Stock trading was once something for the wealthy and influential in Canada. Investors and stockbrokers communicated over the phone to place trades manually. Stock owners would have to follow the news to check how the stock was performing.
But now, technology has transformed the entire investing process. People of all ages can think of investing in the stock market using the Internet irrespective of their earning levels. But it might be intimidating for those who have never bought stocks before and may wonder how to start.
If you have been interested in trading stocks but did not know how to begin, this step-by-step guide can head you in the right direction.
Decide Your Investment Goals
Every person begins investments for various reasons. Some people want to grow their wealth and purchasing power, while others wish to save for their retirement. So, determine your reasons for investing in stocks in Canada to choose the best investment security option.
For example, you can consider opening a Registered Retirement Savings Plan (RRSP) or a Retirement Income Fund (RIF) account if your goal is to save money for your retirement. But if you are looking for ways to make some money in a sustainable yet flexible manner, then opening an investment account is probably the best way to go.
Open a Canadian Investment Account
Once you have thought about your goals and are determined to invest in stocks, you need to open a Canadian investment account. You will find several brokers in the market with unique suites of advantages and options that can help you multiply your funds.
But most new investors in Canada prefer opening an account on one of the latest stock trading apps. These apps are top-rated investment platforms that can offer you multiple accounts depending on your plan. Most of these apps are exposed to the largest stock trading marketplaces of Canada as well as North America.
That means you can use the same account to invest in the Toronto Stock Exchange, NASDAQ, and the New York Stock Exchange. You can get the best research data about low-cost trades to gain an edge on selecting the right investments that can help you grow. Make sure you learn more about the best stock trading apps in Canada before choosing the one that suits your needs.
Make an Investment Strategy
Your next step should be to build your investment strategy. Try to make a robust investment portfolio that includes various securities, such as shares, mutual funds, and exchange-traded funds. Your long-term goal should help you decide which securities you should include more in your portfolio.
For example, if you are planning to retire with an RRSP account, you should concentrate more on mutual funds. Mutual funds are directed by a fund manager who would pool in funds from investors to invest in the right stocks.
As the stock values increase, the profits get distributed among the shareholders. Mutual funds trade only once each day, so they need time to grow. However, they can be a stable source for continuous investment growth.
However, if you are looking for options to grow your funds aggressively, you should invest in company stocks. You can buy shares of companies through the stock market, which may include rights in the company and dividends based on its quarterly business performance. Even though investments in stocks come with certain risks, you can also earn significant rewards.
If you want something between stocks and mutual funds, you can consider investing in an Exchange Traded Fund (ETF). ETFs also get traded in real-time at the market, which allows you to get the best possible price for your investment.
However, ETFs also pool money from investors and buy multiple shares. That means you can buy stocks for multiple companies and have moderate growth on your investments without too much risk.
Do Your Due Diligence
Once you have determined your investment strategy, you need to start your research. There are several crucial sources that you should look at for relevant information. Some of them include financial news, company regulation reports, and fund ratings.
If you wish to invest in stocks or other securities, you should read the information provided by regulatory filings and company prospectus that are released to the general public. The Ontario Securities Commission makes reports that are available to investors for inspection.
You can get insight into a company’s business plan and financial trajectory. The financial news is also a great source of information that can help you understand the factors that could affect your stock performance.
Determine Future Investments
Once you have started investing and growing your funds, you should determine how to continue it for long-term growth. You can take advice from a financial professional for guided investment growth, or you can follow a self-investment plan. If you are not comfortable with either, you can also use an algorithm-based Robo advisor app.
If you decide to work with financial professionals, you will get expert analysis and advice to make the most of your investments. But you will have to pay a fee for their expertise, which is usually deducted from your overall earnings.
If you wish to run a self-directed account, you can decide where you want to invest your money. That means you will need the necessary expertise and adequate research to minimize the risks.
Robo advisor apps are one of the latest ways to know where to invest in the marketplace. These apps are based on artificial intelligence, and they can create your portfolio based on your objectives. You can find the best Robo advisor apps in Canada to fulfill your investment needs. But remember that these apps can also be wrong at times, so you may need human intervention from time to time.
Purchasing stocks in Canada may seem scary and intimidating in the beginning. But it can also be one of the best ways to invest your money and increase your savings. You need to understand your options and conduct thorough research to come up with the best plan. It will help you to grow your investment and achieve a much desired financial freedom.