Investing in stocks can sound like a daunting task for some, especially if you are a complete beginner and have no idea where to start. In this article I am going to show you how to get started investing in stocks.
The first step to investing in stocks is you need find a brokerage to open an account with.
There are essentially two types of brokerages for retail investors:
1) a boutique brokerage or
2) an online broker
You will most likely want to go with an ONLINE broker over a boutique broker as you will have much more control over your account and also pay WAY less in fees. Boutique brokers are mainly used by high net worth individuals who may want to place unique orders such as icebergs or cross-trades, as well as do private placements.
The average investor should start with an online brokerage.
Choosing an Online Broker
There are hundreds of different options for online brokerages to choose from, but the best one for you will be based on your location as well as how often you will be trading.
If you are based in Canada, it is most convenient to open a brokerage account with the bank that you use to do your regular banking with. For example, if you bank with BMO, they also have a brokerage division called BMO InvestorLine, for investing in stocks. If you bank with TD, they also have a brokerage division called TD Direct Investing.
It is a much simpler and convenient process if you choose to open a brokerage account with the same bank that you have your regular bank accounts with. This way, you can transfer funds directly from your chequings into your brokerage account instantaneously. If the bank that you do your regular banking with does not have a direct investing platform associated with it, then you will need to choose a separate online brokerage such as Questrade, Interactive Brokers, or WealthSimple.
Different brokerages will have different fee structures, so make sure to check out a few different online brokers before deciding which one is right for you.
LIST OF BROKERS IN CANADA
LIST OF BROKERS IN THE USA
Investing in Foreign Stocks
If you are not from Canada, but want to invest in Canadian stocks, you will need to do so through your local online brokerage.
Often times, most Canadian stocks will have their shares listed on foreign exchanges such as the OTC (in the USA) and Frankfurt Stock Exchange (in Germany). The stock will have a different ticker symbol depending on what exchange it is trading on.
For example, Zacatecas Silver is a Canadian-based company with the ticker symbol “ZAC” but their shares are also listed in America on the OTC market under the symbol “ZCTSF” as well as in Germany under the symbol “A2QQCM”.
If you are from the USA, you would need to purchase the stock through a local broker, such as RobinHood, using the OTC symbol "ZCTSF".
If you are from Germany, you would need to purchase the stock through a local German broker using the German stock symbol "A2QQCM".
Placing an Order
The second step is to place an order.
There are two main types of order to know first when investing in stocks:
1) Market Order
2) Limit Order
Buying stock is a bit like buying a car. With a car, you can pay the dealer’s sticker price and get the car (MARKET ORDER). Or you can negotiate a price and refuse to finalize the deal unless the dealer meets your valuation (LIMIT ORDER). The stock market works in a similar way.
Market orders are transactions meant to execute as quickly as possible at the current market price.
Limit orders set the maximum or minimum price at which you are willing to complete the transaction, whether it be a buy or sell.
Market orders offer a greater likelihood that an order will go through, but there are no guarantees, as orders are subject to availability.