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How to buy stocks in a company
Want to know how to buy stocks from Canada? Follow these 7 simple steps to be a shareowner.
How to buy stocks
Buying stocks in a company is actually pretty simple. Even you can do it! Follow these 7 simple steps to get started:
- Choose an online stock dealing platform
- Sign up for an account
- Choose the stocks you want to buy
- Place your order to buy stocks
- Pay for the transaction
- Monitor the performance of your stocks
- Sell your stocks (if you want to)
Step 1: Choose an online stock dealing platform
First thing’s first, you’ll need to find a broker to buy and sell stocks. These days, most people go for an online stock trading platform (also known as an online broker), although you can still find brokers that work face-to-face or over the phone in Canada.
The right online stock trading platform for you will depend on how confident you are when investing, whether you want to do it all yourself, and what fees are involved for the volume of stock trading you’re looking at.
Ask yourself these questions to help you choose:
- Are you happy to buy and sell stocks on your own?
- Do you want to be given ideas or are you happy to find them yourself?
- How much research and information do you need?
- What is the pricing structure?
Your choice could also depend on what else you want to trade. Will you be buying funds (such as electronic funds transfers, or ETFs) alongside individual stocks, for example? Do you use investment trusts? Check that the online broker you pick can meet your needs.
Use our table to compare some of Canada’s leading brokers
Step 2: Sign up for an account
Once you’ve chosen a platform you’ll need to register for an account. This step is usually free, but keep in mind that some providers may charge subscription fees or other ongoing fees for features such as market research.
The registration process takes place online and if you’re a new customer you’ll usually need to provide:
- Personal details. This includes your name, email, date of birth, address, Social Insurance Numbers (SIN) and employment status.
- Government ID. Your passport or driver’s license will likely be acceptable.
- Payment details. This is the debit card, credit card or bank transfer information you’ll use to fund your stock trading account.
Step 3: Choose the stocks you want to buy
To begin with, you should identify companies on the stock market whose stocks you want to buy, and then monitor the stock performance over time.
When re-evaluating the company before you invest, ask yourself some questions. Has the stock price changed since you first looked at it? If so, are you happy to buy it at the new price? It’s worth checking the headlines or recent company announcements to make sure no new risks have emerged. And remember, only invest what you can afford to, as the value of stocks can go down as well as up.
In general, if you’re starting out, invest in companies you understand. The latest technology stock may look really good, but do you understand how it makes its money?
Equally, make sure you’re buying for the right reasons – is it because you want exposure to a fast-growing company or just because someone has told you it seems like a good idea?
Step 4: Place your order to buy stocks
Once you’ve decided which stocks to buy, purchasing them is usually the easy bit! If you’re in your online account, you’ll get offered a price and can just click a button to “buy now.” You’ll receive a contract note shortly afterwards.
Step 5: Pay for the transaction
You’ll need to have sufficient funds in your online stock trading account to cover the cost of the transaction, including the brokerage fees that apply.
A bit about dealing charges
Typically, you’ll pay a one-off charge for buying and selling stocks. If this is a fixed amount (say ten dollars or less), it becomes more economical on larger stock purchases.
Alternatively, some brokers charge a percentage of the assets that you hold on the platform. You’ll need to crunch the numbers to work out which one of these options is likely to suit you best.
Step 6: Monitor the performance of your stocks
There are 2 ways you make money from investing: 1 is from an increase in the capital value of the stocks, the other is when the stocks pay dividends.
You’ll need to monitor the performance of your stocks, and the frequency with which you monitor them will depend on your investment strategy. For example, if you have a long-term investment strategy, you may only check in and see how your stocks are performing every month. If you have a medium-term strategy, it may be a good idea to check each night or each week. Whichever option you choose, you can review the performance of your investments by logging into your online trading account.
You may also want to set limits on your stock trades. For example, you could set an automatic sell if the stocks lose more than 10% or gain more than 50% of their value. This will limit how much money you can lose, or it may prompt you to sell out when the stocks get ahead of themselves.
Step 7: Sell your stocks (if you want to)
When you decide to sell your stocks, the process is very similar to the method of buying stocks described in Step 4. When you’re logged into your online trading account you’ll be able to select an option to sell your stocks at the current market price. You will receive the appropriate confirmation that your stock has been sold, and the revenue from the sale will arrive in your online account.
And that’s it, you now know how to buy stocks in Canada! All that’s left to do is put these steps into action and you’ll own stocks in a company in no time.
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