Ever since I immigrated to Canada as a Permanent Resident (PR), I have been exploring ways to “how to buy stocks in Canada”. Bank savings do not pay you as much as a properly researched stock investment.
Based on my research, both Canada and the USA offer two lucrative investment opportunities for retail investors: stocks and real estate. For those who are more open to risk, there are alternative investment options such as cryptocurrencies and precious metals.
However, this guide will focus on stocks and will lay out the steps for “how to buy stocks in Canada”. Whether you’re a beginner or an experienced investor, this guide can give you the basic process of buying stocks in Canada. From choosing the right platform to making informed decisions, you’ll be equipped with the knowledge to start your investment journey.
Table of Contents
How to buy stocks in Canada
The basic rule of thumb is that you need a registered or authorized brokerage to buy stocks in Canada. This brokerage can be an entity, a large bank or a registered individual (a financial planner or stockbroker).
In this age of Artificial Intelligence (AI), you can also buy stocks with the help of AI (Robo Advisors) also.
Let us explore these options one by one.
DIY Approach via Online Brokerage Platforms:
If you’re confident in your investment decisions and want to minimize costs, buying stocks through a registered online platform might be the right choice for you. These online platforms can be a registered brokerage firm (like Wealthsimple) or a big bank (like TD and RBC).
This approach is suitable for individuals who have a good understanding of the stock market and can pick up the right stock by conducting their own research.
To get started:
- Open a direct investment account with a reputable online brokerage firm or a major bank.
- Consider factors such as trade costs, minimum initial investment requirements, types of accounts offered, user-friendliness of the platform, availability of research and investment advice, and the range of investment options.
Some top online brokerage platforms in Canada are:
Some major banks which facilitate the buying of stocks in Canada are:
- Canadian Imperial Bank of Commerce (CIBC) Investor’s Edge
- TD Direct Investing
- RBC Direct Investing
- Bank of Montreal (BMO) InvestorLine
- SNational Bank Direct Brokerage
- Desjardins Online Brokeragecotiabank iTRADE
These banks provide platforms that allow individuals to invest in stocks and other securities directly. However, fees tend to be higher compared to online brokerage accounts.
How to buy stocks online using Wealthsimple
You need to be a Canadian citizen or a resident with a Social Insurance Number.
Step 1: Sign in or log in to your Wealthsimple account
Sign in or log in to your Wealthsimple account.
Click here to sign in or log in.
Once you enter your login credentials, it will ask for your verification code.
Since you want to buy stocks (or ETFs or crypto), click on “Stocks, ETFs & Crypto”.
Step 2: Setup your Wealthsimple profile
The next step is to set up your profile in Wealthsimple, since you are using it for the first time. Click on “Continue”.
Step 3: Check your profile details
Once you have entered all your information, you can check your profile and also read the Trade statements in the My Documents link provided.
Step 4: Add an investment account
Once you will set your profile details, you will be asked to choose which type of investment account you want to open.
This can be an RRSP, a TFSA, a non-registered account and more.
Depending on your goals and financial conditions you can select the type of investment account.
You can also transfer your existing TFSA, RRSP or any other investment account from your bank to Wealthsimple. For more than $5000 investments (at the time of writing of this guide), Wealthsimple will not charge any fee.
Click on “Add an account”.
In a nutshell, these types of investment accounts have the following features.
Tax-Free Savings Account (TFSA):
A TFSA is a registered retirement and savings account, which allows you to save and invest (in stocks, ETFs and more) without incurring any taxes on the interests and gains.
- Tax free withdrawals: The withdrawals or the gains are tax free. This means any capital gains or dividends (in the case of stocks) are tax free.
- No penalty withdrawals: You can withdraw your savings at any time, without any capital gains tax (tax in your withdrawal) and penalties. The tax-free component is crucial: you’ll pay zero taxes on investment income. It doesn’t matter if your investments grow from $5,000 to $500,000. As long as your investments are sheltered in a TFSA, the CRA won’t tax you on money you withdraw.
- Annual contribution limit: There is an annual limit on the contributions you can make in a TFSA. For 2023, the maximum annual contribution you can make in a TFSA is $6500 (as against $6000 for 2022). But any unused contributions in a year can be rolled over to the next year.
- Eligibility: Generally a Canadian citizen with age 18 years or more can open a TFSA.
- Using a TFSA you can invest in stocks, bonds, Exchange Traded Funds (ETFs) and mutual funds.
- Good for: Unlike an RRSP, a TFSA is opened when you aim for relatively short term investments, for example for buying a car, downpayment for your house, etc.
Registered Retirement Savings Plan (RRSP)
An RRSP is also a type of registered retirement and savings account in which you can buy stocks, mutual funds, ETFs and more.
- Tax Rebate on Contributions: Contributions made to an RRSP are tax-deductible, meaning they can be deducted from your taxable income for the year.
- Tax on Withdrawals: When you withdraw funds from your RRSP, the withdrawals are treated as taxable income.This means you’ll have to pay income tax on the withdrawals, just like any other source of income.
- Contribution Limit: The annual contribution limit in an RRSP in 2023 is $6500.
- Eligibility: A Canadian citizen who is of less than 71 years of age.
- Good For: Since withdrawals are taxed, it is not a good idea to open an RRSP, if you plan to withdraw your funds in a short time. RRSPs are good for individuals who want to save for retirement and take advantage of the tax benefits.They are particularly beneficial if you expect your income to be lower in retirement, as the taxes paid on withdrawals might be lower than the taxes saved on contributions.
Personal or non-registered account:
A Personal or a non-registered investment account does not provide you the same tax benefits as an RRSP or a TFSA.
- Tax Rebate on Contributions: No tax rebates on the contributions you make.
- Tax on Withdrawals: When you withdraw funds, the withdrawals are treated as taxable income.This means you’ll have to pay income tax on the withdrawals, just like any other source of income.
- Contribution and Withdrawal Limits: This is the benefit of the non-registered account. There are no contribution and withdrawal limits in a non-registered account..
See the below table.
|TFSA||RRSP||Non registered account|
|Tax rebate on contributions||No||Yes||No|
|Tax free withdrawal||Yes||No||No|
|Defined annual contribution limit||Yes||Yes||No|
Step 5: Add funds
Of course, you need to add funds to your Wealthsimple account to start buying stocks or mutual funds. You can do this by adding your bank account with Wealthsimple.
Go to the top Move Funds>Add a bank account
Now it gives you the option to link a number of bank accounts including CIBC, RBC and TD bank. Click on your bank and follow the process to link it to Wealthsimple.
Step 6: Select the security you want to buy
At the very top of the page of your profile, in the search bar enter the name of the stock you want to buy.
For example, I searched for Royal Bank of Canada and Wealthsimple took me to the page which has all the details for RBC.
As you can clearly see in the figure above (red highlighted drop box), there are four options to buy your stocks in Wealthsimple-Market Buy, Fractional Buy, Limit Buy, and Stop Limit Buy.
Let us know them first.
Market buy: This option means that your stock purchase will happen at the market price available price at the time of buying. Since the stock market is volatile, the price at which you place the order might be different from the actual price at which you buy the stocks. It might happen that when you place your order the price of your selected stock is $50, whereas, when the actual buying happens, the price becomes $51. Or it can happen the other way around when you get your stocks at a lower price. However, financial institutions like Wealthsimple won’t execute the order if prices go up more than 5% from the time you place it.
Limit buy: You will be asked to enter the highest price you are willing to pay. The order will only execute if the market price is at or below that price.
Fractional buy: Instead of buying a whole share of stock, you can buy a fractional share, which is a “slice” of stock that represents a partial share, for as little as $5. For example, if a company’s stock is selling at $1,000 a share and you were buying $200 worth of it, you would own 0.2 (20%) of a share.
Stop limit buy: The stop-limit order will be executed at a specified price, or better, after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy or sell at the limit price or better.
Select your preferred buy type and hit the Buy button to purchase your stock.
Step 6: Know the basics
As you can see, if you understand the terms Bid, Ask, Last Sale, Open, High, Low, Exchange, Market Cap, P/E Ratio, 52 week high, 52 week low, Volume, Average Volume, and Yield.
Step 7: Buy the stock
Under Place an order on the right-hand side select the account from which to draw funds
Choose an order type from the dropdown menu
Enter the number of shares you’d like to buy
Review the order details and select Place Order
How to find your monthly statements in Wealthsimple
- Log into my.wealthsimple.com and sign in to your Stocks, ETFs & Crypto profile
- Click your name on the top right of the screen
- Select My documents from the menu
- Under the filter for Document Type select Performance statements
- You can adjust the date filter to select a specific range
Robo advisors are automated platforms that provide investment suggestions based on your risk tolerance and financial goals. They use algorithms to create and manage a diversified portfolio on your behalf. This approach is good for beginners who want a hands-off investing experience.
Individual Brokers and Financial Planners:
This option involves seeking guidance from registered individual brokers or financial planners. They can offer personalized advice, help you choose stocks, and even execute trades on your behalf. However, this personalized service often comes at a higher cost.
How to buy stocks in Canada-Steps
Buying Stocks Through an Online Brokerage Platform:
If you’re inclined to take control of your investments, follow these steps to buy stocks via an online brokerage platform:
- Research and select a reputable online brokerage platform (e.g., Wealthsimple) that aligns with your needs and preferences.
- Open a direct investment account by providing necessary personal and financial information.
- Fund your account with the initial investment amount.
- Conduct thorough research on the stocks you’re interested in purchasing.
- Use the brokerage platform’s trading interface to place your orders. You’ll need to specify the stock symbol, quantity, and order type (market or limit).
Investing in stocks in Canada is accessible through various channels, each catering to different levels of expertise and preferences. Whether you choose to go the DIY route via online brokerage platforms, leverage the insights of robo advisors, or seek personalized assistance from individual brokers, the key lies in understanding your investment goals and risk tolerance. As you embark on your stock market journey, remember that knowledge and research are your best allies.