Beginner's Guide to Buying Stocks in Canada
Many people get into stock trading because it’s profitable in the long term. According to statistics, Canada had a 2.5% share of the world equity market in January 2022. The market is expected to grow as stocks have become more affordable and Canadians are finding out about the advantages of buying stocks.
To buy stocks in Canada, you need to open a brokerage account first. There are various other steps you should take to be successful with your investments. Here is a beginner’s guide on buying stocks in Canada.
What Is a Stock?
Understanding stocks is a must before you dive into this world. So, what exactly are stocks?
Stocks represent a small piece of a business. Basically, by purchasing a stock, you achieve a piece of a company. When the firm you bought the share from is profitable, you will start earning sums of money known as dividends. The more successful the company is, the better your rewards as a shareholder will be.
It’s even possible for someone who buys stocks to have the right to vote.
Typically, there are multiple types of stocks you can buy. As you’re getting started, you will most likely go for something like common or preferred stocks. Common stocks provide voting rights and very high investment returns, but if the firm fails, your investments can be lost. On the other hand, preferred stocks provide automatic dividend payments but no voting rights, and they are more secure as you’ll be repaid if the company fails.
Canada gives investors access to the Toronto Stock Exchange (TSX) as well as the Canadian Securities Exchange (CSE) and TSX Venture Exchange (TSXV).
How to Buy Stocks in Canada?
Here is how you can start investing in stocks as a Canadian:
1. Create an Account with a Brokerage
The first thing you should do is open a brokerage account. The good news is that it’s easy to find an investment platform that suits your needs.
Most large banks in Canada have brokerage services. If you already have a bank account with a major Canadian bank, you might be able to enjoy various benefits by opening an investment portfolio with them. You already have a relationship with the bank, so they know who you are. Therefore, the whole process will be simplified.
In other cases, online investment platforms are a much better alternative as they are more affordable and have superior research tools.
Some famous platforms used by Canadian stock investors are Wealthsimple Trade and Questrade.
2. Fund Your New Account
You must have some money in your account if you want to buy stocks. There are two types of Canadian investment accounts, respectively registered and non-registered investment accounts.
Registered accounts have tax perks, yet they impose limits on the amounts you can deposit and withdraw. Simultaneously, non-registered ones have no tax benefits, but they do not put limits on how much you can deposit or withdraw.
You don’t need to deposit large amounts to start investing in stocks. Since many Canadian brokerages have no account minimums, even $1 may be enough to get started.
However, it’s recommended to fund the account with at least $1,000.
3. Look for the Right Stocks
You can start buying stocks after you make a money deposit in your new account. Of course, this should be done once you have a trading plan in place.
Stocks can be searched in your brokerage, or you can take advantage of sites like Marketwatch or Yahoo! Finance. Before buying a stock, it’s crucial to compare the different types and figure out which one would suit your plan the most.
You can analyse stocks fundamentally or technically. Technical analysis lets you use chart tools to look at the stock’s performance. Fundamental analysis involves looking at the revenue, cash flow, management team, competitors, profitability, and financial statements of a firm. This way, you can find out their economic and financial history information.
You can buy different types of stocks, including:
· Green stocks
· Growth stocks
· Penny stocks
· International stocks
· Income stocks
· Blue-chip stocks
After you find the right one, you will buy it using the funds from your account. To do this, you must select the number of shares you wish to buy, choose an order type, and submit your order.
Bear in mind that you must trade during stock market hours. The Toronto Stock Exchange works from Monday through Friday between 9:30 AM and 4:00 PM EST. The program will be different during the holidays.
4. Keep an Eye on Your Stocks
Following the stock purchase, you must regularly monitor your stocks to know how your investments are doing. Make frequent check-ins to ensure everything is going well. If things don’t look good, maybe it’s time to sell your stocks. Take your time to analyse the situation and make the best decision.
The Bottom Line
Knowing where and how to buy stocks in Canada is important if you are just getting started. Follow the tips provided in this article for a smooth stock-buying experience. Also, don’t forget to do thorough research before making any investment.