How to Buy Stocks in Canada 2024

Are you ready to join the exciting world of investing? Are you wondering how to buy stocks in Canada to grow your wealth and secure your financial future right from the comfort of your home?

As someone who started buying and trading stocks in 2018, I can tell you that the Canadian stock market has immense potential. Today, I want to share with you the secrets of how to buy stocks in Canada, unlocking the doors to financial prosperity and freedom.

Stocks provide an incredible opportunity to participate in the growth of some of Canada’s most successful companies. By investing in stocks, you become a shareholder, and as these companies thrive, so does your investment. It’s a win-win situation. 

Not only that, but the accessibility of stock trading has skyrocketed in recent years. Gone are the days of spending hours on the phone with your broker or paying exorbitant commission fees. With the advent of online brokerage accounts, buying stocks and ETFs in Canada has become easier and more affordable than ever before.

This comprehensive guide will walk you through everything you need to know about how to buy stocks in Canada. We’ll discuss the best trading platforms available in Canada, explore different approaches to buying stocks, and provide step-by-step instructions to ensure you make informed decisions. 

Let’s dive in and unlock the doors to a prosperous financial future together.

How to Buy Stocks in Canada: A Guide for DIY Investors

When I first started my investment journey in 2018, I decided to take on the role of a DIY investor. I quickly learned that managing my portfolio myself has its advantages and disadvantages.

One of the perks which I enjoyed as a DIY investor is the easy access to financial information through the Internet and the financial press. I also enjoyed the cost savings I received from platforms such as Wealthsimple Trade, which offered zero commissions on most stocks and ETF trades.

However, I soon realised that managing an investment portfolio requires significant time and effort. Conducting thorough research and gaining financial knowledge about every stock in the market can be a tedious task. Additionally, I found it challenging to control my impulses, constantly jumping in and out of positions. This lack of discipline made it difficult to maintain a winning portfolio. If you find yourself in a similar situation, I suggest hiring a financial advisor or robo-advisor.

In my case, my RRSP was managed by Dynamic Funds, a financial advisory firm. This was because I was part of an employer retirement group where my employer matched my retirement contributions. Financial advisors offer more comprehensive financial guidance beyond investing. Although they charge around 1% of your assets annually, they can advise on your personal finances, retirement savings, college savings, or life insurance.

If you are looking for a financial advisor, I recommend working with a Certified Financial Planner (CFP). CFPs are bound by a fiduciary duty to provide advice that is in your best interest, even if it doesn’t directly benefit them financially. This ensures that they prioritize your financial well-being.

On the other hand, my TFSA was managed by Mylo, a robo-advisor platform. Robo-advisors are automated platforms that use algorithms based on your input to make investment choices. They are user-friendly and cost-effective, typically charging around 0.25% or less of assets per year. If you’re new to investing and prefer a hands-off approach, robo-advisors can be valuable resources as they provide stability and ensure you have the right mix of investments.

However, if you are new to the world of investments and prefer managing your investments independently without relying on robo-advisors or financial advisors, I can share my wealth of experience with you. Here is a step-by-step guide on how to buy stocks in Canada as a beginner:

1. Open a Brokerage Account

As someone who has invested in the stock market, I know the importance of having a reliable broker. They are essentially the go-to person or entity that helps you connect to the stock market, buy and sell stocks, and possibly get educational materials on different stock companies.

And here in Canada, while the big banks offer stocks, it’s even easier to trade stocks thanks to the availability of Canadian brokers. They allow you to buy stocks from mobile devices and easily track your portfolio’s performance.

Thankfully, we have many good options for low-fee brokerage accounts in Canada. These discount brokerages in Canada offer flexibility in managing your investments, low ETF management fees, and low or free commission trading. 

Questrade, Qtrade Direct Investing, and Wealthsimple Trade are some of the top choices for investors. With the help of these brokers, you can easily access the stock market affordably.

• As an experienced investor, I highly recommend Questrade for new investors looking for a customizable platform with access to advanced market data and charting capabilities. They even allow you to purchase ETFs for free and only charge 1 cent per stock, making it affordable for beginners. You can check out my comprehensive Questrade Review if you want more details.
• Another independent brokerage platform that I highly recommend is Qtrade Direct Investing. They offer stocks and 100 commission-free ETF trades, and their customer support is top-notch. I’ve written a detailed Qtrade Review that you can check out if you’re interested.
• Finally, Wealthsimple Trade is another excellent platform for beginner stock traders. One of the best things about them is that they don’t charge trading commissions on stocks and ETFs, making it easy for new investors to get started without worrying about fees. If you’re interested, you can read my Wealthsimple Trade Review for more information.

2. Choose Your Investment Account

After I chose my preferred discount brokerage, I had to select an investment account. There are different investment accounts in Canada, registered accounts like RRSP, TFSA, RESP, and non-registered accounts.

The type of account you choose will depend on your investing goals and personal circumstances. Registered accounts come with tax-deferred or tax-sheltered status from the Canadian government, and you don’t have to pay taxes on the investment growth within these accounts until you withdraw the funds. 

Most investors in Canada choose to open registered accounts.

• Tax-Free Savings Account (TFSA): TFSA allows you to save money tax-free for any short or long-term goals throughout your life. It’s important to note that the TFSA contribution limit, which is the limit to how much you can deposit into a TFSA, which for 2024 is $7,000. However, you can invest more than $7,000 if you have unused contribution room. TFSA accounts allow you to invest in different types of assets such as cash, bonds, mutual funds, securities listed on designated stock exchanges, and specific shares of small business corporations.
• Registered Retirement Savings Plan (RRSP): This account is typically used for retirement savings and allows you to defer taxes on your money and investments until later in life. While you receive tax deductions on contributions, you will pay income taxes on withdrawals in retirement. However, as your income is likely to be lower later in life, your marginal tax rate will be lower too. Learn more about how TFSA compares to RRSP.
• Registered Education Savings Plan (RESP): The Canadian government provides a maximum lifetime grant of $7,000, depending on your income, to match a certain amount of your yearly contributions on the first $2,500 contributed into your RESP account. Any income generated from investments within the RESP account will be tax-deferred, similar to the RRSP account.

On the other hand, non-registered accounts require yearly taxes to be paid on generated incomes as they don’t enjoy the same tax-free benefits. Unlike registered accounts, non-registered accounts don’t have withdrawal penalties or contribution limits but lack tax benefits. There are two popular non-registered options to consider: Cash accounts and Margin accounts. 

Cash Accounts allow buying and selling investments with cash available in the account, while Margin Accounts let traders borrow money from the brokerage to buy investments, leveraging their portfolio’s value for a potential boost in buying power, but also increased exposure to losses.

3. Fund Your Account

Now that you understand the types of investment accounts available, it’s time to fund them. Without money, you can’t invest in stocks. 

Most brokerages have a minimum account requirement, but with fractional investing, you can start trading with as little as $1 in your account.

You can fund your account using lump-sum or Dollar-Cost Averaging (DCA). With lump-sum funding, you send a large sum of money to your investment account, whereas with DCA, you contribute smaller amounts regularly.

Also, you can automate your payments to eliminate the need to time the market constantly, and starting small with DCA reduces your exposure to risk during market downturns. 

However, you must employ the power of consistency and time as they will be fundamental to your success. Trading consistently and over a long period gives you some return predictability and helps you figure out what parts are working or not.

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. By compounding your interests and staying long in the game, small amounts can grow into a substantial sum of money in no time.

4. Determine Your Risk Tolerance

It’s important to take a moment and think about what kind of investor you are. 

Do you consider yourself a conservative investor who wants to build a stock portfolio to achieve steady income, including dividends, while maintaining a lower level of risk? 

Or are you more of an aggressive investor who wants to maximise returns by taking on high levels of risk?

It’s important to remember that not all stocks are created equal, and what works for one investor may not work for another. Growth stocks and penny stocks are typically more suitable for aggressive investors who can handle higher levels of risk, while dividend stocks are better suited for conservative investors who prefer fewer risks but regular returns.

5. Define Your Investment Strategy

Before diving into the world of investing, it’s crucial to have a solid strategy in place. Investing without a plan could lead to emotional decision-making instead of financial decision-making, which can be detrimental to your investments. 

I would advise you to pick a sound investment strategy; otherwise, you could end up far worse than if you hadn’t invested. Here are some strategies I would consider when investing.

• ETFs: Exchange-Traded Funds are a collection of funds that track the performances of a broad stock market index. They have become a trendy way to start investing. By investing in ETFs, you receive the benefits of several stocks instead of just one, which is ideal for a new investor. Solid ETFs such as Blackrock’s iShare Core S&P 500 and Vanguard’s FTSE Canada All Cap are excellent places to start.
• Index Investing: The index investing strategy allows you to buy an ETF or index fund that invests in the entire market. This lower-risk option is ideal for new investors. Investing in 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 reduces the uncertainty and risk of investing in some large companies within the stock market.
• Growth Investing: If you are an aggressive investor with a high-risk tolerance, then choosing a growth investing strategy is the way to go. Investing in growth stocks means 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 can potentially return capital gains. 
• Dividend Investing: Dividends are certain payments taken from profits and shared with investors from the companies. Dividend investing is a great way to get a passive income stream. Even when the market is rocky, steady dividend payments will come in. You should opt for dividend ETFs if you want a regular cash flow. 
• 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 ready to handle significant volatility. Investing your whole portfolio into penny stocks is not advisable, but 5% of your total portfolio is okay.

Selecting an investment strategy that aligns with your goals, risk tolerance, and investment timeline is key. A solid plan will help you stay on track and make sound investment decisions.

RELATED: 12 Top Safe Investments With High Returns in Canada for 2024

6. Research and Select Your Stocks

As someone with experience investing in stocks, I know choosing a stock to invest in can be challenging, but it’s crucial to take the time to research your investments properly.

While there are websites like Yahoo! and Marketwatch that can provide stock information, I prefer to use my brokerage account to research stocks directly. However, it’s worth noting that some brokerage platforms like Wealthsimple and BMO InvestorLine may not provide real-time market data, with stock prices lagging behind by 15 minutes. Therefore, I often use financial websites for the most up-to-date information.

When researching stocks, I always consider a few key factors. These include the price, dividends, market and industry trends, stock performance, and future projections. 

It’s important to take a comprehensive approach to research to make informed investment decisions.

I always start with the summary section, which often contains the most critical information about the stock. However, I also dive deeper into the stock’s financials and official documents available under “Investor Relations” on the company’s website.

Living in Canada, I can access many stocks, but I often refer to a list of recommendable stocks sourced from popular companies like Vanguard and BlackRock. Some of my top choices include S&P500, VBAL, VGRO, XEQT, VEQT, XGRO, and ZGRO.

7. Place Your First Stock Trade

Once you have chosen the stocks you want to buy, you can move on to start your trades. It’s important to note that there are specified days and times for trading on the Toronto Stock Exchange and the New York Stock Exchange.

In Canada and the US, you can only make trades during stock market hours between 9:30 am and 4 pm EST from Monday through Friday. However, if you cannot trade during regular market hours, you can set up trades to be executed during market hours.

When you’re ready to trade, always note important information such as the stock prices, bid and ask prices, bid-ask spread, market, and a limit order. This information will help you make informed trading decisions and avoid costly mistakes.

Once you have all the pieces, it’s time to complete your order with your brokerage. Your broker will ask for the ticker symbol, an abbreviation used to identify the company you want to buy, and the total number of shares you want to purchase. 

You’ll also need to specify the order type, which could be a market order if you want to place the order immediately or a limit order if you want to wait until the stock hits a specified price.

Once you hit “place order,” your broker will execute it. Depending on your brokerage, it could take a few minutes before you become an official shareholder of your chosen company. However, you’ll soon see the stock appear in your holding and be on your way to building your investment portfolio.

8. Manage and Monitor Your Investments

As an investor, it is important to regularly optimise your investment portfolio to ensure it is aligned with your goals and risk tolerance. This involves rebalancing your portfolio, automating dividend reinvestment, and reviewing your portfolio periodically.

Rebalancing your portfolio should be done at least once a year, but it can also be done up to four times a year on a quarterly schedule, depending on your needs and trading activity. Rebalancing involves selling securities in overweight allocations and buying securities in underweight allocations to get your portfolio back in line with your original selections. This helps maintain the desired risk and return profile of your portfolio.

Automating dividend reinvestment is another way to optimise your portfolio. A dividend reinvestment plan (DRIP) allows you to automatically reinvest your dividends into more shares of the same security. DRIPs often give you a discount on a stock’s price and let you avoid trading commissions when they are used to buy more shares, keeping your investing costs very low.

Periodically reviewing your portfolio, at least once a year, is important to ensure it aligns with your goals and risk tolerance. As your needs and wants change with your age, investing experience, and lifestyle, adjusting your portfolio is essential. An annual check-in can help you identify areas that need adjustment and ensure your investment strategy and portfolio are still working for you.

9. Learn about Tax Implications and Reporting

When you buy and sell stocks in Canada, there are tax implications that you should remember and reporting requirements that you must follow.

First, you need to understand that you will incur a capital gain when you sell a stock for more than you bought it. This gain is taxable, and you must report it on your income tax return. Conversely, if you sell a stock for less than you bought it, you incur a capital loss, which can be used to offset capital gains and reduce your taxes.

It is also essential to keep track of your investments’ adjusted cost base (ACB). The ACB is the total cost of your investment, including any commissions or fees paid to buy or sell it. The ACB is used to calculate your capital gain or loss when you sell your investment.

Your brokerage will send you a T5008 form at the end of each tax year summarising your trading activity, including the proceeds from the sale of securities and the ACB. You must report this information on your tax return.

Secondly, if you receive dividends from your investments, you must also report them on your tax return. In Canada, dividends are subject to a dividend tax credit, reducing the tax amount you owe.

Consulting with a tax professional is always a good idea if you are unsure how to report your investments on your tax return. They can help you understand your reporting requirements and ensure you take advantage of all available tax credits and deductions.

10. Read Additional Resources and Join Online Communities

When buying stocks in Canada, educating yourself as much as possible is always a good idea. While this guide provides a good overview of the process, there is always more to learn. Reading additional resources can help you understand the ins and outs of investing and make informed decisions about your portfolio.

Many books, blogs, and online resources cover various investing topics in Canada. Some popular resources include The Globe and Mail’s Investing section, Canadian MoneySaver Magazine, and Investopedia’s Canadian Investing section. These resources provide valuable insights into investment strategies, analysis tools, and news that may impact your portfolio.

Also, joining online communities can be helpful for new investors. Reddit’s r/CanadianInvestor community, for example, is a great place to discuss Canadian investment opportunities, ask questions, and learn from more experienced investors. Other forums and social media groups are also available, allowing investors to discuss their experiences, share insights, and ask for advice.

It’s important to note that while online communities can be helpful, they shouldn’t be the sole source of information when making investment decisions. Always do your own research and consult with a financial advisor before making any significant investment decisions.

Common Trading Mistakes to Avoid When Buying Stocks in Canada

Investing in stocks can be an excellent way to grow your wealth over time, but it’s essential to avoid common mistakes that can derail your success. Here are eight of the most common mistakes that investors make when buying stocks in Canada. By being aware of and avoiding these pitfalls, you can increase your chances of success in the stock market.

• Emotional decision-making: It’s crucial to avoid making investment decisions based solely on emotions like fear or greed. It’s easy to get caught up in the hype of a hot stock or panic during a market downturn, but it’s essential to remain rational and objective. By sticking to your investment plan and staying focused on your long-term goals, you can avoid costly mistakes and achieve financial success in the stock market.
• Overtrading and excessive fees: Fees and commissions are important considerations that can significantly impact your returns. As such, paying attention to the trading costs and seeking ways to minimise them is essential. Avoid excessive trading, leading to unnecessary fees and eroding your investment returns. To avoid this, I recommend trading only when necessary and keeping transaction costs in check by comparing brokerage fees and choosing cost-effective investment options.
• Failing to conduct thorough research: Proper research before investing in a company is essential. It’s crucial to take the time to understand the company’s financial statements, market trends, and management team before making any investment decisions. Without thorough research, you may make poor investment choices that could hurt your portfolio. That’s why you need to analyse the financial health of companies and consider their growth potential before investing. 
• Ignoring long-term investment strategies: Investing in stocks requires a long-term perspective and diversification. Avoid chasing short-term gains or trying to time the market. Focus on the fundamentals of the company you’re investing in and have a well-defined investment plan that aligns with your financial goals and risk tolerance. 
• Market Volatility: It’s important to remember that stock prices can be volatile and subject to many factors. Economic conditions, market trends, and company-specific events can all impact stock prices. As an investor, it’s essential to be prepared for short-term volatility and avoid making rash decisions based on market fluctuations.
• Lack of Diversification: Many new investors fail to diversify their portfolios, which can be a big mistake. This mistake can increase your risk exposure and potentially harm your investments. Spreading your investments across different sectors, industries, and geographic regions can help mitigate the impact of any individual stock’s performance. By diversifying your holdings, you can avoid overreliance on a single stock or sector.
• Not Monitoring Your Investments: Understand the importance of not overreacting to short-term market fluctuations. However, also know that it’s essential to monitor the performance of your investments periodically. Regularly reviewing your portfolio, staying informed about the companies you have invested in, and making necessary adjustments are all crucial steps to take. Doing so ensures that your investments align with your long-term financial goals and risk tolerance. 

By being aware of and avoiding these common trading mistakes, you can enhance your chances of making sound investment decisions and achieving your financial objectives. Investing in stocks requires careful consideration, ongoing learning, and a long-term perspective.

How to Invest in Stocks in Canada Using a Robo Advisor

As a beginner investor, feeling apprehensive about entering the market independently is understandable. That’s why I recommend starting with a robo-advisor instead of jumping head-on into the investment market independently.

Robo-advisors manage your investment portfolio automatically based on the inputs you provide. They use algorithms to allocate your assets and decide how to invest your money based on your risk tolerance, financial goals, and time horizon. This takes the responsibility of investing decisions off your shoulders. 

Additionally, robo-advisors automatically rebalance your portfolio when necessary, ensuring that your investments align with your risk tolerance. 

With few restrictions on investment size, robo-advisors are a great option for those just starting their investment journey with limited funds. 

Wealthsimple, Mylo (formerly Moka), and Questwealth are popular robo-advisors available here in Canada.

RELATED: Best Robo Advisors in Canada for 2024

How to Buy Stocks Through a Financial Advisor

Hiring a financial advisor can be an excellent option if you have significant money to invest but don’t know where to start. With the help of a financial advisor, you can determine your risk tolerance and investment goals and create a personalised investment plan that aligns with your needs. 

However, it’s essential to note that financial advisors may require a minimum investment amount, ranging from $10,000 to $1,000,000 or more, depending on the advisor.

Additionally, some of the best-performing mutual and segregated funds are only available through financial advisors, which can be a disadvantage if you prefer a self-directed investment approach. 

For example, the Empire Life Class Plus 3.0 is an exceptional fund for retirement purposes, but you can only access it through a financial advisor.

If you need a financial advisor’s services, I can offer top-notch recommendations to help you achieve your investment goals.

How To Buy Stocks in Canada Without A Broker

You have a few options to consider if you’re interested in buying stocks in Canada but don’t want to go through a broker. 

One way is to participate in a Direct Stock Purchase Plan (DSPP) offered by some companies in Canada. This allows you to buy shares of a specific company without a broker. 

Another option is to participate in a Dividend Reinvestment Program (DRIP), which lets you automatically reinvest your cash dividends to purchase more company shares.

However, it’s important to note that investing without a broker may have some associated limitations and fees. 

How To Buy US Stocks in Canada

Buying US stocks as a Canadian investor is relatively simple, and there are a few ways to do it. You can use a Canadian broker that offers access to US markets. Most major Canadian brokers offer this service, so check with your broker to see if they provide access to US markets.

Also, you can use a US broker that accepts Canadian clients. Some US brokers, such as TD Ameritrade, allow Canadian residents to open accounts and trade US stocks.

It is also possible to use a robo-advisor that offers US stock exposure. Some Canadian robo-advisors, such as Wealthsimple and Questrade, offer portfolios that include US stocks.

However, investing in a US ETF or mutual fund listed on a Canadian exchange is the most common way. Many ETFs and mutual funds invest in US stocks and are available for purchase on Canadian exchanges.

It’s important to note that when buying US stocks in Canada, you’ll need to convert your Canadian dollars to US dollars, which may result in additional fees and exchange rate fluctuations. As a Canadian resident, you’ll need to be aware of any tax implications of investing in US stocks. It’s always a good idea to consult with a financial advisor or tax professional before making investment decisions.

What is a Stock, and How Does It Work?

A stock is a financial instrument representing partial ownership in a publicly-traded company. When you buy stock in a company, you effectively become a shareholder and own a portion of the company’s assets and earnings.

Stocks are typically traded on financial markets through brokerage accounts. 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. 

Investors can make money through stocks in two ways: capital appreciation (an increase in the stock’s value) and dividends (a portion of the company’s profits paid out to shareholders).

Some Key Concepts and Definition

Mutual Funds: Mutual funds are a popular investment option for investors looking for convenient and affordable access to professional management. 

When you invest in a mutual fund, you pool your money with other investors to create a large fund. 

This fund is then managed by a qualified financial advisor who invests the money in a diversified portfolio of stocks, bonds, and other securities on behalf of the investors.

Segregated Funds: Segregated funds are like mutual funds but with an added insurance guarantee that protects the original investment in case of market downturns. 

If the fund’s value drops below the initial investment, the insurance company pays out the difference to the investor. 

This provides security for risk-averse investors. However, segregated funds have higher fees than mutual funds due to the added insurance protection.

Final Thoughts on How to Buy Stocks in Canada

Learning how to buy stocks in Canada may seem like an impossible feat. But I hope this guide on how to buy stocks in Canada has been helpful and informative.

Remember to research the companies you want to invest in and be mindful of the risks involved in the stock market. 

If you’re just starting out, it’s a good idea to start small and gradually increase your investments as you become more comfortable with the process. 

Don’t be afraid to seek advice from a financial advisor or do your own research to make informed decisions. 

Now that you better understand the steps involved in buying stocks in Canada, why not take the plunge and start your journey towards financial growth and wealth accumulation by taking action today? 

FAQs on How to Buy Stocks in Canada

Can I buy stocks online for free in Canada?

Yes. 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 Scotiabank

Bank of Nova Scotia (Scotiabank) offers a brokerage platform called Scotia iTrade, which 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, one of Canada’s very first stock trading platforms.

You can use the TD Direct Investing platform to trade stocks, mutual funds, ETFs, options, bonds, and IPOs.