DIY Investing | How to choose and open a brokerage account

With so many online brokers, trying to choose one and buying stocks can seem intimidating. Here I’ll guide you through the discount brokerages available in Canada, how to open an account and make your first trade.

What’s the best discount brokerage in Canada?

There are 13 discount brokerages you can choose from. There are some similarities and differences between them. However, the path of least resistance for most people is to choose the same financial institution that they already bank with. 

• 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

Factors to consider when choosing a discount brokerage 

When you’re determining which discount brokerage is your best match, here are some factors to consider.

• Stock trading commission – This can range from zero to $9.99 every time you make a trade. 
• Commission-free ETFs available – Most brokers have stocks and/or ETFs where they waive the commission fee. This can save you money if you make frequent trades.
• Foreign exchange rate – If you plan to buy international funds, you’ll be charged a foreign exchange fee and the costs will vary. 
• Mobile app features – having the app makes it convenient to check quotes and make trades while on the go. Some apps have enhanced features.
• Average wait times – In most cases, you may only need to wait a few minutes to get someone on the phone to help you. However, there are a few that have longer wait times.

The Globe and Mail published an online comparison guide, which will make it easier for you to make a decision.

How to open an account with an online brokerage 

Now that you’ve done your research and have chosen an online brokerage, here are the next steps on how to open an account. 

Step 1: Choose the type of investment account 

Explain the different types of investment accounts available. Depending on which brokerage you choose, they may offer any of the following accounts: 

• 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: Fill out the online paperwork 

You’ll be asked to create an account (if you don’t have one). You may be required to provide the following information:

• Personal (e.g. contact info, mailing address)
• Employment (e.g. where you work)
• Financial (e.g. income, assets and liabilities)
• Tax residency (e.g. SIN and tax reporting info)

Step 3: Move your accounts over 

Once you’ve created your accounts with the new financial institution, you can transfer accounts from another financial institution, if needed. You’ll need to provide the banking information from your existing accounts. Your new broker will contact your existing broker and facilitate this process. They may even waive the transfer fees for up to a certain amount. 

For more details, check out these helpful articles about transferring your TFSA and transferring your RRSP.

Step 4: Add money to your account

Now you can fund your account. You may have several options, such as using your Canadian Visa Debit to make instant deposits, using online banking and creating a payee, or setting up pre-authorized deposits. Most deposits are processed within 1 to 2 business days. Check if there is a minimum account balance that you need to meet.

How to make trades 

Here’s how to buy stocks online in Canada. Each online brokerage account may have slight variations, but here are the basics you need to know. 

Step 1: Look up the ticker symbol 

When you’re ready to make a trade, clicking on the “buy” button will take you to a page where you can search for the ticker symbol (an abbreviation of the fund’s name) or the name of the fund you’re looking to purchase. Click on the fund, and it will display some background information. 

Step 2: Calculate the number of units  

Here’s where you’ll do some simple calculations. In order to figure out how many units to buy, you take the amount of money you want to invest and divide it by the current stock price. 

Depending on your platform, you may have the option to put in a dollar amount that you want to invest and it will calculate the number of units for you. However, if you need to calculate it on your own, here’s what you need to do:

Let’s say you have $5,000 in funds that are available to trade and you want to invest in the Vanguard FTSE Canada Index ETF (VCE) with a stock price of $41.75. You’ll take $5,000 and divide by $41.75 which gives you a total of 119.76. You will need to round the number down as you can’t buy a partial unit. 

Also, you may need to factor in the cost of making the trade (up to $10 per trade). As the market fluctuates, you may consider setting a price type. For a safety net,  choosing “limit” and setting a limit price means that you don’t want to pay above a certain dollar amount. Don’t forget, if you’re buying a fund that’s priced in US dollars, you’ll also need to factor in the currency exchange rate. For these reasons, I would round down to 115 units so that there’s a cash buffer. 

Step 3: Verify the trading fee

Double-check that you have sufficient funds to cover the cost of making your trade. If you’re over your limit, it should give you a warning that you need to revise the number of units you can purchase. There’s also an option to choose a time limit on your transaction, which can be for the day you’re trading or in the future. 

If there are any trading fees, they should also be listed in your summary. When you’re ready to confirm your trade, you may be prompted to enter a trading password. This is an extra security feature to ensure that you’re the one who’s authorizing this transaction. 

Once you’ve placed your order, typically it will fulfilled within a few seconds. However, if it’s a very volatile fund and you’ve set a certain price limit, your order may not be filled right away. 

Step 4: Repeat until you’ve completed your portfolio 

Congrats! You’ve completed your first trade. As you can see, it’s fairly straightforward. There are more sophisticated features available in your account, which you can explore when you’ve got more experience under your belt. In the meantime, go back and repeat these steps to purchase the rest of your funds across your investment accounts (e.g. RRSP and TFSA) to build your portfolio. 

Mission accomplished: You’re a DIY investor

Now that you’re all set up, you’re officially a DIY investor! You should be very proud of achieving this milestone. In the next article, I’ll explain how you can monitor the performance of your investments and ensure you stay on track to meet your financial goals.