Investing in the Canadian stock market may seem complicated, but getting set up is actually quite simple. The hard part is picking quality stocks that meet your unique goals and risk profile. But we’ll get to that some other time.

It goes without saying that if you want to invest in stocks, you need a brokerage account. For many Canadians, the default option is to just open an account with the bank they already use for their chequing and savings. While that may be a good start, there’s no shortage of online brokerages that let you invest with all the bells and whistles offered by a major bank–at a lower cost and without having to step foot inside a branch.

Simply put, a brokerage account is your connection to the stock market. Brokerage accounts are offered by banks and licensed stock brokerage firms. By depositing cash into your brokerage account, you can use the money to purchase all types of securities, including stocks.

Types of brokerage accounts

In general, there are three types of brokerage accounts available to Canadian investors, including:

  • Online or discount brokerage account: an investment account with an online brokerage company or major bank that lets you create your own stock portfolio.
  • Managed or full-service brokerage account: a brokerage account that offers investment management through a financial advisor or robo-advisor.
  • Retirement account: a tax-advantaged investment account that lets you accumulate savings.

The type of account you open depends on several factors, including your goals, investment horizon and whether you intend to do it yourself or have your funds managed by an advisor. If you read equity.guru, you’re probably interested in companies that operate in fast-growing industries like marijuana, technology and mining exploration. If that’s the case, an online brokerage account is your best (and cheapest) bet.

To open a brokerage account, you need to do a little research. Things like trading fees, asset selection, minimum investment requirements and trading services are all important when deciding which option is best.

For example, if you are looking for a brokerage with the lowest fees, Questrade might be a good option. If you’re a high roller who wants all the perks of a large investment account, Scotia iTrade could be on your radar. If you value customer service above anything else, Qtrade might be a good option.

Popular discount brokerage accounts in Canada

The information age has given rise to the do-it-yourself investor, and stockbrokers know it. In response, they’ve flooded the market with an ungodly number of online discount brokerage accounts. You can research them yourself or simply read the following summary we have on some of the best accounts available.

FYI: We don’t care which account you choose. We’re not affiliated with any of these companies.

Platform Stock Trading Fee Annual Fee Account Minimum Notes
Questrade $4.95 – $9.95 $0 $1,000
Wealthsimple $0 $0 $0 Charges management fee of 0.5% for net deposits under $99,999
Qtrade $8.75 $0 for accounts less than $25K $1,000
Scotia iTrade $24.99 $0 for accounts less than $25K $0
TD Direct Investing $9.99 $0 for accounts less than $25K $0 Quarterly administration fee of $25 is charged on accounts less than $15K
National Bank Direct Brokerage $9.95 $100 $0
Virtual Brokers $9.99 $0 for accounts less than $25K $1,000

A brief foray into margin trading

Many online brokerages offer something called margin trading.

Trading on margin involves borrowing money from a broker to trade securities. Borrowed money is also called leverage in the trading world.

Basically, the amount of money you deposited into your account serves as collateral for the loan. Since you are using borrowed funds, you’ll be required to make periodic interest payments.

Margin trading is attractive to traders because it lets them earn a higher rate of return. The downside: It can magnify your losses in the case of a losing trade. If you use excessively high leverage all the time, you can blow up your account very quickly.

If you dive into the twisted world of foreign exchange (forex) trading, you’ll find a lot of reference to “leverage.” In forex, a broker will let you leverage at a rate of 50:1 all the way up to 1,000:1 (lol). A 50:1 leverage ratio means you are only required to have at least 2% of the total value of the trade available in your trading account.

Why are we telling you this? Because many brokers offer forex trading as well as stocks, exchange-traded funds and mutual funds. So it’s important to get up to speed with their lingo and marketing tactics (and not be fooled by them).

Keep in mind that margin trading is typically used by traders, not investors. Traders buy and sell securities for short-term profit whereas investors select companies for their long-term growth prospects. A brokerage account will help you do both, but it’s important to get your priorities straight.

How to get started

Once you decide on a broker, you need to create an account and submit your documentation (ID, address, etc.) for verification. In the application process, you’ll probably be asked broad questions about your investment goals and experience. Answer as truthfully as you can.

Once your application is approved, you will be able to deposit money into your brokerage account. Deposits are usually made through electronic transfers from your bank account or your debit or credit card. As soon as the money hits your brokerage account, you can use it to buy securities.

And that’s where the fun begins.

To recap

To open a brokerage account, you need to:

  • Determine the type of brokerage account you need
  • Research the various brokerage firms (we’ve done that for you)
  • Decide on a brokerage account
  • Fill out a new application and submit your documents
  • Fund the account
  • Start investing

–Sam Bourgi

Written By:

Sam Bourgi

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brokerage accounts
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