign-up bonus + free trades
- Funded amount: $25,000-$199,999 and receive up to $350 – $2,099.
- Funded amount: $200,000+ and receive up to 1% cash back (up to $2,000) + $150 sign-up bonus + free trade
*Sign-up bonus available to new clients only. New clients get unlimited free trades until Dec 31, 2024. $100 Sign-up bonus and free trades rebate will be paid by Jan 31, 2025.
Other bonus offers to be combined with main offer:
- Bonus is as high as 5%: Our $250 bonus is as high as 5% for funding of $5,000 to $24,999.
- Lower Minimum Funding: Qtrade have lower minimum funding of $5,000 for the cashback bonus.
- Additional Sign-Up Bonus: Qtrade is giving an additional Sign-up Bonus to new clients, including $100 bonus and unlimited free trades until Dec 31, 2024 and paying out the sign-up bonus sooner in Jan 2025.
Our Final Thoughts
Investing in stocks yourself is an excellent way to lower the fees you pay for investing while still maintaining a diversified portfolio that will help you save for the future. If you are just getting started, it’s a good idea to take an index investing approach and invest most of your funds in a mix of ETFs. These funds will help you track the market and achieve consistent returns. A portion of your funds can also be used to purchase individual stocks, but proceed with caution until you become familiar with the process. Try and maintain a diversified portfolio of stocks and avoid allocating a large portion of your portfolio to a single stock.
Jordann Kaye
Frequently Asked Questions
Self-directed investing is the process of investing your money without any oversight from a financial advisor. When you use a self-directed investing strategy, you are calling the shots on your investments.
Passive investing is the process of using ETFs or a robo-advisor to invest, but you don’t buy or sell individual stocks regularly. When you are a passive investor, you’ll make regular contributions to the same funds and either rebalance your portfolio a few times a year or let a robo advisor do that for you.
If you are entirely new to the world of investing, a robo advisor like Wealthsimple is the right place to start. A robo advisor will give you the guidance you need to set up a diversified portfolio that matches your risk tolerance. You won’t find yourself in the position of panicking when your investments drop or selling your investments during a downturn, which can hurt your overall returns. After you become comfortable with market fluctuations and have learned a bit more about the stock market, you can begin investing a portion of your portfolio yourself and eventually move your entire portfolio if you are comfortable.
You can use both accounts to hold stocks, and neither is inherently more suitable for stocks than the other. Which account you should choose depends on your income. If you are earning less than you think you will in retirement, which is common if you are starting in your career, you should invest within your TFSA. If you are a high earner, use your RRSP to invest. The difference here is when your contributions are taxed. TFSAs tax contributions when you make your initial deposit. So as a low earner, you are paying less tax. RRSPs tax contributions at withdrawals, so if you are a high earner, you’ll pay fewer taxes when you withdraw your contributions.
