Navigating the wealth of choices among online brokers can feel overwhelming. In this article, I will walk you through the discount brokerages available in Canada, as well as the steps to open an account and execute your initial trade.
Which discount brokerage is the best in Canada?
Canada offers a selection of 13 discount brokerages, each with its own set of features. While some have similarities, many find it easiest to go with the financial institution where they already manage their banking.
- BMO InvestorLine
- CIBC Investor’s Edge
- CI Direct Trading
- Desjardins Online Brokerage
- HSBC InvestDirect
- Interactive Brokers
- National Bank Direct Brokerage
- Qtrade Direct Investing
- Questrade
- RBC Direct Investing
- Scotia iTrade
- TD Direct Investing
- Wealthsimple Invest
What to consider when selecting a discount brokerage
As you evaluate your options for a discount brokerage, keep the following criteria in mind:
- Trading commissions – Fees can vary widely, ranging from $0 to $9.99 per trade.
- Commission-free ETFs – Many brokerages offer certain stocks or ETFs without commission fees, which is advantageous for frequent traders.
- Foreign exchange rates – If you intend to invest in global funds, be aware of the foreign exchange fees, which can differ between brokerages.
- Mobile app functionality – A user-friendly app can simplify trading and checking fund status while you’re on the move; some apps offer advanced features.
- Average response times – Typically, wait times to reach customer service should be minimal, but some brokerages may experience longer delays.
For a thorough comparison, The Globe and Mail has published a guide to assist you in making a well-informed choice.
Steps to open an account with an online brokerage
Having made your choice of online brokerage, here’s how to open your account:
Step 1: Select the investment account type
Different types of investment accounts may be available depending on the brokerage you select. Here are some common options:
- Tax-Free Savings Account (TFSA)
- Registered Retirement Savings Plan (RRSP)
- Spousal Registered Retirement Savings Plan (Spousal RRSP)
- Margin Account
- Cash Account
- Non-Registered Account
- First Home Savings Account (FHSA)
- Registered Education Savings Plan (RESP)
- Registered Retirement Income Fund (RRIF)
- Locked-In Retirement Account (LIRA)
- Life Income Funds (LIF)
- Registered Disability Savings Plan (RDSP)
Step 2: Complete the online application
You will need to set up an account and may be required to provide the following information:
- Personal details (e.g., contact information, address)
- Employment information (e.g., your workplace)
- Financial details (e.g., income, assets, liabilities)
- Tax residency (e.g., SIN and tax-related data)
Step 3: Transfer existing accounts if necessary
After creating your new account, you have the option to transfer accounts from other financial institutions. You’ll need to supply your existing account details, and your new brokerage will manage the transfer process, potentially waiving transfer fees up to a certain limit.
For further insights, take a look at these useful articles about transferring your TFSA and RRSP.
Step 4: Fund your account
You can now deposit money into your account using various methods, including immediate deposits via Canadian Visa Debit, online banking, or scheduled automatic deposits. Most deposits are typically processed within one to two business days, so check if there’s a required minimum balance.
Executing trades
Here’s your guide to buying stocks online in Canada. While the process may vary slightly between platforms, the basic steps remain unchanged.
Step 1: Find the ticker symbol
To begin a trade, you will typically click the “buy” button, leading you to a search feature for the ticker symbol (a shorthand for the fund’s name) or the fund’s name. Once located, selecting the fund will provide you with its details.
Step 2: Determine the number of shares
Calculate how many shares you wish to buy by dividing your available investment amount by the current stock price. Your platform may let you input your investment amount directly, automatically calculating the number of shares for you. However, here’s how to do it manually:
If you have $5,000 to invest in the Vanguard FTSE Canada Index ETF (VCE) priced at $41.75, for example, divide $5,000 by $41.75, which equals about 119.76. Since shares cannot be purchased in fractions, you would need to round down. Remember to account for any trading fees, which can reach $10 per transaction. Due to market fluctuations, setting a limit price ensures you won’t pay more than a certain amount for your shares. If the fund is in USD, also factor in the currency conversion rate. Thus, a reasonable choice might be to purchase 115 shares for a buffer.
Step 3: Confirm trading fees
Ensure you have enough funds to cover your trade, which should be reflected in the summary before you confirm. If you’re close to your limit, the system will alert you to adjust the number of shares. You can also select a timeframe for your trade, whether for the current day or a future date.
Provided there are trading fees, these should also be displayed. When ready, you may be required to enter a trading password as an additional security measure to confirm the transaction.
Once placed, your order typically completes within seconds, but if market conditions are volatile and you’ve set a limit, there could be some delay in order fulfillment.
Step 4: Continue until your portfolio is established
Congratulations on completing your first trade! As the process is quite manageable, you may explore additional sophisticated features as you gain more experience. For now, repeat these steps for your other investment accounts (e.g., RRSP and TFSA) to thoroughly build your portfolio.
Congratulations: You are now a DIY investor!
With everything in place, you’ve officially transitioned into a DIY investor—an achievement worth celebrating! In the upcoming article, I will discuss how to track your investments’ performance and ensure you remain aligned with your financial objectives.