How to Buy Stocks in Canada 2023
- What is a Stock?
- Best ways to Buy Stocks in Canada
- How to Buy Stocks for Beginners
- Market Limit Orders & Stop Orders
- Stock Investment Returns and Taxes
- How to Build an Investment Portfolio
- Buying Dividend Stocks In Canada
- Stocks in a TFSA, RRSP, and Non-Registered Account
- Buying Stocks Online in Canada – FAQ
- Investing Online in Canada – Summary
If you have been on the cusp of starting your investment journey, but haven’t quite been able to dive in, you are not alone. Many will agree that taking those first steps are the most challenging. However, the sooner you start learning how to buy stocks in Canada, the sooner you can begin putting your money to work for you.
The thing is, the idea of trading stocks is actually more intimidating than actually executing a simple purchase using an online platform. With one of Canada’s best online brokers, you can DIY your way through investing or use robo advisor services to help you along the way.
We’re living in a time of abundant opportunities when it comes to how to invest. Long gone are complicated investing platforms, or limited and expensive investment options. No more calling some guy in a pinstripe suit on Wall Street. Today, you can make use of low cost ETFs and easy to use mobile trading apps.
Read on to learn how to invest, including how to do it for free. We’ll dig into how to buy stocks on Canada’s best online brokerages, the different investment strategies you might want to choose from, and provide a step by step guide to help you take the first step.
Stock trading is a fantastic way to grow long term wealth, and luckily for us, it has never been more accessible or cost effective.
Best ways to Buy Stocks in Canada
When first buying stocks, you will want to choose the best online brokerage for your trading needs. Each brokerage allows you to buy and sell stocks, sure, but there are some key differences to check out before you choose the right brokerage for you.
Differences can include things like the variety of investment products on offer, fees, level of customer service, and other factors.
Take a look at our list of the best ways to buy stocks in Canada below.
4.9 / 5$6.95 - $8.75
Free buying AND selling of 100+ ETFs
4.6 / 5$4.95 - $9.95
Free BUY of ETFs (full prices for ETF sales)
4.2 / 5Free on Wealthsimple Trade
Free to Buy And Sell
3.8 / 5$9.95
Free buying and selling of 80+ ETFs
On top of the best brokerages to help you start buying stocks in Canada, there are a number of strong contenders for beginners.
Let’s have a look at what they offer.
| Trading Fees | Account Minimum | Best Features for Beginners | |
| CIBC Investor’s Edge | $6.95 per trade with a special rate of $5.95 for students | $0 | As this is one of the big banks, you can be assured of the safety and quality of this brokerage. For young investors aged 18-24, the annual account fee and trade for free. They also offer a variety of research tools to help you learn more about the companies you are interested in investing in. |
| CI Direct Trading | $1.99 minimum, $7.99 maximum per trade | $1,000 | You can automatically reinvest your dividends, helping to grow your wealth more quickly and saving on taxes. If you want to invest in ETFs as well as stocks, you will do so for free. If you are interested in purchasing US stocks, you can do so with your CI Direct Trading account, which can hold USD and CAD. |
| TD Easy Trade | $0 for the first 50 trades per year | $0 | The super simple app makes stock trading for dummies possible. It also has a future to allow you to easily set and track investment goals, which can be very motivating for beginners. Free TD ETFs are also an added bonus. |
What is a Stock?
Before we get into the nitty gritty, let’s get down to basics-what exactly is a stock anyway?
We are constantly inundated with news about the financial markets with words like “stocks”, “shares” and “securities” being tossed out as if we all know exactly what that means. You might have searched for “stock market for dummies” to try and wrap your head around it, but in the end you still felt confused.
Rest assured, you are not alone.
A stock is simply a piece of a company. When you purchase stock in a company, you are purchasing a share, or shares, of the company. Think of it like a pie sliced up into many, many pieces. When you buy a share of the company’s pie, you own a tiny fraction of that company.
When the company’s profits are high, you will be rewarded with things like dividends. A dividend is a small share of the profits delegated to all shareholders. If the company does not offer dividends, don’t worry, you can still benefit when their stock price rises due to profits being reinvested within the company.
The short of it is, when you own stock in a company, you own a slice of the actual company. Not bad, considering you won’t have to lift a finger when it comes to the day to day operations.
Types of Stocks You Can Invest In
In Canada, we have access to stocks on the Toronto Stock Exchange (TSX) and others such as the TSX Venture Exchange (TSXV) and the Canadian Securities Exchange (CSE).
There are also a wide range of types of stocks you can invest in within those stock exchanges.
Stock trading beginners will usually start with common stock and preferred stock holdings.
Common stocks are those you are likely already familiar with. Common shares usually end up producing some of the highest investment returns you can get, as well as the possibility of dividends and voting rights. Common stocks are not without risk of course, as if the company fails, you can lose most, if not all, of your investment.
Preferred stocks are different from common stocks as they usually don’t offer voting rights. On the plus side, they give you automatic dividend payments for the life of your investment. Also, if they happen to go belly up or are involved in a merger, they’ll repay shareholders.
There are a number of other options to choose from within the two main categories of stocks, including:
In general, beginners should take a simple approach and start out small with the basics, including the best ways to buy stocks in Canada, which we’ll outline below.
How to Buy Individual Stocks in Canada for Beginners (Not Dummies!)
So, you now know the stock market basics and what brokerages are out there to help you start trading. The next step, and the most important, is to choose the right brokerage and start investing!
Ready to get started? Follow these 3 simple steps.
Step #1: Open Your Brokerage Account
If you want to cut costs to the bone and decide to go with the discount brokerage route here’s how you would get started with one of our top online brokerage picks, Qtrade.
Head over to Qtrade to create a new account.
After a few easy steps, including setting up funding for your first trades, you will be ready for step 2!
Step #2: Choose the Account Type
We recommend that you first max out your tax advantaged registered accounts first, as long as you qualify. Here are the different types of registered accounts.
In Canada, you can choose from:
- Tax Free Savings Account (TFSA)
- Registered Retirement Savings Plan (RRSP)
- Registered Education Savings Plan (RESP)
We have all the details you need to know to invest using registered accounts. Head over to our TFSA vs RRSP article to start learning more.
If you don’t yet qualify for a registered account, no problem! You can choose to open a non-registered account.
Step #3: Start Investing
Once you’ve logged in and selected the investment account you want to make a trade in, you can go ahead and start preparing to make your first trade!
We recommend doing your due diligence on the companies you are thinking of investing in. There are a lot of choices of stocks to invest in, but not all are worthy of your money. You can check out our top TSX dividend picks as a starting point, as well as by using the educational resources provided by your brokerage.
After selecting the ticker symbol for the stock you want to purchase, complete the necessary information on the next page as shown below.
Almost there! Now, you just need to review the order. If everything looks good, you are ready to submit!
To track orders, simply click on the “Order Status” tab to check on how things are going.
For stock market beginners, the toughest trade to make is the first one, which is totally understandable as it’s all new to you.
After that, you can easily follow the same simple steps to trade again and again! Soon you will be trading with confidence as you watch your investments start to grow.
Should You Invest in Stocks With a Broker or Robo Advisor?
So, we’ve covered stocks and stock brokerages. Great start!
Now you might be asking yourself how you can possibly know what stocks to buy as a novice stock investor.
In the past, you would likely work with a broker from a bank who would try and sell you on investing in a mutual fund. While mutual funds are still available to investors, we would not recommend them. The high cost just doesn’t make sense.
Luckily, there is a relatively new way for you to use a DIY trading platform without you having to choose the stocks yourself.
A Canadian robo advisor service offers you an AI assisted managed ETF portfolio. With the help of automated investing, you will not have to worry about choosing stocks, and still have a chance at making decent returns.
It won’t be as cheap as doing it yourself, but for brand new stock market investors, this could be the perfect solution to help get you started.
For more on robo advisors, read our Wealthsimple review (Canada’s best robo advisor) or how comparison between Wealthsimple and Qtrade.
How to Start Stock Trading With Market Limit Orders & Stop Orders
Market orders are the most straightforward and simplest types of orders. With a market order, you are choosing to buy a stock or ETF at the best market price available on the market at the time your order is sent to the exchange market and is processed (i.e. executed).
In other words, if you are buying a stock, and the last order price is $28.80, then you will be buying stock in and around that price.
This is the type of order that I personally use and what I recommended in the section above because it is the most simple.
But what if you want absolute certainty in the price you’re paying for a stock?
Limit order gives you the ability to specify a price that you will pay (or receive) when buying or selling a stock or an ETF. Your order will only be executed if the price matches the price you set, within the time limit you choose.
Remember, the order only executes when the stock price you set kicks in. If it never hits that price, or worse, if it goes up, you might lose the opportunity to buy a stock or ETF at the original market price.
Another type of order is called a stop order. A stop order is when you place an order to buy or sell a stock at a specified price. The transaction is triggered when the price you selected becomes the market price. The order will then be processed as a regular market order. The goal is to protect a potential gain or limit a potential loss.
Timing the market is a tough business – one that even the pros can’t get right.
That said, one major benefit of limit and stop orders is that you can set a price you believe to be a fair price for a stock. Assuming you do your homework and understand what a fair value of a company is, say using value investing principles, then using limit orders ensures that you won’t overpay for a stock.
Stock Investment Returns and Taxes
As with any investment, when you make money on your investment, you need to let the tax man know. Or else.
You need to claim any capital gains, which are investment earnings on any shares you sell at a gain, on your tax returns. In Canada, you’ll be taxed on 50% of your capital gain amount.
If you automatically reinvest dividend earnings (DRIP), you will still be taxed on the gains. The good news is it will be at a lower rate.
How to Build an Investment Portfolio for Beginners
Now that you know how to buy stocks in Canada, the question is just which stocks (or other investments you should buy).
Investors often refer to all the investments they own as their “portfolio”.
Most Canadians (and investors around the world for that matter) are best off if they focus on diversifying their portfolio as much as possible.
This means making sure they are invested in companies from around the world and from all the different sectors. But it also means investing in something other than stocks (because stocks can go up and down by 30%+ in a very short time). For most people this means some balance of stocks and bonds in their overall investment portfolio.
Here’s a great video describing the difference between the two:
The quickest way to buy an instantly diversified portfolio is through an all-in-one ETF. This type of investment lets you invest in many companies and many government bonds just by purchasing one single ETF using the steps above.
Here’s our Ultimate Guide to all-in-one ETFs in Canada
If you want to read more about managing risk and how much to put in bonds vs stocks, I recommend checking out our Free eBook.
How to Get Started Buying Dividend Stocks In Canada
Now, many Canadian investors simply love the idea of dividend investing. This has long been the most popular type of DIY investing on Million Dollar Journey.
The basic idea is that stocks make us money in two ways:
1) The price of the stock goes up, and we sell it for more than we bought it for. This is called a capital gain.
2) The company decides to pay shareholders (aka: investors who have purchased their stocks/shares on a stock exchange). This type of payment is called a dividend. Many of Canada’s biggest companies make a lot of money (duh) and each year they decide to pay out a portion of their profits to their shareholders. That payment is called a dividend.
For a lot of people the idea of building an ever-increasing stream of dividends as the fuel for their retirement (at any age) is a perfect fit. The dirty secret when it comes to getting started in investing is that everyone is going to tell you that their style of investing is by far the best one.
The truth is that your overall success in building an investment portfolio is likely going to come down to your personal psychology. Whichever style of investing you feel you “click with” best will likely motivate you to save and invest more money AND stick with the strategy when times are rough. Those two behavioural concepts are vitally important in avoiding the most common investing mistake of selling at the worst times!
Our Ultimate Guide to the Best Dividend Growth Stocks in Canada fully explains this style of investing and is always updated with our top dividend stock picks (as well as fill reasoning for why we like them). If you’re attracted to the simplicity of dividend-focused investing, the good news is that Canada has some great dividend all stars.
How to Buy Stocks in a TFSA, RRSP, and Non-Registered Account
For most Canadians, when they first get started buying stocks online they will only need to open a Tax Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP). Most Canadians are somewhat familiar with these acronyms but don’t really know the details. The other type of account that some might want to open is a Non-Registered Account.
A Non-Registered Account is the plainest of investment boxes. It just holds your investments, but leaves them wide open to taxation. Generally speaking – with a few very specific exceptions – most Canadians would only use this type of account once they have maxed out their TFSA and RRSP. There are also other types of investment accounts for corporations, your children’s education, etc. But for now, let’s just focus on getting started with a TFSA or RRSP.
You can see our full RRSP vs TFSA comparison, but the most important takeaway is to just choose one and GET STARTED! It’s never too late, and we can show you how to create a $1,000,000 portfolio whether you are in your 30s, 40s or even 50s. I’ve watched way too many investors procrastinate on this decision for years, and rob themselves of a lot of investment growth in the process.
Buying Stocks Online in Canada – FAQ
Getting Started on Investing Online in Canada
With so many options to help new investors learn how to buy stocks in Canada, there has never been a better time to start investing. DIY online brokerages make it easy and convenient to buy and sell stocks, ETFs and other investment products.
While it is true that the stock market dips and rises depending on unpredictable market conditions, investing in stocks can help your money grow in the long run.
Over the last decade, the S&P/TSX Composite Index has averaged a 4.91% return. With a time horizon of 20 years, there’s a good chance for that number to increase considerably. The earlier you start, the more potential you have to earn on your investments.
Most seasoned investors will agree that having stocks as part of your overall investment portfolio is an excellent strategy for building long term wealth. There are other savvy additions that can be made as well, including bonds, GICs, real estate (including REITs) and small businesses.
Making informed investment decisions will help you reach your financial goals, both short term and long term. If you are ready to get started, check out our Qtrade review and find our why it’s, our #1 choice for the best online brokerage in Canada.
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