Buying stocks online in Canada has never been quick, easier, or cheaper.
Thanks to low interest rates and increasing competition between Canada’s online brokers, Canadians now have access to a myriad of ways to access the world’s stock markets.
Our top brokerage picks all include very low fees & commissions, are easy to use, and make informative educational resources available to all users.
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How the Stock Market Works in Canada
You’ve seen that weird set of scrolling numbers at the bottom of a news screen or heard that people are making money “betting on video game meme stocks” and so you Googled: How does the stock market work in Canada?
You’ve come to the right place.
Before we get to step-by-step logistics on how to buy stocks online in Canada, let’s quickly look at what exactly a stock is.
When you buy a stock – also known as a share of a company – you become a shareholder. It is also often said that you own equity in the company.
The goal is to buy stocks in companies and businesses that you think will excel over time. Ideally, you want to buy shares of a company that will increase its profits over time. The company can decide to pass these profits directly on to you (as one of the company’s owners/shareholders) in the form of dividends, or it can choose to reinvest those profits back into the company – this creating a more valuable company going forward. As the company gets larger and more profitable from this reinvestment, people will probably be willing to pay more for shares (shares = small pieces of the company) and the value of your original investment will go up.
When it comes to the best way to buy stocks in Canada, our most recommended platform is the Qtrade discount brokerage. It’s what we personally use (after trialling many stock trading platforms over the years), and it has consistently been rated #1 by independent sources such as The Globe and Mail.
Where to Buy Stocks Online in Canada: Brokers vs Robo Advisors vs Banks
When companies decide that they want to separate their ownership into a bunch of small shares, they go to a stock exchange. A stock exchange is like a wholesale store for stocks/shares. In Canada the main stock exchange is the Toronto Stock Exchange (TSX), while in the USA it would be the New York Stock Exchange (NYSE).
Now, there are a few ways to go shopping at this store.
In the past most Canadians started buying stocks by walking into their local big bank branch and asking to get started with investing. This often resulted in clients being guided into pooling their money with many other investors in order to buy stocks through mutual funds. Mutual funds are largely terrible investments due how expensive they are. Canada is often ranked as having the highest mutual fund fees in the world.
If you want to go to the stock exchange store and purchase stocks as cheaply as possible, we recommend looking at our Canadian Online Broker Review Comparison, where we show why the Qtrade discount brokerage is the best way for the average Canadian to quickly get started building wealth through the stock market.
One of the biggest reasons that the mutual fund model of stock investing has hung on so long is that it is super easy. You walk into the same big bank that you’ve always used, and then they can set up a very easy automatic way to invest your money (and pay their large fees). Most mutual fund investors never truly understand what they’re invested in, or what it means for their future.
The online brokerage model is clearly not like that. While our most recommended brokers make it quick and simple to buy stocks online, there is an element of DIY independence involved in cutting costs to the bone. You have to do a bit of legwork in terms of understanding how to buy stocks using ticker symbols and prices. We’ll explain how in detail below, but some people simply don’t want to put in the hour or two that is required to feel confident with buying stocks using an online broker.
The main Canadian competitor to the discount brokerage trading platforms is a “middle ground” option known as a robo advisor.
Related: Our in-depth comparison of Canada’s best robo advisors.
When I’m asked: What’s the easiest way to buy stocks in Canada?
My simple answer is: Wealthsimple
Wealthsimple is our #1 rated robo advisor because they have very competitive fees, but mostly because they are just so easy to use.
Using Wealthsimple to instantly buy a stock portfolio (or a mixed portfolio of stocks and bonds) is about as easy as it gets. The fees (often identified as management expense ratios) are about triple what you will pay with a discount brokerage account – but they are still less than a quarter of what mutual funds will charge you. (Yes mutual funds are that expensive).
How to Buy Stocks In Canada Quick Comparison Chart
Best for DIY Investing
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Charged as a percentage of your investment portfolio. In the .35% to .8% range once the underlying investments (ETFs) are taken into consideration.
Hands on. You’re in the driver’s seat.
Hands off. You decide on a strategy (with the help of an automated survey and an advisor).Your investments will be re-balanced according to passive index investing principles.
No one to ask for help. You are effectively on your own.
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No need to worry about limit or no-limit orders, leftover cash, partial shares, or any other DIY stuff.
As complicated as you want to make it. One-off index buy or a daily rebalance/trading - up to you.
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How to Buy Individual Stocks in Canada for Beginners (Not Dummies!)
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.
Let’s say I have $1,000 to invest and I want to invest in BMO. Here’s how to do that using my preferred discount brokerage: Qtrade.
Step 1: Sign in to your Qtrade account. You then have three options to start buying:
- Click on Trade at the top toolbar, and select Equities
- OR click the button that says Buy/Sell Equity Order
- OR enter the Ticker Symbol (if you know it) under ‘Get Quote’ then hit submit then buy from the quote page
Step 2: Choose your stock and fill out the required information. Note that if you searched by ticker symbol, some of these will auto-populate. (Ticker Symbol = 3 or 4 letter abbreviation for the company. So APPL = Apple.)
- Account: Which account do you want to buy your stock in – RRSP, TFSA, Non-Registered?
- Market: the country the stock is listed in (BMO is in Canada)
- Ticker symbol: To find it, click the magnifying glass and search the company’s name. For BMO it’s BMO.
- Action: select ‘buy’
- Quantity: the number of shares you want to buy. Say BMO shares are $105 apiece. This means, with your $1000, you could buy 9 shares.
- Order Type: Choose’ Market’ which is the simplest way. A market order allows you to buy a stock at the best available current price.
- Good Through: Set it at today’s date
- Enter your phone number then click ‘review order’
Step 3: Review your order. If something looks wrong, hit modify. If everything looks good, then you can confirm your order by entering your password and hitting the blue ‘submit order’ button.
Congratulations! You have just begun online stock investing in Canadian stocks!
You now own several pieces of the massive company that is the Bank of Montreal. Your first dividend payments will be on the way in no time! You can check your status at any time by choosing ‘Order Status’ under ‘Trade’ on the main toolbar.
How to Start Stock Trading With Market & Limit 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. Keep in mind, stock exchanges/the market executes orders in the sequence it receives them. So if someone buys a whole bunch of stocks just before you buy yours and that moves the price up to say $29.00, then when your order is ready for execution, you will be buying the stock at this new 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.
Now, you might ask yourself, why not always go with limit orders? This way, I can always make sure I’m not overpaying for a stock?
Well, while this is theoretically true, it also means that you might not be able to buy the stock or ETF you want at all. 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.
Timing the market is a tough business – one that even the pros can’t get right.
That said, one major benefit of limit 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.
Buying Stocks Online in Canada – FAQ
How to Buy 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). Or 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
When you first start looking at how to buy stocks in Canada, it can be a bit overwhelming.
It can seem like there are just too many things to compare when it comes to the type of assets to invest in, as well as choosing a trading platform with which “to go shopping” on the stock exchange.
The key is to not get paralyzed doing endless analysis, and to set a date for yourself to begin taking action.
On that note, it’s important to understand that when you first begin investing in Canada (using any of the platforms that we mentioned) you’ll need to decide what type of account you want to get started with. There are 10+ different kinds of investing accounts in Canada, and they all have different characteristics when it comes to how the investments inside of them will be taxed.
Think of a Canadian investment account as a box that you will be putting investments into. Some of the boxes are kind of awesome because as long as investments (like stocks, bonds, and ETFs) stay in them, the tax man can’t touch them. Other boxes are more bland, and don’t really offer anything beyond basic storage.
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! I’ve watched way too many investors procrastinate this decision for years, and rob themselves of a lot of investment growth in the process.
As a rough rule of thumb:
If you are making more money now than you think you will be making in retirement – OR – you are making more than $80,000 (and are paying high tax rates), then open an RRSP and max that out first.
If you are making less money now than in retirement – OR – you are making less than $80,00, then open a TFSA and get started.
The two accounts are kind of mirror images of one another when it comes to tax treatment, and that’s the reason for the rules of thumb. The good news for a beginner stock market investor is that both accounts will very effectively shield your investments from the tax man as long as they are held in their tax-advantage box!
Steps to Getting Started Investing Online in Canada
If you’re just getting started with online investing, here are the steps that I’d follow to find my best fit for an online trading platform.
1) Understand the difference between a bond and a stock.
2) Decide whether a discount brokerage or a robo advisor is a better fit using our handy comparison chart above.
3) Open an account. (While you’re doing the paperwork, why not open a TFSA, RRSP, and a Non-Registered account at the same time – you don’t have to use them if you don’t want to.)
4) Think about how much risk you want to take in your investment portfolio. The more bonds you have, the less your long-term returns are likely to be – but the safer your original investment is.
5) Decide which of our investing strategies (or what combination) makes the most sense to you.
The MDJ Editorial Team’s 2021 Top Pick for buying stocks online in Canada is the Qtrade discount brokerage. Its super low fees and outstanding customer service make it the best choice for both beginners and seasoned investors!
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