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 to continue to be successful. The key things we want you to know about buying stock is start small, think big, make informed decisions. You will be a success once you decide to follow a strategy which 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 information. However, until you hit the launch button, you’re not going to make any progress. Some advisor 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 actually invest. Speaking of recommendations and advice, Canadian author David Chilton wrote a book called ‘The Wealthy Barber’. Check it out.

In order to get over the initial anxiety of putting your money where you cannot access it for a while, remember this is about an investment which you expect to see a return on. The first rule of successful investing is pay 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?

One question many people struggle with is 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. In order to invest it might mean some real austere measure at first. How much austerity you can handle depends on your vision. Can you drive a midsize 10 year old sedan for a few years and sacrifice your dream luxury German or Italian import car with tires that cost Can $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 important as investing every month. You must know exactly how much money comes in monthly and exactly 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 you can increase your awareness of your personal barriers. Study the methods and challenges successful investors dealt 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. Other start to network with other successful investors. The most important investment is in yourself.

Buy Stocks with Dividends & of Quality Companies

Assets that produce an income will give you a better return for your money than holding to on to cash in a bank account. Cash will change in values overtime. Income producing assets will give you a much better return for your money.

Take time to learn about an organization before you invest. Read what you can about the company as well as 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. Who wants to invest in a manufacturing company that does not think it has to dispose of its chemical waste in a safe manner. 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 a sector that you know nothing about. Invest in things you understand. It does not make sense to put your money in a technology or service that you do not understand.

What are some different stock buying strategies?

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

Bonds are fixed income. 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 earn a lot of money. On the other hand, if the company fails or does not earn a 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. 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. With this investment you do not have to do any of the research since the manager will have the knowledge and information you need about the stocks and bonds available within the Mutual Fund.

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

With 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 specific plays or moves. Within certain sports it is even more specific. Investing is no different. Take a look at some important 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 – Highest price for 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 in order to gain the basic 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, rather they are suggestions of available resources that may be helpful.

Recommended Reading on Buying Stocks in Canada

Happy Go Money by Melissa Leong

Millionaire Teacher by Andrew Hallam

Wealthy Like Rabbits by Robert R. Brown

Personal Finance for Canadians for Dummies by Eric Tyson, MBA and Tony Martin, B.Comm

Now you have some resources and insights into how to get started. So, when do you get started? Getting started might seem like a daunting task. Some potential new investors face their own challenges they will not talk about. Some investors seem very open about why they never got started. Whatever side of the investment community you find yourself, you’re not alone. Since you have competed the article does the sentence start small, think big, make informed decisions make more sense to you?  We certainly hope so.

 

Investing can introduce you to an entirely new lifestyle. Anything worth having is worth working for. Investing is no different. It takes a lot of thought and planning. Finally, it would almost be sacrilegious not to mention two of the icons of investing, Warren Buffett and Oprah Winfrey. Read their books, watch their videos. Listen to their wisdom as they talk about how they invest in people and ideas. Investing is also about building relationships and the most important one is a relationship with yourself as you become more aware of your tolerance for risks and how to become a wise investor.

Online stock trading for beginners in Canada

 

One of the most important question 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 as a whole involves a bit of risk. One advantage, day trading eliminates overnight risk. As the name implies, all trades close the same day. You do not have to concern yourself with conditions which 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 on your investment. Some of the disadvantages include, you actually 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 of how to be successful. You might want to consider this option after you gain some experience. Bottom line, a day trader holds a stock for less than a day. A day consist 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 knowledge about 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 there are more variables that 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. In order to have any chance of success, you must devote all your time and focus on what you are doing.

 

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. 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 a working knowledge of the terminology involved with investing comes in. Know what the bid and ask price means, not just the definition. Understanding the terminology associated with investing cannot be stressed enough.

 

Open a brokerage account

 

Now that you 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 the 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. The risk is high and not recommended for beginners. If your investment loses money you are still responsible for the full 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 a variety of apps that will give you the information you will need in order to get started.

 

Another important 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 important information before you place an order to buy a stock.

 

The real key to becoming a successful investor is patience and change your attitude about 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 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 audio books or watch videos from people like Warren Buffet and Robert Kiyosaki. If you make a decision to begin, stick with it, learn the basics and learn the vocabulary as well as how each term interfaces with others.

 

When people take time to understands the ins and outs the way that works 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 quick, 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 what your tolerance level is for this online investing, have a plan and stick with your plan.

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