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How to buy stocks in Canada
Learn how to invest in stocks in Canada in 5 easy steps.
Wondering how to invest in stocks in Canada? E-Trade launched in 1992 as a platform for retail investors to place trades online. Today, brokers new and old continue to harness new technology and the power of the internet to bring stock trading to the masses. Let’s walk through how to buy stocks in Canada.
How to buy stocks in Canada: 5 easy steps
- Choose an online stock trading platform
- Sign up for an account
- Set up a funding method to pay for the transaction
- Choose the stocks you want to buy
- Place your order
Step 1: Choose an online stock trading platform
While big brokers TD Direct Investing, CIBC Investor’s Edge, BMO InvestorLine, RBC Direct Investing and Scotia iTRADE are still going strong, they’re not the only brokers in town anymore. The increasing competition over the past few decades has transformed the way everyday investors access the stock market. It’s delivered more user-friendly platforms, greater convenience, faster trading and lower fees.
Our top picks for where to invest in stocks in Canada
Finder Award
Interactive Brokers
- Access to international stock exchanges
- Low margin rates
- Powerful research tools
National Bank Direct Brokerage
- Commission-free trading
- Several account types available
- Access to array of research tools
How do I choose the right stock trading app for me?
- Compare features. Think about your level of trading experience and what kind of features are important to you, along with the platform’s ease-of-use.
- Compare fees. While most brokers don’t charge a stock trading fee, some charge extra for specialized investment products. High-value trades are often charged as a percentage of the total trade value, rather than a fixed fee.
- Tradable securities. Most brokers offer at least stocks and exchange-traded funds (ETFs). Big brokers like Interactive Brokers have the largest lineup of investment options, while more beginner-focused brokers like Wealthsimple offer a more simple lineup of stocks, ETFs and cryptocurrency.
- Research tools. Online brokers usually offer market news, updates and other research tools that will let you investigate the trading history of individual stocks.
- Customer support. How fast can you get a hold of customer support if you’re having an issue with your investment? The quality of customer support and the ease at which you can contact them is no less important than fees or research tools.
Using a robo-advisor
If buying and selling stocks still seems intimidating, you could consider using a robo-advisor. Robo-advisors are algorithms that invest in a mix of stocks (and bonds) according to your risk tolerance, financial situation and investing timeline. This passive investing approach saves time too, as you don’t need to research what shares to buy and sell and when to do so.
Step 2: Sign up for an account
Brokers, banks and other financial services companies follow a regulatory process known as Know Your Client (KYC), which is a process to verify the identity and other credentials of customers. When you’re applying for a brokerage account, you’re taking part in the KYC process.
The exact steps for opening a stock trading account vary between platforms, but here’s how it generally works:
- Start an online application. Most platforms let you complete the entire application process online, although some may require extra steps like visiting a brokerage branch in person to verify your identity and complete the process.
- Create your profile. Create the username and password with which you’ll access your account. You may have to confirm any devices linked to your trading account before your application can proceed.
- Select an account type. TFSAs and RRSPs are popular types of accounts, although you may also be able to open other accounts like trusts and business accounts.
- Enter your personal information. You’ll typically need to provide your full name, email address, residential address, phone number and Social Insurance Number (SIN).
- Enter basic employment and financial information. You may be asked to provide the name of your employer, basic financial information and bank account details to transfer funds to your investment account.
- Verify your ID and residency. Usually, you need to email or upload a copy of valid, government-issued photo ID (such as a driver’s license or passport) to your brokerage website.
- Submit your application and wait for approval. Once you’ve provided all required information and documents, submit your application. Approval often takes anywhere from 1-2 business days.
RRSP Deadline
For the 2022 tax year, the contribution deadline is March 1, 2023. The maximum amount you can contribute is 18% of your earned income in the previous year, up to an annual limit of $29,210 for the 2022 year. Contributions are tax deductible – you claim your RRSP contribution as a deduction on your tax return. Savings grow tax-free within your RRSP, as you won’t pay tax on investment earnings as long as they stay in your RRSP.
Step 3: Set up a funding method to pay for the transaction
While you can open an account with most brokers without a minimum deposit, you can’t trade until you have sufficient funds in your account to cover the cost of the transaction.
One of the easiest ways to do this is to link your bank account and transfer funds via Electronic Funds Transfer (EFT). EFT transfers take between 1 and 3 business days to complete, but some brokers offer a feature called instant deposits, which allow you to trade before the funds have settled.
Other funding methods include wire transfer, cheque deposit and account transfers from other brokerage accounts. Credit cards are typically not permitted as a brokerage account funding method.
Step 4: Choose the stocks you want to buy
Where do you get investment ideas? In other words, how do you choose the best stocks to buy?
A good place to start is with an industry that interests you and then explore the different companies in that space. Identify key players and young companies with potential for growth but also figure out which companies are falling, or have fallen, out of favor. If you want to follow a Warren Buffett saying, “never invest in a business you cannot understand.”
Tools like stock screeners can help you narrow down stocks by sector, industry, price range and more. Search for companies by name or ticker symbol. If you’re on the fence about a purchase, add the stock to your watchlist to keep an eye on its performance. Analyst research reports can give you valuable insight into companies and guidance as to whether a particular company is a good investment.
At the end of the day, you should perform as much in-depth research as possible until you’re comfortable investing.
Related Best stock picking services
Step 5: Place your order
With a stock in mind and funding in place, it’s almost time to invest. But before you buy any shares, you should know how much money you want to invest in any particular stock.
Consider your budget, investment goals and your overall portfolio allocation. With the advent of fractional shares, you no longer need the entire share price to invest. Fractional share trading lets you invest specific dollar amounts in a stock instead of having to buy whole shares. Though not every broker offers this feature.
How many stocks should I purchase?
The ideal number of stocks for your portfolio depends on your investment goals and level of desired diversification. Renowned value investor Benjamin Graham put this number between 10 and 30 stocks. New investors may hold fewer stocks, while experienced traders may feel comfortable monitoring a wider range of securities.
Types of stock orders
There are two ways to purchase stock: placing a market order or a conditional order.
- Market orders. Place a market order when you want to buy a stock immediately at the current market price. If you’re buying shares of a volatile stock, the price at which your order is executed could be higher or lower than the last traded price.
- Conditional orders. Place a conditional order, such as a limit order or stop order, when you want a stock to meet specific conditions before you invest. A limit buy lets you set a maximum purchase price for your order. If that price becomes available within your specified time, the trade is executed. If the stock never hits the specified price, your trade won’t be executed.
Once you’ve entered details like the type of order you want to execute and the number of stocks you’d like to purchase, submit the order.
How much does it cost to buy stocks in Canada?
The cost to buy stocks depends on which trading platform you’re using. Some online brokerages like Wealthsimple charge no fees or commissions to trade stocks, and some require a minimum deposit to open a trading account. Other brokers charge extra for specialized investment products. High-value trades are often charged as a percentage of the total trade value, rather than a fixed fee.
You can compare the fees and features of the best stock trading apps here.
What happens after I buy a stock?
Once the broker executes your order, you’re considered a shareholder. Congratulations! And now you can either hold the stock or sell it.
Buy-and-hold investors hold on to stocks in the hopes that they will eventually increase in value. They may hold a stock for months or years before they decide to sell it — hopefully at a profit.
Active traders, on the other hand, may offload a stock quickly. Specifically, day traders engage in intraday trading, which involves buying and selling a stock over a single trading day. The aim here is to take advantage of sudden changes in a stock’s price. This type of trading is complex, fast-paced and requires a comprehensive understanding of the market. It’s not a suitable trading strategy for beginners.
Ultimately, what you do with the assets in your portfolio depends on your investment goals, strategy and risk tolerance. Make sure to check in occasionally on your investments to track their performance and ensure your portfolio still aligns with your investment goals.
When should I sell my stocks?
The process of selling your shares is equally as important as buying them. But not every investor follows the same playbook.
Some experts say you should consider selling your stocks if the company’s fundamentals change for the worse or if the competitive landscape changes. For instance, you may decide to sell your stock in a company whose earnings continue to steadily decrease or whose performance has dramatically weakened compared to industry peers.
Another reason to sell might be that you need the money for a more attractive investment.
Ideally, investors want to sell when it will be the most profitable. But timing the market is incredibly difficult, if not impossible, and can be costly. This is why it’s important to develop a strategy and stick to it.
What are the benefits of buying stocks online?
- Lower fees and faster trades. Online trading is cheaper and faster than broker-assisted trades, which can cost upwards of $25 or more per trade.
- Convenience. Sign up for an account in minutes, and trade from anywhere with an internet connection.
- More control. Online trading gives you complete control over your portfolio and investments. Do your own research, and place your own trades without influence from brokers or financial advisors seeking a commission.
- Complimentary research and trading tools. Many online brokers provide free educational resources and research tools that can help you better understand the markets and investing.
- Real-time updates. Monitor asset prices, stock market news and your portfolio from your phone, tablet or laptop.
Is it safe to buy stocks online in Canada?
Generally speaking, yes, it’s safe to buy stocks online. Most online trading platforms employ safety measures like 24/7 infrastructure monitoring and two-factor authentication as standard protocols along with maintaining a membership or good standing with the IIROC. But, like with anything on the internet, there are still some things to watch out for:
- Technical problems. Your ability to trade and invest depends on the underlying platform, its software and its servers. If you can’t access your account because of a server outage, you could miss an opportunity to buy or incur losses if you can’t sell.
- Security concerns. Hackers constantly target online brokers, and a breach could result in the theft of personal and financial information.
- Making rash investment decisions. Emotional investing and unfettered access to the market can lead to impulse trading, which can be costly. Traders can also get caught up in the excitement of fast-moving markets, investing too much too quickly and without first taking the proper time to understand the stock.
Compare more online stock trading platforms in Canada
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Bottom line
- Buying stocks online begins with comparing and choosing a quality trading platform.
- Before committing money, learn about your investing options and research potential companies to invest in.
- Try to remove emotions from investing and be prepared to follow your plan.
Not ready to buy? Practice your trades risk-free with a stock-trading game.
Frequently asked questions on how to invest in stocks
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
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