How To Buy Stocks in Canada: Start Investing NOW

Dividend Earner

Dividend Earner

Updated on

5 min read Affiliate Disclosure

When you start accumulating savings and you manage to spend less than you earn regularly, you should start to think about making your money work for you. One way to have your money work for you is to buy stocks or ETFs.

It can, however, be intimidating to start buying Canadian stocks and learning how to do it. There are so many new terms that you need to learn, and it can feel overwhelming at times.

However, owning a stock is not difficult and I’ll show you how you can buy Canadian stocks or Canadian ETFs in 3 simple steps. It’s that easy.

3 Steps To Buy Stocks In Canada

Before we jump on how you can buy stocks, it’s important to note that stocks, also known as securities, ETFs or mutual funds are held in accounts. The accounts are a very important step in the process of buying stocks as it implies various income tax considerations. We are going to focus on the TFSA to keep it simple.

Choosing an investing strategy is also going to be important once you are set up, but start with an index ETF to keep it simple.

  • Step 1 – Open investment accounts with a Discount Broker (many trading platforms exist with various pros and cons)
    • Online trading platforms without a bank is easier to get started with, which means Questrade, Qtrade, Interactive Broker, or Wealth Simple.
  • Step 2 – Fund your Account
  • Step 3 – Buy your 1st Stock
  • [Optional] Step 4 – Automate your funding and investing

The last step is the one that is critical and will make you money down the line. It falls into the category of paying yourself first.

Register with a Discount Broker

To buy stocks in Canada, you don’t have that many options. It’s either through a bank, a bank-owned discount broker or one of the 3 independent discount brokers. If you want to invest in stocks on your own (the DIY approach), settling for a discount broker might be the best course of action. Discount brokers act as middlemen on your behalf.

Most banks will have their discount broker option as well as a wealth management but by far the easiest to get going these days is with Questrade. You can fill out the form online, and then fund the account from your bank. It’s pretty easy and you get the lowest fees and free ETFs to get started. The perfect setup for a Canadian beginner portfolio.

This step is all about signing forms, proving your identity and making sure you are going to comply with all money regulations. When you get set up, you will need to choose the accounts you want to open. I suggest starting with a TFSA as it’s very flexible and you don’t pay taxes. You can add other accounts later if you want as well as joint accounts where applicable.

With Questrade, this process can all be done online and is quick. With other discount brokers, you may have to print and mail the forms in. Questrade allows you to upload the form after you sign it which is convenient.

Fund your Account

If you are using Questrade, you will need to make a bill payment to the account and there is a minimum to cover. If you decide to use your bank’s discount broker, you can probably just do a money transfer.

These steps can take a couple of days with Questrade and your bank should be instant or the next day.

Buy your 1st Stock

This step is very easy but also very emotionally charged with so many questions. Which stock to buy? What price to buy? How much to start with?

The purchase is easy since all you need to do is choose the company, select to buy several shares and choose the price with a limit order or use a market order. It is recommended to use a limit order which can simply be set at the market price if you want but it protects you from paying more.

That’s all there is to it. ETFs with Questrade are free and you can buy them in small amounts. It’s the perfect way to get started by buying an index.

[Optional] Step 4 – Automate your funding and investing

Being able to buy stocks is only the beginning, next you need to automate your process by paying yourself first! The process is simple and all discount brokers will have a way to transfer money on a regular schedule.

Be it every week or bi-weekly, it’s a great way to save and then easily invest if you take advantage of the free ETFs with Questrade.

Selecting Your Canadian Stocks or ETFs

As you can see, the setup to buy stocks is pretty easy but selecting which stock is where the complication comes in. Don’t forget to establish a strategy like index investing, dividend investing, or even a blend of the two.

Learning to invest takes time and it’s going to be about managing your appetite for risk vs reward. My dividend growth investing strategy provides me with dividend income as seen below.

Annual Dividends

Buying US Stocks

You can also buy US stocks through a couple of different options, either directly from the US exchange or through Canadian Depositary Receipts (CDRs).

Interestingly enough, many Canadian blue-chip stocks also trade on the NYSE (dual-traded shares), and many pay dividends in USD, so you can keep the dividend in USD to avoid any currency exchange – the fees can be expensive.