Buying a stock in Canada takes a few minutes once an account is open. The decisions around it (which account, which brokerage, what order type, how much to put in one company) matter more than the purchase itself. This guide starts with how the stock market works and the terms you will see, then walks through each step of a first purchase. Every other guide in this section is listed in our Canadian stocks hub.
How the stock market works
A stock (or share) is a small piece of ownership in a company. Companies sell shares to raise money, usually first in an initial public offering (IPO); after that, investors buy and sell those shares with each other on an exchange such as the Toronto Stock Exchange (TSX) or, in the US, the NYSE and Nasdaq. The price moves with supply and demand, which reflects what investors expect the company to earn.
Shareholders can make money in two ways:
- Capital gains: selling for more than they paid.
- Dividends: cash that some companies pay out of their profits, usually every quarter.
Stock prices rise and fall, sometimes sharply. Over long periods broad stock markets have grown, but with losing years along the way; our page on historical stock market returns shows the long-run averages for Canadian, US and global stocks and how widely single years vary.
Key terms
| Term | Meaning |
|---|---|
| Ticker | The short code a stock trades under (for example RY for Royal Bank on the TSX) |
| ETF (exchange-traded fund) | A fund holding many stocks or bonds that trades like a single stock |
| Index | A benchmark that tracks a group of stocks, such as the S&P/TSX Composite Index or the S&P 500 |
| Dividend | A cash payment from a company to its shareholders |
| Capital gain | The profit from selling for more than you paid |
| MER | A fund’s yearly fee, as a percentage of what you hold |
| Bid and ask | The highest price a buyer is offering and the lowest a seller will take; the gap is the spread |
| Bull and bear market | A lasting rise in prices, and a drop of 20% or more from a recent high |
| Diversification | Spreading money across many companies, sectors and countries |
Step 1: Choose a brokerage
A brokerage holds your account and carries out your orders. The main choices in Canada:
- Online (discount) brokerages, including the bank-owned ones and independents such as Wealthsimple and Questrade. You choose and place every trade. Many now charge no commission on Canadian stock and ETF trades, but fees for US trades, currency conversion and account services differ a lot.
- Robo-advisors, which build and manage an ETF portfolio for an annual fee. They don’t let you pick individual stocks.
Our comparison of online brokers in Canada covers commissions, currency conversion costs and account fees side by side, and is kept up to date as pricing changes. Check that the firm is a member of the Canadian Investor Protection Fund, which protects client accounts up to $1,000,000 per account category if the firm fails (not against market losses).
Step 2: Pick the account type
| Account | How it is taxed | Often used for |
|---|---|---|
| TFSA | No tax on growth or withdrawals | Flexible long-term saving; a common first account |
| RRSP | Contributions deductible; withdrawals taxed | Retirement saving, especially at higher incomes |
| FHSA | Deductible contributions; tax-free withdrawals for a first home | First-time home buyers |
| Non-registered (cash) | Dividends taxed yearly; gains taxed when sold | Saving beyond the registered accounts |
| Margin | Like a cash account, but lets you borrow to invest | Experienced investors only |
The limits and trade-offs are compared in TFSA vs RRSP for beginners. One stock-specific point: Canadian dividends paid in a non-registered account qualify for the dividend tax credit, while US dividends are taxed differently depending on the account.
Step 3: Fund the account and place an order
- Transfer money from your bank (this can take a few business days).
- Search for the stock or ETF by name or ticker.
- Choose the order type.
- Enter the number of shares (or a dollar amount, where fractional shares are offered).
- Review the estimated cost and submit.
Orders are filled while the exchange is open; the TSX trading hours and holidays page lists the schedule.
Order types
| Order type | What it does | When it helps |
|---|---|---|
| Market order | Buys right away at the best available price | Large, heavily traded stocks with narrow spreads |
| Limit order | Buys only at your price or better | Thinly traded stocks, wide spreads, fast-moving prices |
| Stop (sell) order | Becomes an order to sell once the price falls to a level you set | Limiting a loss on a position you already hold |
A few habits help new investors: use limit orders when the spread is wide; avoid the first and last minutes of the trading day, when prices can jump; and place smaller orders in thinly traded stocks.
Buying US stocks
Most Canadian brokerages let you buy US-listed stocks. The costs to watch are the currency conversion on the way in and out, and the US withholding tax on dividends, which depends on the account. Options include converting inside a USD account, Norbert’s Gambit for larger amounts, and Canadian Depositary Receipts (CDRs), which trade in Canadian dollars. Our guide to buying US stocks from Canada compares them.
ETFs as the core, stocks around it
Many Canadians hold a broad ETF as the core of their portfolio and add individual stocks for companies they want to own:
- A diversified ETF (for example an all-in-one ETF covering Canadian, US and international stocks) as most of the portfolio; the options are compared in our best all-in-one ETFs guide.
- A smaller group of individual stocks.
- A cap on any single stock (many investors use a few percent of the portfolio per company, and a higher ceiling for their strongest ideas).
The mechanics of buying an ETF are the same as for a stock; our guide to buying ETFs in Canada covers the ETF-specific points.
Before your first purchase
- Confirm the account type and its tax treatment.
- Read the company’s basics: what it sells, whether it is profitable, how much debt it carries.
- Decide the position size before you place the order.
- Write down why you are buying.
- Decide in advance what would make you sell.
For ideas to research, the lists in this section cover dividend stocks, blue chip stocks and bank stocks.
Common beginner mistakes
| Mistake | Why it costs money | Alternative |
|---|---|---|
| Trying to time the market | The biggest up days often come right after big down days | Invest on a regular schedule |
| Owning only a few individual stocks | One company’s bad news can sink the portfolio | Hold a diversified ETF as the core |
| Selling in a downturn | Locks in the loss and often misses the recovery | Set the plan before prices fall |
| Ignoring fees and currency costs | Small percentages compound over decades | Compare total cost, including FX |
| Investing money needed soon | A drop can force a sale at a loss | Keep short-term money in savings or GICs |
| Frequent trading | Costs and taxes add up, and few traders beat the market | Buy and hold, reviewed on a schedule |
| Waiting for “enough” money | Loses years of compounding | Start small and add regularly |
How much missing the market’s best days has cost investors historically is shown on our stock market returns page, and our compound interest calculator shows how regular contributions grow.
Reviewing your holdings
Most long-term investors do better with a fixed schedule than with daily checking:
- Monthly: contributions and cash.
- Quarterly: whether each holding still fits the reason you bought it.
- Yearly: rebalancing, and tax items such as which account holds what.
For the wider beginner path (goals, emergency fund, choosing a risk level), see how to start investing in Canada.