Determine your objective and investment capital. Open a trading account of your choice and purchase the shares of your preference after making an analysis of the market.
What are stocks?
Stocks, also called shares, are ownership of a company. The company raises funds for its operations from the public by issuing its shares divided into units. The public pays a price for buying the shares that are used by the company for its operations. For this investment, the company pays out dividends to its investors. The share value also rises based on the company’s performance, which, while selling, offers the investor capital growth and profit. The stocks listed in Toronto Stock Exchange can be accessed by Canadian investors.
How to begin investing in stocks in Canada?
- Determine how much you can invest.
- Ascertain your goal – short term, medium term, or long term.
- Explore if you wish to invest in one share or a portfolio of shares.
- Complete fundamental analysis of the company’s balance sheet. This will help you understand if the share is valued at a fair price in the market.
- Complete a technical analysis of the historical trends of the share to forecast its price changes.
- Open an online trading platform. In Canada, you have various choices, like Questrade, Wealthsimple, TD etc.,
- Based on your contribution limits, funds available and investment objective, figure out where you need to invest your stock in – a registered account such as TFSA, RRSP, RESP or a non-registered account.
- Purchase the share.
Types of Stocks
a. You can invest in shares directly and you will become a direct owner of the company.
b. You can invest in an ETF that has a group of shares within and it mirrors an index. You do not have to build a portfolio nor do you have to rebalance it. For this, you need to pay a small percentage of management fees. In this case, you are not the direct beneficiary of any company.
c. You can invest in a mutual fund that is focused on a group of shares. It is actively managed by professionals and you have the chance to beat the market. However, you need to pay fees and will not be the direct owner of the company.
Investing in Shares
The process of investing in shares in Canada is pretty easy. However, the background research is the complicated part. Shares are prone to market risk, liquidity risk, volatility risk, financial risk, unexpected turn of events etc.,