How to Invest in Stocks in Canada: 5 Quick-Start Tips

Breaking into the stock market is easier than you might think, but you’ll need to compare your options to find the ideal trading platform for your goals, even if you’re an investing beginner.

To invest in stocks in Canada, you’ll need a brokerage account. As for what goes into your portfolio? That will depend on your strategy — and your stock research.

1. Choose an investment platform

All of the major banks in Canada are equipped to offer investment services, and there are perks to opening an investment portfolio where you bank. One such benefit is a simplified application and funding process — your bank already knows who you are, and can easily access your deposit accounts for fund transfers.

But don’t assume your bank is the right choice — take some time to explore your options before you start investing. You may find more competitive fees or better research tools offered by other investment platforms.

Ways to compare investment platforms

As you narrow down your platform options, consider the following:

  1. Account options. Make sure the brokerage you’re considering offers the type of account you want to open.
  2. Fees. Commissions and account fees eat into profits, so familiarize yourself with the actions that trigger a fee and at what rate.
  3. Research tools. To make informed stock picks you may need research tools like stock screeners and charting software, and not all platforms offer these tools.
  4. Investor feedback. Look for investor reviews of your potential broker on the Better Business Bureau, Trustpilot, Reddit and other online forums, and check to see if they are Canadian Investor Protection Fund (CIPF) members.
  5. Investment options. Most brokerages offer stocks, but you may want to see what other assets your platform has in its lineup to diversify your holdings.
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Pay close attention to investment fees

Most major Canadian brokerages charge between $4.95 to $9.99 per stock trade, with an average commission fee of $6.95 per trade. Here’s why it matters: Let’s say you want to invest $500 in a popular stock. After your trading platform takes its $6.95 commission, you’re left with $493.05 to invest. Right off the bat, that’s a 1.4% loss.

Seven bucks may not seem like much, but flat-rate commissions can seriously eat into your bottom line, especially when you invest at smaller dollar amounts. Had you invested just $100, the average Canadian stock commission fee of $6.95 per trade would snap up a tidy 6.9% of your initial investment. You’d need your investment to gain at least that much just to break even.

2. Pick and fund an account

Canadian investment accounts can be broadly grouped into registered and non-registered accounts.

Non-registered investment accounts

Non-registered investment accounts don’t have contribution limits or withdrawal penalties, but lack tax benefits.

Cash accounts are basic accounts that let investors buy and sell investments with the cash they have available in their accounts. Think of it like a debit card: you’re good to go as long as your investment account got the funds.

Margin accounts allow investors to borrow money from their brokerage to buy investments. You have to pay borrowed funds back with interest — sort of like a credit card. Margin accounts are typically best suited to experienced investors.

Registered investment accounts

Registered investment accounts are offered through Canadian government programs. These accounts offer lucrative tax benefits, but limit how and when you can deposit and withdraw funds.

Don’t let the name fool you — tax-free savings accounts, or TFSAs, aren’t just for savings. They can be used as investment accounts, too. TFSA contributions aren’t tax-deductible, but investment gains are tax-free. The biggest drawback? You’re limited in how much money you can put into your TFSA annually. The annual contribution limit for 2022 is $6,000.

Registered Retirement Savings Plans, or RRSPs, are designed to help you save for retirement. Funds deposited into an RRSP can be used to reduce your taxable income, but you can only contribute 18% of your income up to the annual RRSP limit, which is $29,210 in 2022.

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A Registered Education Savings Plan, or RESP, helps Canadians save for a child’s higher education. Money in an RESP grows on a tax-deferred basis. Funds are released when the beneficiary attends post-secondary education. Taxes are owed on RESP funds when they’re released, but if the beneficiary is in a lower tax bracket, the money may be tax-free.

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How much do I need to start investing?

Many brokerages in Canada don’t have account minimums, which means you can start buying stocks with as little as $1 if your broker offers fractional investing.

Fractional investing lets traders buy portions of individual shares. This feature is handy for those who want to invest in popular stocks but can’t afford to purchase a full share outright.

3. Research potential stocks

There are many different types of stocks on the market, and nearly as many terms to describe them.

  • Blue-chip stocks come from well-established companies with a solid reputation and consistent market performance.
  • Growth stocks are likely to outperform their industry peers with above-average revenue growth and earnings.
  • Green stocks have strong ESG scores — ratings that measure how well a company manages its exposure to environmental, social and governance risks.
  • Income stocks consistently pay dividends and can act as an income stream for investors.
  • International stocks come from global companies in foreign markets.
  • Penny stocks typically trade for less than $5 per share and typically come from new, untested companies.

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Ways to compare types of stock

Two common ways to size up a stock are fundamental analysis and technical analysis.

Fundamental analysis is a way of evaluating a stock based on its financial history and economic data. This type of research often involves a deep dive into a company’s financial statements, revenue, profitability, cash flow, management team and industry competitors.

Technical analysis is a method of evaluating a stock using charting tools. These tools are typically accessed through trading platforms and offer a sophisticated look into a stock’s performance over time. Charting tools often carry a steep learning curve and tend to be favoured by advanced traders.

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It takes time to learn how to conduct your own research, but the more you practice, the more confident you’ll feel about your stock picks.

Open a practice account

If you want to get some experience under your belt before putting your money on the line, consider opening a practice account, also known as a paper trading account. Paper trading simulates the stock market in real time, so you can practice executing trades and monitoring a portfolio without risking a dime.

4. Buy your stocks

Once you’ve conducted your research and found a stock you’d like to buy, it’s time to add it to your portfolio:

  1. Find the stock on your trading platform. Search for the stock by company name or ticker symbol — the short set of characters that identifies the stock on its exchange.
  2. Pick your shares. Indicate how many shares you’d like to buy. You must purchase at least one share unless your broker offers fractional investing.
  3. Select your order type. Opt for a market order to buy the stock right away at the current market price.
  4. Submit. Process your order to execute the trade.

How many stocks should you own?

Numerous studies suggest investors should hold at least 10 stocks to protect the value of their investments from the natural ups and downs of the market. More experienced traders may hold 30 or more stocks, but the bigger your portfolio, the more time and expertise it will require to monitor and rebalance.

5. Monitor your stocks

A portfolio of stocks requires careful monitoring, so schedule regular portfolio check-ins to see how your investments are faring.

How often you check your portfolio depends on your investment strategy. Experienced traders who buy and sell frequently may check their stocks daily. Investors who prefer to hold their stocks for the long haul — also called buy-and-hold investors — may only review their portfolio once a month.