You’re an intellectual individual. You want to invest in your future so you went to your local bank and they put your hard earned into some mutual fund. Right on! Unfortunately, the funds return on your investment didn’t even offset inflation. At this rate, you’re never going to retire. This upsets you so you realized it’s time to take matters into your own hands: you’re going to invest on your own. But just how do you buy stocks?
In order to buy stock on your own, you should set up an account with a discount brokerage. A discount brokerage will enable you to buy and sell securities on the major stock exchanges. Unlike major brokerages, a discount brokerage will charge you less commission per trade which helps you save even more money. This allows you to take those savings and put them towards what’s really important: investing.
The account you will set up will de a self directed investing account. Depending on your financial goals, you can open up a Registered Retirement Savings Plan (RRSP), Tax Free Savings Account (TFSA) or regular investing account. Keep in mind that you will have to claim and pay taxes on your gains in a regular investing account. You do not have to claim gains made in a TFSA (Tax Free Savings Account) and only pay taxes in your RRSP account upon withdrawal.
There are several discount brokerages to choose from. You could simply go to your closest bank, whether it be Royal Bank of Canada or TD, and open (or transfer) to a self directed account there. By transferring I mean you can transfer your existing RRSP plan, or a portion of, into a self directed account.
The commissions at your bank will be substantially higher than companies that are strictly discount brokerages, such as Questrade or Virtual Brokers. On average, your bank will charge you $29.95 a trade whereas Questrade or Virtual Brokers will only charge you $4.95 a transaction. If you do get help from a live agent, the commission fee jumps up as you are getting help from a live professional.
I recommend receiving a helping hand from a professional at the beginning. You can also try paper trading with fake money to get a feel for the market before you put your own capital at risk. This will help you familiarize yourself with the websites and get comfortable placing orders.
Buying stocks is easy, it’s the research and dedication to succeed that is the hard part. Simply open an account with an online discount brokerage and you’ll be on your way. Invest in the right stocks and you’ll be on your way to financial freedom quicker than you think.