How to Buy Stocks in Canada (2024)

More and more people are thinking about investing in stocks these days. Whether it’s something you read or something a friend said, they can be a way to make a potential profit and grow your investments.
However, while everyone wants to buy shares at a low price and sell at a high price (for a potential profit), there are many factors you need to consider before taking the next step, including your goals, your tolerance for risk and how market volatility may affect your outcome.

So, what do you need to get started?

Answering these questions will help you determine how you want to approach this important investment journey.

Another important consideration is your budget. Are you planning on putting a bit of money in each month? Each week? Or do you have a lump sum that you want to invest at the start and work with that?

This also begs another question around whether you want to control the investments yourself (i.e. self-directed), or if you’d rather hand the reigns over to a financial advisor.

If you’re planning on going down the self-directed route, the information provided here may be helpful.

Choose a direct investing account

If you’re interested in investing on your own, you’ll first need a direct investing account with an online brokerage. There are several different types of accounts to consider, depending on your goals.

Some of the most popular investment accounts include:

Registered Retirement Savings Plan (RRSP)are typically used to save for retirement. Contributing to an RRSP can allow you to defer taxes on the returns you earn on the investments in the plan and to access the funds in retirement years when you may potentially be in a lower income tax bracket.

ATax-Free Savings Account (TFSA)can be used to save for short- or long-term goals because it lets your savings grow tax-free. A TFSA can be used to save for various types of goals, like an upcoming vacation or large purchase.

Margin accounts¹can help you boost your buying power by leveraging value in your portfolio. You can borrow against value in the securities you already own to make additional investments and access sophisticated investment strategies, including option trading2and short selling. However, leveraged trades are not for everyone. Along with the potential for greater returns, comes the flip side of increased exposure and risk.

Acash accountcould be used to save for a variety of goals, can provide flexibility to easily access available cash in the account and you can trade a variety of securities on North American markets.

There are many more accounts available to choose from with TD Direct Investing. You can review them here.

Now that you have an overview of some of the types of accounts available to you, the next step is to consider what types of stocks and companies you want to invest in.

It's important that you spend some time building your investing knowledge understanding the stock market and researching the companies and sectors you want to invest in.

Do your due diligence. Research sectors, compare companies within the same sector, compare companies of different sizes. The more you read, the better equipped you are to help make an educated choice about where to put your money.

That said, gains aren’t guaranteed, and no amount of research can protect you against unexpected market turns.

Now that you understand what you’re getting into, it’s time to obtain a quote.

You've decided which stock you wish to buy or invest in, now it's time to choose the account where you’ll place the trade and ensure there is sufficient cash to do so.

Once that is done, you can open an order entry ticket from your direct investing account.

This can be accomplished in 4 simple steps.

Step 1:
Select the stock name or symbol and desired trade (i.e., ‘Buy’).

Step 2:
Enter the quantity you wish to purchase.

Step 3:
Select your order type. The two most common order types are Market Order and Limit Order.

AMarket Ordermeans you want to purchase the stock right away at the current market price. Caution is required when placing market orders as some securities do not trade heavily and placing a market order could result in paying more than you intended.

ALimit Orderlets you specify the maximum price you are willing to pay on a buy order, and the lowest price you are willing to accept on a sell order. In other words, for a buy order you won’t purchase the stock unless it trades at or below your limit price. You can use the current market price in helping you establish your desired limit price.

Step 4:
Place your trade (i.e., Buy Order) which means you confirm to buy.

That’s it, you now know the basic steps involved in how to buy stocks.

So, what next? Managing your portfolio.

Depending on your objective, you may want to set specific times to revisit your portfolio, to help ensure you’re still in line with your goals. Depending on how involved you want to be, this can be done daily, weekly, monthly or even longer.

To make this step easier on you, some online trading platforms like WebBroker can empower you with real-time market data to help you uncover, evaluate and act on your investment ideas as well as provide tools to help you keep track of them along the way.

Debt-to-equity ratio:

Return on equity (ROE) ratio:

Earnings per share:

Price-to-earnings or P/E ratio:

Quick ratio:

Investors use this ratio to assess a company’s short-term liquidity and financial health. It compares the value of a company’s current cash balance and current assets with its near-term liabilities. It’s similar to the current ratio, with the main difference being that the quick ratio excludes a company’s inventory when calculating its assets.

Consider using multiple ratios to get a broader picture of a company’s financial health. Many times investors who are looking to build long-term wealth, also consider investing in dividend stocks and growth stocks. Dividend stocks provide cash payments to investors based on the number of shares that they own. Growth stocks offer a higher growth rate than the average stock. One of the other popular investing strategies is value investing that seeks to invest in stocks that may be undervalued by the market.

It's also important to consider your tax liability when deciding to invest. Income earned from your investments can fall into one of the three categories – Interest, dividend or capital gains. While interest income is taxed at the same marginal tax rate as ordinary income, dividends are taxed at a lower tax rate than interest income. Capital gains are earned when you sell an investment at a profit, and they need to be reported on your tax return for the year the investment was sold. In Canada, you’re only taxed on 50% of the total capital gains you earn. However, this rate goes up to 67% for gains exceeding $250,000. You won’t pay taxes on investments held in a TFSA or other tax-sheltered accounts. But be aware that if you trade frequently within the registered accounts, your earnings may be treated as business income and taxed at your marginal tax-rate. Income earned on investments purchased using non-registered accounts such as cash, is fully taxable depending on the type of investment income.