Research The Stocks You Want To Buy
Once youve set up and funded your brokerage account, its time to dive into the business of picking stocks. A good place to start is by researching companies you already know from your experiences as a consumer.
Dont let the deluge of data and real-time market gyrations overwhelm you as you conduct your research. Keep the objective simple: Youre looking for companies of which you want to become a part owner.
Warren Buffett famously said, Buy into a company because you want to own it, not because you want the stock to go up. Hes done pretty well for himself by following that rule.
Once youve identified these companies, its time to do a little research. Start with the companys annual report specifically managements annual letter to shareholders. The letter will give you a general narrative of whats happening with the business and provide context for the numbers in the report.
After that, most of the information and analytical tools that you need to evaluate the business will be available on your brokers website, such as SEC filings, conference call transcripts, quarterly earnings updates and recent news. Most online brokers also provide tutorials on how to use their tools and even basic seminars on how to pick stocks.
To learn more about evaluating companies for your portfolio, see NerdWallets feature on how to research stocks.
in free stock for users who sign up via mobile app
The Need For A Bank Account
Your trading account requires a bank account to link with the Demat account. Only after you provide a bank account can you purchase shares online.
If you want to purchase online shares, you have to make the requisite order through your Demat and Trading Account. The broker will then forward the transaction for settlement in the stock exchange. Once settled, the shares will be transferred to your Demat Account within two working days. Furthermore, the necessary changes, or purchase costs, will be debited from your bank account.
Direct Stock Purchase Plans
If youre already identified stocks that youd like to buy, you may consider a direct stock purchase plan. Not all publicly traded companies participate in direct stock purchase plans, but many of the largest, most popular names do, and you dont need a brokerage account to buy stocks this way. Youll most likely be charged additional fees, however.
Direct purchase plans are almost always administered by third parties, rather than the companies themselves. The two most common direct purchase plan administrators are ComputerShare and American Stock Transfer & Trust Company . Both firms charge additional fees for direct purchase plans. In contrast, most online brokers charge zero commissions to buy and sell shares of stock.
Take Coca-Cola. You can buy a one-time amount of $500 of Coca-Cola stock on ComputerShare for a $5.00 fee, or set up at least 10 recurring $50 purchases for a $2.50 fee. Either way, theres a $0.05 processing fee for every share bought. Reinvesting any dividends incurs a charge of 5% amount invested up to a maximum of $5. ComputerShare will round up your investment with fractional shares, if necessary.
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Execute Trades In Your Account
Once youve opened and funded a brokerage account and then identified stocks youd like to buy, its time to execute trades in your account. Before you put in an order to buy stock, you need to understand a few details about the processpurchasing stock isnt as simple as just pressing a buy button on an app. Youll generally have to pick an order type, which provides instructions on how you want to purchase a stock.
Two of the most common order types youll have to choose from:
- This type of order instructs the broker to buy stock immediately at the lowest price available. The current stock price you see when you enter a market order isnt necessarily the price at which your market order will be executedprices change in milliseconds, and youre only telling the broker to get the lowest price available.
- Limit order. You name your price, and the buy only gets executed if the stock falls to that price or lower within a selected time period. If the stock never reaches the specified price before the limit order expires, your trade gets canceled.
Buy Stocks Free Online: Wealthsimple Trade
Wealthsimple Tradeis Canadaâs only commission-free stock trading platform. It is great for beginner stock traders.
Compared to the $9.95 per trade charged by big bank discount brokerages, investors do not pay trading commissions when they buy or sell thousands of stocks or ETFs on Wealthsimple.
This platform also offers fractional share trading so you can buy small portions of expensive stocks like Amazon, Tesla, and Apple.
- Accounts available: Personal investment account, TFSA, and RRSP.
- Minimum investment: None
- Trading fees: No trading commissions
- Promotion: Get a $50 cash bonuswhen you open an account and deposit and trade at least $150 in stocks.
- Best for: Beginner investors
Apply: Open an account here.
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What Kind Of Investor Are You
Before you commit your money, you need to answer the question: What kind of investor am I? When opening a brokerage account, an online broker like Charles Schwab or Fidelity will ask you about your investment goals and what level of risk you’re willing to take.
Some investors want to take an active hand in managing their money’s growth, and some prefer to “set it and forget it.” More “traditional” online brokers, like the two mentioned above, allow you to invest in stocks, bonds, exchange traded funds , index funds, and mutual funds.
Best Online Broker: Questrade
Questrade has been offering brokerage services to Canadians since 1999. It offers low-cost trading in stocks, ETFs, options, Forex, and other investment products.
Questradeis a superb choice for experienced and novice investors who are looking for a customizable platform, access to advanced market data, and charting capabilities.
- Accounts offered: Personal non-registered, TFSA, RRSP, RESP, margin, and corporate accounts.
- Minimum investment: $1,000
- Trading fees: 1 cent per stock minimum $4.95 and maximum $9.95 per trade.
- Promotion: Get $50 in free tradeswhenyou fund your account with $1,000 min. and start trading.
- Best for: Seasoned traders
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Here Is What Our Clients/partners Say About Us
“I am in continuous touch with Anton and I plan to invest more into other product this year. I highly recommend working with Anton and the AIX team. Im condent with my investments and can recommend Anton and AIX to anyone interested in secure and high-return investments.”
“I was pleasantly surprised at the professionalism and overall composure I felt from Anton, which made me feel comfortable with investing my money with AIX. As a client, I feel very supported and happy with the care I received.”
“Since investing with AIX Investment Group with the assistance of Mariana, we have worked together to get a clear understandable plan for our future which gives us condence and security knowing what kind of lifestyle we can lead. In addition, we have seen gains in our portfolio in a short space of time which is a reassuring indicator. I strongly recommend Mariana as a Advisor for investments in AIX products.”
“In the time Khalid has been my Advisor he has helped me diversify into several opportunities which gave me consistent returns along with peace of mind. Investing with AIX has been a highly protable and convenient experience for me.”
“I strongly recommend the all round professionalism and thorough global nancial knowledge demonstrated by Richard from AIX. This company are at the forefront of innovation technology based investment strategies that have already beneted my family.”
How Much Money Do You Need To Invest In Shares
Despite the common misperception, you dont need a tonne of money to get started investing in shares. Brokerage fees have dropped significantly in recent years, so its practical to buy your first individual share with just a few hundred dollars.
You are also spoiled for choice with a nice selection of exchange-traded funds , so you can literally gain exposure to a group of shares or commodities with very little outlay.
In short, if youre ready to start investing in shares, a lack of investable capital shouldnt necessarily stand in your way.
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How To Reduce Risk
The most effective way to reduce risk is through diversificationowning a large array of stocks in many different economic sectors so that if one stock or even one sector suffers a major setback, it will represent only a very small percentage of a portfolio.
If one day Amazon delivery drones start attacking pedestrians and the stock craters, wont you be better off if Amazon represents just 1/100th of your portfolio versus ½?
One simple way of receiving broad exposure to markets is by purchasing a mix of domestic and international low-cost ETFs . Though ETFs trade on exchanges just like individual stocks, many contain dozens or even hundreds of stocks. Or have an automated investing service do this for you. With one single purchase, youre able to track some or all of a countrys entire economy rather than putting all your eggs in one stock basket and zeroing in on a handful of stocks.
Enter At The Right Time:
Entering the market at the right time is one of the most important share market basics often overlooked by investors. The general rule of thumb suggests that one must enter the market when it is low.
Purchasing the identified stocks at the lowest price level will maximise the potential profits investors can earn. On the other hand, exiting the stock when it is trading at the highest price is profitable.
Planning the right entry and exit is the fundamental of share market investment. Without a strong plan in place, you will be like a ship without a compass in the sea. Since the stock market is highly risky, you need to exercise caution beforehand to avoid a disaster.
Planning entry is based on fundamental and technical analysis. There is no right or wrong which analysis method you select but be careful of what you infer from the result. While selecting a stock, you mustnt only concentrate on individual stock performance, instead look for cues from general economic performance and macro-economic factors, which might impact share performance. As a rule of thumb, invest in the direction of the trend.
Most successful investors follow four data points, which are P/E ratio, P/B ratio, and Dividend Yield of NIFTY, and FII activity to identify the right entry point.
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How To Buy Shares
The process of buying shares online is simple and hassle-free. Online discount brokers have driven orders of new investors to join the stock market. Buying and selling shares online has emerged as an attractive form of investment in the recent past. The conventional way of growing your savings such as Fixed Deposits, does not provide lucrative returns these days due to growing inflation. Investors today, look for more promising forms of investment which can give them a good return on their investment. The stock market has lived up to this reputation gaining more popularity among retail investors.
What If The Stock Market Crashes
It will. Thats one thing you can count on.
Repeat after me: I will not invest money that Ill need in the next five years. To soothe their nerves, smart Barefooters have a couple of grand stashed away in their Mojo account so they dont have to sell when everyone else is.
So if youve been putting off dipping your barefoot into the stock market, the time to begin is now. Like any skill, you get more comfortable the more you do it, and its one hobby that can definitely pay big dividends.
While I cant remember much from high school maths, the lessons I learned from buying businesses have stayed with me till this day.
Tread Your Own Path!
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Active Vs Passive Management
If youre planning to invest in funds, its important to make the distinction between passively-managed index funds and actively-managed funds.
Index funds are simply designed to track an index and replicate its long-term returns. For example, an S& P/ASX 200 index fund invests in the largest 200 ASX stocks by that make up the index, and with the appropriate weights. If the ASX 200 increases by say, 10% in a given year, the fund should do the same.
Because they dont require any stock-picking expertise, these funds dont have to employ active managers. This keeps costs much lower, as well get into shortly.
On the other hand, actively-managed funds hire investment managers to construct the portfolio. The big difference from an investors perspective is that index funds are designed to match the performance of a benchmark index. Actively-managed funds are designed to beat a benchmark index. The downside is that active management costs more.
To be clear, this doesnt mean that if you invest in an actively-managed mutual fund that you will beat the market.
In fact, numerous studies have shown that the majority of actively-managed funds underperform the broader share market. Some actively-managed funds can be worth the cost, but be sure the fund has a well-established history of beating its benchmark index before investing your money in it.
For example, if you have $10,000 invested in a fund with a 1% expense ratio, youll pay $100 in investment fees this year.
Use A Stock Screener To Find Stocks To Buy
Whichever strategy you choose, finding the stocks you want to buy can still be challenging. Stock screeners help you narrow down your list of potential stocks to buy and offer an endless range of filters to screen out all the companies that do not meet your parameters. Nearly all online brokerage accounts offer stock screeners, and there are more than a few free versions available online.
With a stock screener, you can filter for small-cap stocks or large-cap stocks or view lists of companies with declining share prices and stocks that are at all-time highs. They also generally let you search for stocks by industry or market sector. Filtering by P/E ratio is a great way to find shares that are overpriced or underpriced.
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Get Your Unique Identification Number
To create a database of all Market Participants and investors, SEBI has made it compulsory for investors to get a UIN. You can get a UIN through Point of Service agents appointed by NSDL.
You must, however, note that a UIN is only required when you are trading with a capital of Rs 1 lakh or more.
After understanding the six steps listed above, you are now all set to purchase shares online. Once you place a purchase order, it is matched with a similar sale order in the stock exchange. After settlement, your Demat Account is credited with the number of shares purchased.
Investment Returns On Stocks And Taxation
When investors assess the strength of a company and the attractiveness of its stock, some performance measures they use include the dividend payout ratio and dividend yield.
The dividend payout ratio refers to how much of the companyâs profit is paid out as dividends to shareholders, while the dividend yield measures the dividend as a percentage of the stockâs current price.
Dividends may be paid out on a monthly, quarterly, semi-annual, or annual basis. A company could also decide not to pay out dividends, either because it is in financial trouble, or it wants to reinvest profits into growing the company.
A shareholder can also make money from stocks by selling them when the price goes up. When the price you sell a stock is higher than what you paid for it, you earn a capital gain. When the reverse is the case, you incur a capital loss.
If your stocks are held within a non-registered account, they are taxed as follows:
- Capital Gains: 50% of capital gains are included in your income and taxed at your marginal tax rate. Capital losses can be carried back up to three years to reduce or eliminate capital gains. Capital losses can also be carried forward indefinitely.
- Dividends: Eligible dividends are grossed up and taxed. To avoid double taxation, you can claim the dividend tax credit. Dividends from foreign companies are added to your income and taxed at your marginal tax rate.
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How Can Investing In Shares Make Me Money
There are two ways you could make money from investing. One is if the shares increase in value, meaning you reap a profit when you sell them. The other is if they pay dividends.
Dividends are a bit like interest on a savings account. If a company makes a profit, it can choose to give some of it back to you it could be on a regular basis or as a one-off. The first £2,000/year paid in dividends is tax-free, though above this it’s taxed at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers and 38.1% for additional-rate taxpayers.
However, shares could also decrease in value and/or the company may decide not to pay a dividend, so there are no guarantees.
How To Invest In Stocks Using A Robo
Instead of buying individual stocks and putting in the research required to reliably pick stocks, you can opt for a professionally managed basket of stocks, aka an index ETF portfolio.
An Index ETF can hold thousands of stocks and offers diversification across industries and geographical locations. This level of diversification is difficult to achieve when you buy individual stocks.
You can purchase ETFs directly using your brokerage account. With this approach, you may need to rebalance your portfolio 1-2 times a year unless you invest using all-in-one ETFs such as Vanguardâs VGRO or VBAL.
Alternatively, you can purchase ETFs through a low-cost wealth manager, also referred to as a robo-advisor.
Robo-advisors simplify the investment process by doing all the legwork on your behalf. They:
- Help you identify your risk tolerance, investment objectives, and how long you plan to invest
- Recommend an investment portfolio that matches your needs.
- Automatically rebalance your portfolio when required
- Take care of dividend re-investing and provide free financial advice
- Make it easy to contribute small amounts on a regular basis
In exchange for these benefits, you pay a small annual management fee .
Wealthsimpleis our top choice for a robo-advisor service in Canada. You pay 0.40% to 0.50% annually for a hassle-free investing experience.
New clients get a $75 cash bonus when they open an account here.
You can also check out this comparison of robo-advisors in Canada.
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