How to buy stocks in 2024?
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Discover the methodologyAnyone who wishes to invest in the stock market can do so by buying shares. Investing in the stock market can be an excellent way to boost savings and build capital.
But how do you buy shares online and make money trading them?
Here you can find out how to buy stocks, how profitable they can be and much more.
Buying stocks: what you need to know
- Buying and selling stocks can easily be done independently through online brokers. It is a market accessible to everyone.
- Canadian stocks offer tax advantages.
- You can, if you prefer, entrust the management of your shares to a professional.
- A stock allows you to earn money through both dividends and capital gains.
- The best stocks to buy for regular income are regular dividend stocks.
- The best stocks to buy for long-term capital gain are growth stocks.
- The cannabis sector is currently among the best sectors to invest in.
What is a stock?
A stock is a small part of a company that can be purchased by an investor. The investor who buys shares of a company, therefore, becomes an owner when they buy a share.
Investors can have different goals when they buy shares in the stock market depending on their investment strategy:
- Dividends: this is a small share of the profits shared with the investors. For example, a company might pay you $1 this quarter for each share you hold in it.
- Capital gains: as the price of a stock change over time, it is possible to resell a stock at a higher price than the one at which it was purchased and pocket the difference.
To start buying individual stocks simply, use our comparison tool to pick the best online brokerage platform for you.
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How to buy stocks in Canada?
There are several ways to buy shares on the stock market today including:
- Investment firms: these firms charge fees and commissions in exchange for advising you on your investments and for managing the buying and selling of stocks.
- Low-commission brokers: Online brokers offer the advantage of low fees and commissions, but generally do not provide advice or help you choose your investments.
- Financial advisors or portfolio managers: A financial advisor can manage an investment portfolio for you and buy the stocks in it for a higher fee.
Buying stocks also requires you to have an investment account in which to store them:
- The cash account: this is the most common investment account and allows you to buy shares for cash. It is accessible online as well as through a traditional broker.
- Margin account: This account allows you to borrow a portion of your investments from the investment company.
- Registered plans: RRSPs (Registered Retirement Savings Plans), RESPs (Registered Education Savings Plans) and TFSAs (Tax-Free Savings Accounts) are types of cash accounts.
How do I buy stocks online without a broker?
The stock market and stock investing have become much more accessible in recent years as buying stocks online has become easy and popular. More and more brokers or online brokers offering you the opportunity to directly invest in the stock market yourself.
Buying shares online is an investment method that allows you to place your stock market orders yourself from a platform. Before getting started though, know that this requires an understanding of how the stock market and financial markets work. If you know what you are doing, you can save on brokerage fees.
Buying shares online has many advantages including:
- For the right person, it can be very exciting and rewarding while offering opportunities to learn
- The ability to set up your own investment strategy
- Trades that are made faster and more often in real-time on the markets
- Live orders, even outside of business hours. There's no need to rely on a broker's availability
- Finally, the brokerage fees are greatly reduced compared to traditional brokers. For equivalent services, the fees per transaction range from around $5 to $30.
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What is the best online trading platform in Canada?
Choosing the right brokerage platform to buy stocks online is very important if you want to become a profitable stock market investor. Here are the elements you should compare before making your choice:
What are the best stocks in 2022?
Now you may be asking yourself, what stocks should I buy? Here is a breakdown of some of the best stocks to buy today.
| Stock | Best performance | 3 month performance |
|---|---|---|
| Wealth Health Technologies | + 7,500% in 6 years | 146.10% |
| Constellation Software | + 2,320.57% in 10 years | 17.05% |
| Dye & Durham | + 2,206.15% in 10 years | 109.47% |
| Shopify | + 1,435.50% in 5 years | 92.21% |
| Score & Gaming | + 444.44% in 1 years | 24.03% |
| Aphria | + 262.74% in 1 year | 9.69% |
| Brookfield Renewable | + 121.15% in 10 years | 30.27% |
| LightSpeed POS | + 62.02% in 1 year | 31.02% |
| Nuvei Corp | + 1.94% in 1 year | 86.91% |
| Docebo | - 3.33% in 1 year | 68.96% |
Good to know
Check out our analysis of the prices, yields and dividends of the most popular stocks to buy.
How much does buying shares cost?
Some brokers let you buy shares with low or no brokerage fees. Others charge these commissions on each purchase and sale. Fees vary depending on the type of broker that you use to buy shares. Here's a simple breakdown.
| Type of broker | Applied fees | Why it may be right for you |
|---|---|---|
| Traditional investment firm |
| Personalized investment advice |
| Online broker |
| Fewer fees |
How to buy the shares of a specific company?
Now that we've seen how to access the stock market and the ways to buy stock online, here's how to buy stock in a particular company.
- First, research the stock of the company you want to buy
- Decide how many shares you want to buy
- Place your purchase order and add these shares to your portfolio
Take the time to choose the company whose shares you want to buy. It is not advisable to choose a stock solely because you have heard about it or because its price is attractive. In point of fact, the price of a share is not representative of the performance of a company. In order to choose the right stocks to invest in consider the following:
- The profitability of the company: you can ensure that a company is profitable and that its profitability will increase over time by analyzing its annual and quarterly financial statements
- Review dividends: part of the return on your stock will depend on whether the issuing company pays a dividend, how much and how regularly.
- The long-term performance of the share on the market: review the historical evolution of the share price to better understand if it will appreciate when you resell it.
- The company's operation and stability: finally, check that the company you are investing in is financially solid and has the necessary fundamentals for its growth.
What yield can you expect when you buy stocks?
The yield on a stock usually refers to the dividend paid to the price at which you bought it. But there are other returns that can be generated by buying and selling stocks on the stock market. Here's how to assess the potential total return on a stock:
- Dividends: some stocks in the stock market pay a dividend. A dividend is a share of the profits made by a company that is paid out to its shareholders. The dividend is therefore a regular income. The amount varies from one company to another and depends mainly on the profit made by the company during the previous financial year and its distribution policy. The average annual dividend of shares currently listed on the market can vary from 0.1% to 10% or more.
- Capital gain: the shares you have bought can be resold. This is particularly profitable following a sharp rise in the price. When the selling price of a share is higher than its purchase price, the difference is called a capital gain. Of course, if you sell your stock for less than you bought it for, you will suffer a capital loss or capital depreciation. The capital gains are extremely variable because certain stocks are volatile, while others are relatively stable price.
Buying shares: from which vehicle?
To buy and hold shares in the stock market, you must have an investment or savings vehicle such as
- TFSA: this tax-free registered account allows you to invest and grow money. That growth is not taxed, making them a very popular account in Canada. Withdrawals are accessed at any time.
- RRSP: the registered retirement savings plan lets you prepare for your retirement. Contributions to this account are tax-deductible up to an annual limit. The capital accumulated is tax-free as long as the funds are not withdrawn. However, there is tax due when the money is withdrawn from the plan.
- RRIF: registered retirement income funds are also available through a bank, insurance company or trust. They allow you to transfer assets from an RRSP, PRPP, RPP or DPSP to receive regular payments. Income from an RRIF is tax-free but amounts paid from an RRIF are taxable when received.
- RESP: the Registered Education Savings Plan is an investment vehicle for saving for a child's education. In addition to the earnings, RESPs allow you to receive government grants to supplement your contributions. The money then grows tax-free.
- LIFs and LRIFs: finally, LIFs and LRIFs are also tax-sheltered accounts that allow you to collect the money in a locked-in RRSP or a locked-in retirement account or LIRA.
When should I buy stocks?
While buying stocks is a good investment strategy, it is important to buy them at the right time. To do this, you need to consider both the dividend payment date, the ex-dividend date, as well as its potential for long-term growth and performance.
In order to receive dividends from a stock, you need to buy and hold it in your portfolio at least three days before the record date. Otherwise, you will have to wait until the following dividend to receive this payment.
If you want to make a capital gain over the longer term, you ensure that the price of the chosen share can still rise. To do this, you should perform several analyses, including:
- Technical analysis: this is a graphical analysis of current and past share prices which, with the help of trend or volatility indicators, will enable you to obtain signals of a probable rise or fall in its price in the more or less long term.
- Fundamental analysis: this second method of analysis is based on the study of the macro and micro-economic fundamentals of the listed company to determine its probable growth.
How much tax do you pay on shares in Canada?
Taxes applied to the purchase and sale of shares depends on the type of income:
How much tax do you pay on dividends in Canada?
You can save by investing in Canadian shares, after grossing up the dividends by 38%, you can receive a 15.02% tax credit. The remaining amount is taxed as income tax. Dividends from foreign companies do not benefit from this tax credit.
How much tax do you pay on capital gains in Canada?
Only 50% of the capital gains are taxable in Canada. This means that half of the capital gains realized by selling your shares for more than the price you bought them for is tax-free. The amount you pay on the taxable 50% will depend on the amount of the gain and your tax rate.
| Type of profit | Taxation |
|---|---|
| Capital gain | 50% taxed as income tax |
| Canadian dividend income | Tax credit on eligible or non-eligible dividends and taxation of the balance for income tax purposes |
| Foreign dividend income | Taxable for income tax purposes |
How can I buy unlisted shares?
It is also possible to buy shares of unlisted companies, but this is mainly done through internal contacts of these companies or through specific dealers who take care of the negotiation in advance.
However, there are downsides to buying these stocks, including significant liquidity risk. These stocks may never be listed on the stock exchange. To invest in private, unlisted stocks, you have several options:
- Go through intermediaries and start-ups
- Buy shares from existing employees
- Buy shares directly from promoters
- Go through mutual funds
Can I buy shares in another country?
It is easy to buy shares of foreign companies listed in another country through many of today's trading platforms. However, you will most often have to pay transaction fees on the purchase of these securities and sometimes exchange rate fees.
International stocks may offer a more attractive return than some Canadian stocks, but they are also less tax-efficient because they are not eligible for a tax credit.
It is therefore prudent to calculate these fees before investing in these foreign stocks. You can also use an international equity fund to pay fewer fees and benefit from interesting international stocks.
Good to know
Remember that dividends received from foreign companies are not eligible for a tax credit in Canada.
Our advice before investing in the stock market
Before starting to invest in the stock market, consider these tips:
- Define your investment goals: ask yourself what you expect from your investments and during what length of time (short, medium or long-term). Also define your objectives in terms of return, taking into account the fact that the most profitable stocks are often the riskiest.
- Know what kind of an investor you are: to know your investor profile, you need to define your level of knowledge in financial investment, the time you can devote to this activity and your comfort with risk.
- Invest only non-essential money: as equity investments are not secure investments, it is essential to never risk money that you will need in the future or to meet your daily needs.
- Carefully choose your intermediary or broker: it is important to always verify the reliability of the financial intermediary you use for your stock exchange investments. It is the same if you wish to entrust the management of your portfolio to a financial manager or advisor.
- Choose your investment vehicle: investing in shares is possible through different types of investment vehicles that vary according to your goals (simple investment, preparation for retirement, financing education).
- Consider the fees: comparing the fees and services of different online brokers is essential before choosing one. Take into account transaction fees, the possible management fees, the opening fees and the withdrawal fees.
- Invest in stocks you know: understanding the business sector of a company whose shares you buy is also important to be able to assess its potential as well as future challenges and threats. Do not invest in a promising stock without understanding what you are investing in.
- Take the time to educate yourself: there are countless tools and resources available to teach you about investing in the stock market, whether you go through an online brokerage or something else. The more you learn about the stock market and how it works, the more likely you are to find the best stocks to buy.
Ready to get started? It's easy. Just open an account with an online broker. With our comparison tool, you can decide and open an account in just seconds
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Investing: alternatives to buying stocks
Stocks are popular investment products for individual investors, but they're not the only instruments you can put your money into. Here are some alternatives you might consider:
- Mutual funds: Mutual funds are funds that allow you to invest in a basket of securities made up in whole or in part of stocks on the stock market and managed by a manager.
- ETFs: Exchange-traded funds are also funds that allow you to invest in a basket of securities but that most often follow an index or a sector passively.
- Bonds and debt securities: These securities are actually debt securities issued by companies or governments that provide a fixed return. They are not very profitable but are one of the most secure investment options.
- Cryptocurrencies: these are the most fashionable assets at the moment thanks to their very high volatility. But the risk involved is also very high, so these instruments should be reserved for more seasoned investors.
