How To Buy Stocks in Canada (Step By Step Guide For Beginners)

Advertiser Disclosure

This article may contain references to products/services to our partners. We may be compensated when you click on links to their products/services. Our partners cannot pay us to guarantee any favorable reviews. All products we feature or write about are objective and unaffected from these partnerships.
Hide text

Last updated on July 28, 2020
invest in canada guide

There was once a time where buying stocks in Canada was only for the wealthy and well connected. Investors would have to call their stock broker to place trades, which would be fulfilled manually. From there, stock owners would have to read daily newspapers to see how their money was moving.

Fast forward 30 years, and technology has changed everything about the investing process. With the advent of the internet, investors of all ages and wealth levels can make their money grow across multiple stock markets. But if you’ve never bought stocks in Canada before, do you know where to start?

There’s never been a better time to start buying stocks, ultimately making your money work for you. Here’s everything you need to know about getting started on buying stocks in Canada.

Step 1: Determine Your Investing Goals

Everyone starts investing for different reasons. While some want to grow their available cash and buying power, others want to build a nest egg for retirement. What is your reason for buying stocks in Canada?

Before you start buying and selling securities, it’s important to decide why you want to start investing. If you want to save money towards retirement, then think about opening a registered retirement savings plan (RRSP) account, or a registered retirement income funds (RIF) account. If you are simply looking to grow your money in a flexible and sustainable way, then opening a individual or joint investment account is the best way to go.

Step 2: Open a Canadian Investment Account

Once you have determined why you want to invest and your overall goals, it’s time to open a Canadian investment account. There are many different brokers in the marketplace, each offering a suite of benefits and options to help you grow your funds.

New investors should consider opening an account with our top-rated investment platform, Questrade.

In addition to offering multiple accounts based on your plans, Questrade has exposure to North America’s largest marketplaces. With one account, you can invest in the Toronto Stock Exchange, the New York Stock Exchange and the NASDAQ. In addition, Questrade offers best-in-class research, along with low-cost trades, giving you the edge in choosing the investments which will help you grow. You can read our full review of Questrade here.

Step 3: Determine Your Investment Strategy

After you’ve opened your brokerage account, the next step is to work through your investment strategy. A robust and healthy portfolio should consist of a combination of securities, including stocks, exchange-traded funds and mutual funds.

If your goal is long-term growth towards retirement with a RRSP or similar fund, it may be prudent to consider investing heavily in mutual funds. Arranged and directed by a fund manager, mutual funds invest in a broad range of stocks by pooling investor funds together. As the stocks increase in value, the funds are distributed among all of the fund’s shareholders. Because mutual funds trade once per day and are focused on growing over time, mutual funds are a good anchor for stable and continued growth.

If you are looking for aggressive growth, consider investing directly in company stocks. The major stock markets offer direct ownership in companies through shares, which can include voting rights and dividends based on quarterly performance. However, because you are investing directly into a company’s performance, stocks are a much more volatile security. Although it comes with significant risk, putting money directly into your preferred companies can also come with significant rewards.

If you are looking for a balance between direct investments and mutual funds, consider putting your money in an exchange traded fund (ETF). Like stocks, ETFs trade in real time with the market, allowing you to get the best available prices on your investments. But like mutual funds, ETFs pool investor money to invest in multiple shares, based on an index, industry, or other indicators. Because ETFs give you exposure to many different companies, you can still get moderate growth without putting all your money into one company.

Step 4: Do Your Due Diligence Before Buying Stocks in Canada

Now that you have determined where you want to put your money, it’s important to start doing your research to ensure your comfort in growing your cash. The three key places you should look are company regulatory reports, financial news sources, and fund ratings systems.

If you are investing in stocks or ETFs, it’s important to read provided prospectuses and regulatory filings available to the public. Both the U.S. Securities and Exchange Commission and the Ontario Securities Commission make reports available for inspection, giving you insight into the company’s trajectory and business plan. Never invest in a stock unless you have read these important reports, and are comfortable with the company’s future direction.

Should you decide to focus on mutual funds and ETFs, you will want to start your research with prospectuses, report cards and fund ratings. Investing research company Morningstar provides the industry’s most trusted analysis on securities, giving you the best insight on when to invest and when to hold off. Your investment platform will give you access to these reports.

Anytime you have money invested in the marketplace, it’s important to continually read financial news to best understand factors which could affect your overall performance. Publications like The Wall Street Journal and other digital news sources dig deep on how indexes and industries are responding to global changes, including consumer shifts and market responses to daily news.

Step 5: Determine Your Future Canadian Investment Plan

After you’ve started investing and are growing your cash, it’s time to determine how to continue that growth. Most platforms offer three options: guided growth through a financial professional, continued self-investment, or an algorithm-lead “Robo-Advisor.”

Self-directed accounts operate as the name suggests: users direct where they want to place their money without help from a professional. While this is great for investors who want to directly pick where they go, the lack of assistance can expose them to much more risk.

When you partner with a financial advisor to determine where you want to put your money, you will get their expert advice and analysis to help you get the most out of your investments. However, they will charge a nominal fee for managing your funds, which is often taken out of your overall earnings.

Finally, investment managers driven by artificial intelligence, or “robo-advisors” is one of the newest ways to invest in the marketplace. The “robot” will create a portfolio based on your goals, and automatically adjust it as the marketplace changes. While it is a lower-cost option from working with a financial professional, the robot isn’t always 100 percent right, forcing you to intervein when investments go off track.

While it might seem intimidating and scary at first, buying stocks in Canada is one of the best ways your investment can grow from the ground up, giving you solid savings over time. Through understanding your options and doing diligent research, you can make the most out of your money and ultimately achieve your goals of true financial freedom.

Do you live in Canada?

Get updates on the best new products and offers for Canadians.