How to Buy Stocks in Canada [2024] | Step-by-Step

Summary: Buying stocks is one of the most rewarding ways to grow your wealth over time, even if it carries certain risks along with it. Nevertheless, the most convenient way to do so in Canada is through one of many reputable online broker platforms. Our go-to brokerage for venturing into the Canadian stock market is Interactive Brokers.

Who can buy stocks in Canada?

When it comes to investing in stocks in Canada, the process is open to a wide range of individuals. However, regardless of whether you’re a seasoned investor or just starting out, understanding who can buy stocks is crucial.

Individuals who can buy stocks in Canada include:

• Canadian residents: If you are a Canadian resident, you are eligible to buy stocks in Canada. This includes citizens, permanent residents, and individuals on work or study permits. Canadian residents have access to various online brokerage platforms that offer a user-friendly way to invest in stocks;

• Non-resident Canadians: Even if you are a Canadian citizen or have ties to Canada but currently reside outside the country, you can still buy stocks in Canada. Non-resident Canadians can open brokerage accounts in Canada and invest in Canadian companies or international stocks listed on Canadian exchanges;

• Foreign investors: Foreign investors are also welcome to buy stocks in Canada. Many Canadian companies are listed on the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSXV), making them accessible to investors from around the world. Buying Canadian stocks can be a way for international investors to diversify their portfolios.

How to buy stocks in Canada: Step-by-step

Buying stocks might appear daunting to newcomers, but the procedure is actually quite straightforward. Nowadays, online trading platforms provide users with a friendly interface and a plethora of useful features, enabling them to personalize their investment journey according to their individual requirements.

That said, buying stocks in Canada involves the following steps:

Step 1: Choose the right broker

First things first—a broker is your gateway to the stock market. They provide a platform through which you can buy and sell stocks. The good news is that there are various online brokers available in Canada, each with its own features, fees, and user interfaces. Yet, it’s key to choose a broker that aligns with your investment goals, offers a user-friendly interface, is regulated and licensed, and has competitive fees.

One of the brokers that fit all the mentioned criteria is our go-to brokerage, Interactive Brokers. Aside from holding licenses from The US Securities and Exchange Commission (SEC), National Futures Association (NFA), and Commodity Futures Trading Commission (CFTC), it’s also home to over 2 million investors worldwide. What’s more, IBKR provides its users with the following features too:

• Commission-free stock trading;
• Global stock-trading on 90+ market centers;
• Fractional shares;
• No minimum deposits;
• Additional income on fully paid shares;
• Lowest financing rates for margin accounts.

Step 2: Decide which stocks you want to buy

Before diving into the stock market, it’s important to have a clear understanding of what kind of stocks you want to invest in. Namely, stocks represent ownership in a company, so you’ll need to research and decide which companies align with your investment strategy. You can choose from various types of stocks, including:

• Blue-chip stocks: These are shares of well-established, financially stable companies that have a history of delivering consistent returns;

• Growth stocks: These stocks belong to companies with high growth potential, even if they may not be profitable yet. Note that they can be more volatile but offer the possibility of substantial returns;

• Dividend stocks: Companies that pay regular dividends to their shareholders. These stocks can provide a steady income stream.

Step 3: Decide how much you want to invest

The next step is to decide how much you want to invest in the desired stock. However, your investment amount should only be based on your financial situation, risk tolerance, and investment goals. As such, it’s key to never invest more than you can afford to lose. Also, we must point out that diversification is key, so consider spreading your investment across different stocks to reduce risk.

Step 4: Deposit funds into your account and place a trade

Once you’ve chosen a broker and know how much you want to invest, it will be time to fund your brokerage account. Luckily, most brokers offer various funding methods, such as bank transfers or electronic funds transfers.

After your account is funded, you can place your first trade. So, search for the stock symbol of the company you want to invest in and enter the number of shares you wish to purchase. You’ll also specify the type of order. These include:

• Market order: Buy at the current market price;
• Limit order: Set a specific price at which you’re willing to buy.

Step 5: Monitor and manage your investment

Smart investing doesn’t just end with you buying stocks. It requires you to regularly monitor the performance of your investments and stay informed about the companies that you’ve become a shareholder in.

The thing is—the stock market can be volatile, and prices can change quickly. You should, therefore, consider setting up alerts or notifications on your brokerage platform of choice to keep track of any significant developments.

Pros and cons of buying stocks in Canada

What to avoid when buying stocks in Canada

When buying stocks in Canada, or any other part of the world for that matter, there are several common mistakes that investors often make. Avoiding them can help you make more informed and successful decisions, which can lead to potential profit.

Some of these pitfalls include:

• Lack of research;
• Following trends;
• Ignoring risk tolerance;

• Overlooking diversification;
• Timing the market;
• Overconfidence.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

FAQs about how to buy stocks in Canada

Can I buy stocks without a broker?

No, you need a broker to buy stocks, as they provide access to the stock market.

How much money do I need to start buying stocks?

The amount you need varies, but many online brokers have no minimum deposit requirement. However, it’s advisable to start with an amount you’re comfortable with.

Can I buy stocks of companies outside Canada?

Yes, many Canadian brokers offer the ability to buy stocks of companies listed on international stock exchanges.

How often should I check my investments?

Regular monitoring is important, but avoid making knee-jerk reactions to short-term market fluctuations. Quarterly or semi-annual reviews are common for long-term investors.