How To Start Investing In Stocks In Canada?

Category: Finance

Do you want to invest your money in Canadian stock markets but have no idea where to start? Do not worry, we’ve got you covered. A lot of people can find the process of trading stocks complicated. However, it is not a great mystery. If you are clear with a few basics of investing, you will be good to go. So, let’s start just there – the basics. The Basics Of Investing In Canadian Stock Markets Before the digital age, the process of buying stocks was a tedious one, involving phone calls and even newspapers. The advent of online trading has made things much easier for seasoned as well as amateur investors to trade on stock markets. You can simply begin by opening an online brokerage account to buy and sell stocks through your laptop or smartphone. There are countless numbers of online brokerage platforms available in Canada. While some charge a fee, some provide their services free of cost. Apart from purchasing individual stocks, you also have the option to explore Exchange-Traded Funds (ETFs). An ETF is an investment fund that trades on a stock exchange as a basket of securities, such as stocks, commodities, and bonds. Unlike a stock, owners of ETFs have an indirect claim to a portion of profits and residual value in case of company liquidation. Copyright © 2021 Kalkine Media Key Steps To Follow To Begin Investing Set Up An Online Brokerage Account An online brokerage account can enable you to buy and sell stocks as well as ETFs without the need of a human broker to execute transactions. But while trading via such online accounts can be easy, an investor, especially beginners, need to be careful with their research of the stocks they are investing in. In Canada, nearly all major banks have a brokerage wing. As their brokerage fees can be considerably higher, investors can explore discounted brokerage platforms like Questrade and Wealthsimple Trade. Select Your Investment Account Investors in Canada have the option of investing via registered or non-registered accounts. However, it is advisable to get your account registered. Some of the important registered accounts are: TFSA: Tax-Free Savings Account, or TFSA, enables an investor to earn tax-free returns forever. This account can be used for your long-term and retirement goals. It is important to note that every year, the government gives a contribution limit for TFSA accounts. In 2021, the TFSA contribution limit was set as C$ 6,000. RRSP: If you opt for a Registered Retirement Savings Plan (RRSP), it can be used to defer taxes on your earnings if you are not making any withdrawals. This is often considered ideal for retirement goals. The RRSP contribution limit is C$ 27,830 for 2021. RESP: The Registered Education Savings Plan could be a good option if you want to save money for the post-secondary education of your child. The advantage of this plan is that apart from your contributions, the government may grant you up to C$ 7,200 as a contribution. Before Investing, You Must Analyse The Stock As mentioned earlier, this is a crucial step for stock trading. Once you have selected a type of account, it is very important to research about the company before buying its stock. For beginners, fundamental analysis might help in finalizing a stock. Under fundamental analysis, you can use the available company data, such as latest financial reports and its outlook for the year. For fundamental analysis, you may want to keep in mind factors like earnings per share (EPS), price-to-earning (P/E) ratio, debt-to-equity ratio, dividend payouts, etc. Once you get an idea of the stock markets, you can start doing technical analysis with price charts and historical data of the stock in question. Analyzing moving averages, relative strength index and trend channels come under technical analysis.