Financial Literacy
DIY Investing For Beginners - Online Brokerages in Canada
If you are new to this space and you’re looking to get started, you can always go into your bank and speak with a financial advisor who can manage your money through the traditional route. However, you probably realize that you’re paying a “small” fee for them to manage your account that can compound to a large sum over time. To cut costs, you can manage the money yourself by signing up with an online brokerage in Canada, such as Questrade and Wealthsimple Trade. Here in this article, we will cover the basics of online brokerages and what options available for new Canadian investors.
What's an Online Brokerage?
In essence, online brokerages are platforms that allow you to buy and sell stocks, bonds, ETFs and other investment vehicles online within your trading account. They are also known as discount brokerage because buying and selling stocks are more cost-effective than a traditional brokerage who might provide you investment data or have a financial advisor managing your investments.
How Much Cheaper Are These Online Brokerage?
In general, brokerage fees are fees the broker charges you to hold and manage your investments. As such, brokerage fees may include annual fees, fees for researching investment data, and inactivity fees if you aren’t trading regularly. It’s important that you are aware of the different types of brokerage fees, as well as the types of brokers available to manage your investments. For a full service-brokerage, they may charge you $150 per transaction or 1% annual fee to manage your asset. This is significantly higher than discount brokerages with some of their platforms charging $10 to as low as $0 per transaction .
What Online Brokerages Are Available In Canada?
As the saying go, “it takes money to make money.” For those who would like to invest their money in an online brokerage, here are a few notable online brokerages available:
- Questrade – One of the best overall platforms for beginners and professional.
- Wealthsimple Trade – Only $0 commission trading platform available in Canada (mobile only).
- Qtrade Investor – One of the best platform for robust research and portfolio analysis.
- Online Brokerages options are also available at a Big 5 Bank – Reputable brand and easy integration with your bank account. It does costs less than their traditional brokerage services but more expensive than many of the other online brokerages. You can find a list of them here.
In The section below we’ll talk about Questrade and Wealthsimple Trade, which are two great platforms for new DIY Canadian investors to explore.
Questrade
Questrade is an online brokerage headquartered in Toronto, Ontario, that boasts itself as one of Canada’s lowest commissions on trading and investing. In summary, we’ll talk about the Pros and Cons of the platform:
Pros
- Low fees: Buying or selling stocks costs 1c each (min. $4.95- max .$9.95) and $0 commission for buying ETFs.
- No annual fees: As one of the lowest fees in the country, Questrade also comes with no annual fees.
- CIPF Insured: If the platform is bankrupt, the individual’s general accounts, registered retirement account and registered educational savings plan are each protected of up to $1,000,000. For the full coverage, you can find out more here.
- Online platforms and mobile app: Questrade can be accessed on the browser, desktop program and even on a mobile app to give a seamless experience for customers.
- Has Various Investment Accounts Types: Both non-registered accounts and registered (TFSA, RRSP, RESP, and LIRA) accounts.
- Allows you to hold USD currency in your accounts: valuable asset when you want to minimize foreign exchange fees from converting CAD to USD. The platform also allows you to convert currency using Norbert’s gambit, which you can find out more here.
- Allows for DRIP: Also known as Dividend Reinvestment Plan which allows you to automatically purchase stock that recently paid you a dividend.
Cons
- Quarterly Inactivity Fee: Questrade charges $24.95 if no trades are made within that quarter. They will waive this fee if you complete 1 of the following: complete one trade or deposit worth $150 or more per quarter; your combined value of all your accounts is over $1,000; you’re 25 years of age or younger.
- ECNs and ATSs Fee: You may be charged an Electronic Communication Networks (ECNs) or Alternative Trading Systems (ATSs) fee. ECNs and ATSs are basically intermediaries that connect Questrade to the stock exchanges, such as New York Stock Exchange (NYSE) and Canadian Securities Exchange (CSE). So be aware that ECNs and ATSs can charge a fee based on trading activity on their exchange, which can be found here.
- Minimum Balance Requirement: Minimum investment requirements vary from account to account. For most accounts, they requires a minimum investment of $1,000
In summary, Questrade is a solid platforms for beginners and professionals. Questrade offers one of best all-around platform and a combination of their generally low fees. If you want to open an account, you can do so through here.
Wealthsimple Trade
Wealthsimple Trade is an online brokerage that tries to make trading simple and affordable to the point where they make no commissions on any of the trades you make. In summary, we’ll talk about the Pros and Cons of the platform:
Pros
- Basically No fees: $0 commission for buying stocks and ETFs. Note, there is a foreign exchange fee of 1.5% when converting CAD and USD
- No annual fees: As one of the lowest fees in the country, Wealthsimple Trade also comes with no annual fees.
- No Inactivity Fee: You can leave your account empty and they won’t charge you anything.
- No ECNs and ATSs Fee: CNs and ATSs are basically intermediaries that connect Wealthsimple Trade to the stock exchanges, such as New York Stock Exchange (NYSE) and Canadian Securities Exchange (CSE).
- No Minimum Balance Requirement: In short, you can still keep your account open with a minimum investment of $0
- CIPF Insured: If the platform is bankrupt, the individual’s general accounts, registered retirement account and registered educational savings plan are each protected of up to $1,000,000. For the full coverage, you can find out more here.
- Online platforms and mobile app: Wealthsimple Trade can be accessed from a mobile app and even on any internet browser. Although it’s far from a seamless experience for customers, it’s definitely constantly improving.
- Has Various Investment Accounts Types: You can open non-registered accounts and certain registered (TFSA and RRSP) accounts. They even have a crypto account if you’re interested in trading cryptocurrencies.
Cons
- Limited Options: In general, you’re able to find many stocks and ETFs on the platform but certain stocks aren’t available to be traded on the platform. You can find their policy here.
- Doesn’t allow you to hold USD currency in your accounts: Unfortunately that means you will have to pay a 1.5% foreign exchange fees from converting CAD to USD when you purchase stocks listed on the NYSE. Furthermore, you will have to pay an additional 1.5% foreign exchange fees for when you sell that stock as you can’t hold USD currency in the account. The 1.5% foreign exchange fee is technically cheaper than what many banks would charge you (2%).
- Does not allow for DRIP: Doesn’t allows you to automatically purchase stock that recently paid you a dividend. This isn’t a problem for a Canadian stock but it is very big turn off for US stocks that pays you a dividend in USD.
In summary, Wealthsimple Trade is for anybody that is just starting out, especially if you’re just trying to dabble and wanted to see what investing is like. Because of the $0 commission fees and $0 minimum account balances, it is very helpful for many people who don’t have a lot of money but want to start their financial journey. If you want to open an account, you can do so through here.
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