How to Buy Stocks in Canada for Beginners

When you are ready to take your first step to buy stocks, this article will help you get started, keep you on task and provide information to help you continue to be successful. The key things we want you to know about buying stock are to start small, think big, make informed decisions. You will succeed once you decide to follow a strategy that makes sense to you and starts to yield a return on your investment.

Just Start Investing to Learn

Start with a plan. Not just any plan, a viable plan that makes sense. After all, you’re in the driver’s seat, and all the information you get from other people about getting started is good. However, until you hit the launch button, you’re not going to make any progress. Some advisors and consultants will tell you to research all aspects thoroughly before you make a decision. Great advice. However, you have to take the first step, which is to invest. Speaking of recommendations and advice, Canadian author David Chilton wrote ‘The Wealthy Barber.’ Check it out.

To get over the initial anxiety of putting your money where you cannot access it for a while, remember this is an investment you expect to see a return on. The first rule of successful investing is paying yourself every month. In other words, make a monthly plan to take a fixed percent of your income and invest. Find a realistic figure. At least 10% is a good benchmark. If you can invest more, do so. Do it every month, like clockwork.

Do you have the money to buy stocks?

Many people struggle with one question: they say they do have money to invest because they’re living month to month. Does that sound familiar? If you are going to become a real investor, you have to manage your money. People who live month to month or paycheck to paycheck find it almost impossible to get ahead.

Find a way to either increase your income or cut your expenses. To invest might mean some austere measure at first. How much austerity you can handle depends on your vision. Can you drive a midsize ten-year-old sedan for a few years and sacrifice your dream luxury German or Italian import car with tires that cost $1,000 each? I think you get the gest. Investing will require discipline, a viable strategy and execution. You can also take on other sources of income, maybe work a second job. You can use the income from your second source of income as your investment resource. In either case, you have to do something if you want to become a successful investor. Keep in mind as your investments start to pay you dividends, you can adjust how much money you set aside each month.

Don’t invest money you don’t have

Set up a prudent reserve. It is essential to have enough money saved to account for at least three to six months or longer of living expenses. This is very important. It is fair to say a prudent reserve is as essential as investing every month. You must know precisely how much money comes in monthly and how much you spend on all expenses. Exactly. No guestimates.

Invest in Yourself

Successful investors will tell you one of the most important investments they ever made was in themselves—knowledge about strategies, types of investments, ways to increase your skills as an investor all help. Read books about investing, books by people who have become successful, books about ways to improve your awareness of your barriers. Study the methods and challenges successful investors deal with. Some people invest in a coach who walks them through lifestyle changes. Others take seminars or study every day, in the same manner, they would study to learn a foreign language. Others start to network with other successful investors. But, the most important investment is in yourself.

Buy Stocks with Dividends & Quality Companies

Assets that produce an income will give you a better return for your money than holding on to cash in a bank account. Cash will change in value over time. Income-producing assets will provide you with a much better return for your money.

Take time to learn about an organization before you invest. Read what you can about the company and the key people in the history of the company. There’s nothing like finding out you just invested a lot of money in a company that has an opposing view to your philosophy. For example, who wants to invest in a manufacturing company that does not think it must dispose of its chemical waste safely? Find out about a company’s vision, business model and plans to scale the business.

In addition to learning about a company before you invest, learn about the sector. If you think you want to invest in technology or agriculture, learn about these sectors. It is a terrible mistake to invest in an industry that you know nothing about. Instead, invest in things you understand. It does not make sense to put your money into a technology or service you do not understand.

What are some different stock-buying strategies?

Many different investment strategies exist. Bonds, stocks, Index funds, Mutual Funds and Alternative Investments.

Bonds are fixed incomes. You can earn interest on the money you make from your investment, and you earn interest on the initial investment. With bonds, you lend money to governments or companies in exchange for interest. Bonds have low risk.

Stocks, you buy a percentage of ownership in a business. You get profits from the company, called dividends, when the company does earn a profit. If the stock you purchase does well, you can make much money. On the other hand, if the company fails or does not profit, you can potentially lose all of your investment.

Index Funds allow you to buy partial ownership in several different companies traded on the stock exchange. With an Index Fund, you limit your risk because you have a diversified portfolio. In addition, index funds do not present such a high risk. These features make this fund one of the best ways to get started.

Mutual Funds consist of stocks and bonds purchased by a group of investors. In addition, you also get a professional Fund Manager. This type of fund may have fees associated with paying the fund manager. However, you do not have to do any research with this investment since the manager will have the knowledge and information you need about the stocks and bonds available within the Mutual Fund.

ETFs are exchange-traded funds which seek to track the performance of an index using a smaller basket of high-performing stocks. You can purchase ETFs on autopilot in your TFSA with the top Canadian robo-advisors like Wealthsimple or Questwealth.

Alternative Investments include real estate and gold as an example. These high-risk investments need skill and experience before you consider investing your money. Not low-risk investments at all and not the best investments for beginners.

Buying Stocks – Terms & Glossary

Any new venture-specific terms associated with what you are doing help gain knowledge. For instance, professional athletes learn terms a coach might use to describe particular plays or moves. Within certain sports, it is even more specific. Investing is no different. Take a look at some essential terms to help get you started.

Ask – the lowest price a seller will agree on to sell a security

Bear Market – Time when stock prices drop

Bull Market – Time when stock prices rise

Bid – The highest price for the sale of a security

Portfolio – The different types of investments a company or a person owns.

These are just a few of the many terms you should study to gain the essential skills you need to become a successful investor. In addition, here are some titles that are specific to investing in Canada. These titles are not recommendations; instead, they are suggestions of available resources that may be helpful.

Online stock trading for beginners in Canada

One of the most critical questions to ask as you get started with your online stock trading business might have to do with where you will focus your investments. Some options to get started include Day Trader, Swing Trader, Intraday Trader and more.

Day Trader

Not for the faint at heart, day trading in Canada as a whole involves a bit of risk. One advantage, day trading eliminates overnight risk. As the name implies, all trades close on the same day. You do not have to concern yourself with conditions that might occur overnight. Since the trade closes the same day, the earnings from your trade compound faster. As you earn money, you can turn around and reinvest your earnings the next day. You can also earn some interest in your investment. Some of the disadvantages include, you trade against computers. They will not make a mistake; you might. Day trading can be stressful and requires a solid understanding of terminology, strategies, and methods to be successful. You might want to consider this option after you gain some experience. The bottom line, a day trader holds a stock for less than a day. A day consists of 61/2 hours total. That’s the total amount of hours in a trading day. So, if your day or time zone does not coincide with the market, you have even less time. This is not recommended for beginners. Day trading requires skill and knowledge of other aspects of the stock market that you learn as you continue to increase your understanding of online stock trading.

Swing Trader

A swing trader will hold a stock for more than one day. It could be a week or longer or shorter. You might sell a percentage over the time that you hold the stock. This is more volatile because more variables can affect the price. So, there are more risks associated with swing trading.

To sum up, swing trading is holding a stock for multiple days. It can last a few days and, in some cases, several weeks. Things to consider are finance cost, risk exposure and margin requirements.

Intraday Trader

Rooted in technical analysis, intraday trading is managed quickly, sometimes within seconds. However, to have any chance of success, you must devote all your time and focus on doing.

Value Trading

Focusing on the intrinsic value of a company rather than fast growth indicators. Investing in stable companies that pay regular income, are unaffected by economic downturns, and could be TSX monthly dividend stocks to buy.

Options Trading

According to Investopedia dot com, Stock Options (gives an investor the right, but not the obligation, to buy or sell a stock at an agreed-upon price and date). Ideal for people with low capital, options trading can be rewarding and help an investor realize good returns. If you have CAD 5,000 or less to start with, options trading might be the way for you instead of investing in penny stocks in Canada. One thing to keep in mind, it’s a high-risk, high-return investment strategy. Start with paper trades until you understand how the market works thoroughly. Here’s where the importance of working knowledge of the terminology involved with investing comes in. Know what the bid and ask price means, not just the definition. Understanding the language associated with investing cannot be stressed enough.

Open a brokerage account.

Now that you are on your way to becoming an online investor, your next step is to open a brokerage account. You have three types of accounts to choose from.

Cash account. With a cash account, you control all the money and must take responsibility for paying all the transactions in full by the settlement date.

Margin accounts give you the options to borrow money so you can invest. However, the risk is high and not recommended for beginners. If your investment loses money, you are still responsible for the total amount of the loan.

Options accounts are special margin accounts with special approvals and conditions.

As with all issues that relate to online investment, do your homework before you decide to invest. If you are new to the online stock world, the cash account might be the best option until you learn more.

Decide on the apps you will use to track investments.

Use your search engine to find an app or apps that will track stocks. You can find various apps that will give you the information you will need to get started.

Another essential step to explore before you buy stock

Check out a company’s investor relation page. There you will get information about how the company interfaces with its investors. This will be important since this will be the place you can find out crucial information before you place an order to buy a stock.

The real key to becoming a successful investor is patience and changing your relationship with your money. Look for a return on your investment. Day trading, for example, gives you at most 6 ½ hours to make a trade. This strategy does not work well for beginners. You might want to consider mutual funds. You get to own a portion of more than one stock in more than one company.

The internet has a plethora of videos made by people. Some are telling about their method, others encouraging you to do what they did. In either case, the best way for you to get started might be to take time to read books, listen to audiobooks or watch videos from people like Warren Buffet and Robert Kiyosaki. If you decide to begin, stick with it, learn the basics, learn the vocabulary, and how each term interfaces with others.

When people understand the ins and outs that work best for them, they have a better experience.

Reinvesting the earnings is essential for success. Money spent is no longer available. Make your money work for you. If you are looking to get rich quickly, this is not the way. However, on the other hand, if you want financial freedom, you have taken the first steps.

Network with other online investors. Ask them what worked and what did not work. Find out your tolerance level for this online investing, have a plan, and stick with your plan.