How To Start Investing In Canada


Where To Find A Discount Brokerage Online

Investing For Beginners In Canada (10 THINGS YOU NEED TO KNOW!!)

In many cases, its possible to open a brokerage account and start online trading with an initial deposit of $100 or less. All you need is to find a reputable self-directed account and get started. From there, you will be able to start buying stocks.

Online brokerages are fairly easy to find. In Canada, there are no fewer than 12 leading discount brokerages vying for your investment dollar. Most discount brokers offer preferred pricing to active traders who trade frequently. You can check out the leading brokers in our review of the best Canadian online brokers, but here at MapleMoney, our top choice is Questrade.

Ive included more information on Questrade below, along with an exclusive new account offer for MapleMoney readers. But first, lets take a closer look at what stock trading is all about.

How Much Should I Invest

New investors want to know how much they should invest and how they compare to their peers. Most rules of thumb would have you save 10% of your paycheque, but thats not always possible for young investors with many competing financial priorities.

The most important piece of advice is to get started as soon as possible. Start with a small amount you know you can afford to put away, even if thats just 2-3% of your salary.

Then, make it automatic by setting up recurring contributions that align with your pay periods. Money gets automatically whisked away before you even have a chance to see it, let alone spend it.

Finally, make sure to check in on your savings goal at least once a year and increase the number of your contributions. Thats right, give your future self a raise! Soon youll be saving 10% or more of your salary and really growing that retirement fund.

Dont worry too much about age-based savings milestones. Everyone has their own goals and life experiences that define how much they can reasonably save.

That said, if you are curious, Fidelity has published some retirement guidelines that suggest you should aim to save 1 times your current salary by 30, 3 times by 40, 6 times by 50, 8 times by 60, and 10 times by 67.

Fidelity suggests a savings target of 15% of your gross salary to reach those lofty figures.

What does this look like for a $75,000 per year earner?

  • Age 30 $75,000
  • Age 67 $750,000

Best Investing Strategies For Canadians

An investing strategy is simply a plan of action thats designed to help you pick the best investments for your goals, values, and risk tolerance.

Below are five of the most common investing strategies for Canadians. Though you can certainly follow one strictly, feel free to combine elements of different strategies if it feels right . The goal here is simply to find an investing strategy or combination that works for you, then stick with it.

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When Should I Speak With An Advisor About Investing

If any of this applies to you, its worth having a chat with a Scotia advisor :

  • You have money saved up that isnt already invested or generating much interest
  • You have an existing portfolio and need a second opinion to make sure its performing well
  • Youre interested in starting a regular savings plan
  • You have questions and want to learn more

Determine What Type Of Investor You Are

How To Start Investing In Canada (2021): Your Complete Guide

Ill break down a few different types of investors you can be based on your risk tolerance.

Aggressive Investor

Risk Tolerance: HighEquity Allocation: ~60% or More

Investors with an aggressive approach tend to have a better understanding of markets. Knowing the intricacies of different securities and the level of risk involved allow such investors to purchase assets with high volatility. The assets they are inclined to invest in can offer them phenomenal returns while significantly putting their capital at risk. Aggressive risk tolerance is not for investors who cannot afford to lose capital.

Moderate Investor

Risk Tolerance: MediumEquity Allocation: ~30-60%

Investors willing to accept some level of risk to their capital, but they balance their investments, so they do have significant upside potential. They combine various asset classes with investment horizons ranging from a period of five to ten years.

A combination of large-company mutual funds with securities like bonds with lower volatility can see investors see a mix of securities with around a 50/50 structure. A moderate strategy can see half of the capital invested in dividend-paying growth funds.

Conservative Investor

Risk Tolerance: LowEquity Allocation: ~30% or Less

Investors who are willing to accept little to no risk to their capital have conservative risk tolerance. Typically, retirees who have spent a lifetime building a sizable nest egg are less inclined to allow any risk to their capital.

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Types Of Stocks Trades

You can place various types of orders when buying or selling a stock.

The three common types of orders are market orders, limit orders, and stop orders.

: This is an order to buy or sell a stock immediately at the current best market price. Since stock prices are always changing, the market price that is executed may be different from the market price you saw when you clicked on âbuyâ or âsellâ.

Limit Orders: A limit order specifies the price at which you want to buy or sell a stock. When you set a limit price, the trade only occurs at that price or better.

For example, a buy limit order will only be executed at price $XY or lower.

A sell limit order will only sell a stock when the price is $XY or higher.

Limit orders may not get filled if the set price conditions are not met or there are not enough shares available.

You can determine how long a limit order stays active. For example, 1 day, 7 days, or Good Till Cancelled .

Stop Orders: This order buys or sells a stock when the price breaches a stop price. Once the stop price is reached, the order becomes a market order and is filled at the next best market price.

Investors who are long can use a stop-loss order to protect their position. If the price of a stock falls to or below a specific price an order to sell your stock at the market price is triggered.

Stop orders can also be used to cover short positions. When you specify a limit price and stop price, the trade is a Stop-limit order.

How To Start Investing In Canada

Whether you live in an apartment in Toronto or Montreal, a house in Ottawa, or alone with your pet mussels on a rock in Prince Edward Island, if you can lay a hand on a spare loony, you canand absolutely should start investing. Unless you’ve got big credit card balances always pay down high-interest debt before doing anything else.

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How Do I Invest With Only A Little Money

Many wealth advisers and financial planners will take on only those clients who meet a certain threshold in investable assets say $100,000, $500,000, $1-million, or more.

But you dont actually need an adviser to start investing you can do it on your own by opening an online brokerage account or using a robo-adviser. There are many to choose from, including online brokerage services operated by the big banks and fintechs such as Wealthsimple or Questrade.

So, how much money do you need to start investing online? Some robo-advisers or brokerage accounts have no account minimums, while others may require a balance of about $1,000 before you can start investing. In fact, you could potentially start by buying a partial unit of an ETF for $1 although that wouldnt make much sense if youre paying more than that in trading costs or other fees.

Speaking of fees, thats something to be mindful of regardless of your method of investing. After all, every dollar you pay in fees is a dollar off your investment returns. Rob Carrick, The Globe and Mails personal finance columnist, put together an excellent overview of the various investing fees charged by financial planners and online DIY brokerage services for advice, commissions, fund management, and other costs. As with all services, you want to be sure youre getting value for your money and not paying more than you need to.

Open And Fund Your Account

How to Start Investing in Canada: 4 Great Options!

Once youve picked an investment platform, youll need to sign up for an account. Be prepared to supply the following information:

  • Full name.
  • Social Insurance Number.
  • Bank statements.

Some of Canadas major financial institutions use the Verified.Me service to confirm applicant identity. If you plan to invest through one of these institutions, be prepared to navigate the Verified.Me process, which may require you to securely sign in to your bank account.

Though numerous investment platforms have no minimum opening deposit, others require a minimum account balance of up to $1,000 before you can start investing.

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How To Invest In Stocks In Canada

Getting started as a stock market investor in Canada is the easiest it has ever been.

You donât need a tonne of money to start trading stocks, and you can open a brokerage account online. While you can buy stocks with as little as $100, we recommend setting aside a little more to save on the trading commissions that pile up when you make multiple small trades.

Also, some brokerage platforms have a minimum investment requirement, and we will note them in this guide.

Here are the key steps you should take to invest in the stock markets as a beginner:

Defining Your Risk Tolerance

ImageSource: Shutterstock

To successfully maneuver your investing journey, you have to figure out your risk tolerance. Your risk tolerance, or capacity for risk, determines how much of your investments youll put into stocks and how much youll put into bonds .

A portfolio with 100% stocks has the highest expected return over the long term, but you should also understand that it will be much riskier in the short term. Stocks can and do lose value, and many investors dont have the stomach to watch their investments fall by as much as 50% in one year.

If youre an equity investor, you can diversify away some of this risk by owning stocks not just in Canada but also in the U.S., International, and emerging markets.

Bonds, however, lower the expected long-term returns of a portfolio, but they play an important role in protecting your investments from losing too much value in a market crash.

I take two different approaches to risk. One, with my retirement more than 20 years away, I am comfortable with a portfolio of 100% equities, and I achieve that by investing in Vanguards VEQT. But, when it comes to managing my kids RESP account, I invest more conservatively, knowing theyll need the money for post-secondary in less than 10 years . This portfolio started out with 80% equities and 20% bonds but has recently shifted to 60% equities and 40% bonds after my oldest turned 10. By the time my kids are 17, the portfolio will be close to 100% fixed income or cash.

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How To Reduce Risk

When youre talking about risk in the investing sense, youre talking about the risk of loss in the short and medium term. There are two basic ways to reduce it:

through diversification, by holding groups of stocks that have different reactions to market events and combining them in a portfolio with other asset classes like bonds or even gold. The advantage of diversification is often you can reduce risk without sacrificing expected return.

If one day Amazon delivery drones start attacking pedestrians and the stock craters, wont you be better off if Amazon represents just 1/100 of your portfolio versus 1/2?

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. You can also have an automated investing service do this for you. With one single purchase, youre able to track some or all of a countrys entire stock market rather than putting all your eggs in one stock basket and zeroing in on a handful of stocks.

Using A Financial Advisor

A Beginners Guide for How to Start Investing in Canada

Financial advisors can give you top-level advice on investments. Financial advisors are experts and have robust experience in the investment world. You have an option of letting them do all the work as you stay hands-free.

With financial advisors, you are prioritized and can schedule meetings, talk about your finances and plans with the person investing your money. You can find a good financial advisor through google by checking on reviews. Usually, fiancial advisors have higher fees than online brokers and robo-advisors.

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How Should I Prepare For A Meeting With A Scotia Advisor

Asking yourself these questions will also be helpful:

  • How much money do I have to invest?
  • What investments do I already have?
  • When did I last speak to an advisor?
  • How much can I spare each month for investing?
  • Do I have a financial plan and when was it last reviewed?
  • What are my financial goals?
  • How long before I need to reach these targets?
  • How comfortable am I with risk?
  • Do I have an emergency fund?

How Much Money Do I Need To Start

You should consider how much you have to start investing. These days, investors can open an investing account with a robo advisor with $0, so you dont need to be a millionaire to begin investing. While bigger investments usually lead to bigger returns, that doesnt mean you cant get started if you only have a little money set aside for investing. The key is to set up a regular contribution plan by direct debit to automatically transfer money to your account weekly, bi-weekly, or monthly. You can do this for as little as $25 at a time.

We recommend opening an account with Wealthsimple, one of the top robo-advisors in Canada. Or, if you feel ready to tackle a bit of investing on your own give Wealthsimple Trade a try. With Wealthsimple Trade, there are no account minimums, so you can start trading for as little as $1. Better yet, Wealthsimple Trade charges no commission fees and a nice Welcome Bonus, so it really is one of the most wallet-friendly ways to learn how to invest. For a limited time, get a $25 cash bonus when you open a Wealthsimple Trade account and fund at least $150. Sign-up today to take advantage of this exclusive offer! Note, however, that if you do buy/sell any U.S. stocks or ETFs, there is a currency exchange fee for USD trades of + 1.5% . However, that fee is still under the industry standard of most brokerages, which is around 2%.

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Open Your Own Account

You can select stocks and make purchases at a number of online brokerages. This approach requires high risk tolerance since it can be difficult to determine which stocks have the biggest upside potential. If you decide to go this route, it may be best to start with just a few hundred dollars until you become more knowledgeable and experienced.

How To Choose The Best Trading Platform

How To invest $1000 or less in Canada (5 ways)

When evaluating and comparing different online trading platforms, youll need to take a few factors into account: how much money to have to invest, what type of account you want to open, what type of assets you want to buy, how actively you want to trade, and how often you think youll interact with customer service.

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How To Start Investing In Canada: 7 Steps To Success

So, you want to start investing in stocks. Maybe become a stakeholder in some of Canadas biggest companies? Capitalize on their growth and build long term wealth that will change your familys financial outlook?

Investing in stocks is a wise choice, and, when done right, it can help you earn a lot of money.

But investing in stocks is a big decision. If you are like most Canadians, you may not know where to start. Will you manage your own stocks or let a robo-advisor do the work? Do you want to handpick them or pool your money with other investors in a fund? Buy-and-sell frequently, or set-it-and-forget-it?

If you dont have answers to these questions, dont worryThe Motley Fool helps thousands of investors just like you around the world answer questions like these every day.

Investing in stocks starts with the right knowledge. Well take you through the basic steps to investing in stocks in Canada.

Mutual Funds: Let Someone Else Make The Big Investment Decisions

A mutual fund is a type of investment where multiple investors contribute to a larger pool of money which is then invested and managed by professionals. Mutual funds consist of securities including stocks, bonds, money market instruments, and more.

Most major banks in Canada offer mutual fund investment opportunities. For example, HSBC allows clients to invest in mutual funds1and diversified multi-asset portfolios2 professionally managed by their own investment experts located in over 25 countries worldwide.

Investing in mutual funds can be a great option if youre looking for advice and greater potential to grow your investment long-term, but you dont want to do the research and make your own investment decisions. A well-diversified mutual fund portfolio can also help to minimize investment risk. But, mutual funds are also sensitive to movement in the markets, so theres always a risk of losing the original amount you invested.

If youre not sure how best to invest your money and you need a bit of direction, thats okay! Take a more hands-on approach and consider HSBC Wealth CompassTM3. This online service allows you to determine your investor profile, receive a personalized investment recommendation and open a mutual fund account online.

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