It is now easier than it has ever been to buy stocks online in Canada. Come 2022 and beyond, Canadians will be able to buy stocks fast, cheap, and without any form of stress courtesy of the increasing competition between Canada’s best online brokers. Not only are these new brokers cheaper than the former method, but they are also more advanced, diverse, and friendly. Now, anyone with little experience (we mean including those that don’t know anything about stocks before now) can buy stocks and use them the right way to make more money. Keep reading to know how to start buying stocks in Canada using these new and improved mediums.
What is a stock?
If you already know what a stock is, you can skip to the next section. However, if you fall in the category of those that are super new to the world of stocks and shareholding – you might want to stay here a little longer.
So what is a stock? First, you need to know that ‘stocks’ and ‘shares’ mean the same thing. That’s why we are going to be using it interchangeably from now on. A stock refers to a part of a company – referred to as owning equity. So if you buy a certain percentage of the company (stock/share), you become a shareholder of such a company. When buying stocks, you are to target the business you think will excel over time – it’s an investment in success. In simple terms, stocks are small pieces of a company/business.
Let’s take a look at an example of the company; RBC to better explain what stocks are. Think of its ownership as a pie chart divided into 1.4 billion small slices where each slice represents stocks. If RBC then made a profit of $8.4 billion at the end of the year then each slice would take $6 in earnings. Everyone who owns a share could then get $3 per share as RBC’s dividend, while the remaining $3 (totaled to be $4.2 billion) can be used to do anything by the company. The options include buying a new asset, buying back their shares, and so on.
Where To Buy Stocks?
The simple answer to that is question is ‘online’. The best place to buy stocks in Canada is online. However, there are three options: brokers, Robo advisors, or banks. Where should you buy your stocks?
Ideally, there is only one place to get stocks from but the method of accessing the stocks is where the variations come in. You see, when companies decide that they want to split their ownership into small shares, they go to a wholesale store for stocks otherwise referred to as a stock exchange market. In Canada, Toronto Stock Exchange (TSX) is the main stock exchange market. Now, since the stocks are loaded onto TSX, the method of ‘shopping’ for the stocks is where this article comes in.
Using Banks to buy stocks
In the past, banks were the only way to get stocks from TSX. So you would usually have to walk up to any local big bank, ask how to get started with investing, and get advice on what stocks are best for your based on your financial records and goals. Although this sounds simple – like a fairytale story, it is mostly not like that. Often, clients are guided into using mutual funds to buy stocks with many other investors and this is not so great because mutual funds in Canada are EXPENSIVE. There’s no better way to say it. By going through this route, most of your money would have been spent on getting the stocks that you would only have too little to yourself.
But there is an advantage to mutual funds – it’s why people still use them to date. Mutual funds are super easy. The process is too simple; walk into a bank, tell them what you want, and they help you set it up. Pay, and that’s all. The setup is automatic and you can invest your money without any stress but with thick fees. You don’t need any skill or background knowledge to use mutual funds.
Using Online Brokers
If you want to buy stocks at a cheaper rate, then using an online broker is still the best option you have. Some brokers have discounts and promos that can help you get the best deals on certain investments. It is quick, relatively simple, and most recommended. The only thing people might run away from is that it requires a little DIY independence unlike the automatic method with mutual funds. You would also need to have basic background knowledge on how to buy stocks using ticker symbols and prices (don’t worry – we will get to that soon). The only reason this method is not as famous as it should be is that some people would rather pay heavy fees than put in the time to confidently buy stocks using an online broker.
Robo Advisors
These are considered as the ‘middle ground’ – between banks (mutual funds) and online brokers. Though Robo advisors are still somewhat expensive (triple a broker), it’s still less than a quarter of what you will pay with mutual funds so it is typically the middle ground. Using Robo advisors is best for passive investing and the fees are charged as a percentage of your investment portfolio. Here, you also don’t need to actively supervise the process. All you need to do is decide on a strategy (with the help of an advisor and an automated survey), then your investments will be re-balanced according to the principles of passive index investing (source: guide published Feb 4, 2022). What you stand to get with Robo advisors are;
- Non-biased advice from specialists
- DIY is completely non-existent.
- Tax-loss harvesting to save money during tax collection
How to buy stocks in Canada
Using a discount brokerage (online broker), you will first need to find a preferred discount brokerage then you can go ahead to follow the steps below;
- Sign in to the online broker account
- Buy stock by looking for ‘trade’ on the application’s interface and then select ‘equities’. If you know the ticker symbol, you can get the quote for the ticker and buy directly.
- Choose the stock you prefer and fill out the required information (account, market, ticker symbol, quantity, and order type).
- Review the order and check to see if all the information is correct. You can always modify anything that doesn’t seem good before you hit ‘submit’.
Conclusion
If you have completely read through this guide, then you are ready to start owning parts of different companies. However, you just need to decide first whether you want to use a discount brokerage or a Robo advisor. As a passive investor, a Robo advisor is perfect but if you want 100% hands-on investing, then a discount brokerage might be the best for you. Also, take note that with every investment comes a certain amount of risk so contact the right personnel for quality and professional advice before you pour all your money into the stock exchange.