When looking at how to buy stocks in Canada, we think you should look at not just the mechanics of buying shares—but also how to pick the right stocks. Here are some tips
Whether you buy stocks using a full-service broker, or a discount broker, you’ll want to make sure you hold top-quality stocks in a well-balanced portfolio.
Spot value at a cheaper price
“As more investors come to recognize the value of these stocks, they begin to rise. Well-informed investors who recognized the value while the stock lingered at a cheaper price begin to reap the benefits of their foresight.” Pat McKeough shows you how to uncover hidden value in this invaluable report, Canadian Value Stocks: How to Spot Undervalued Stocks.
How to buy stocks in Canada: Why you may not need a broker
A broker can sell his or her clients a wide variety of products and services that will bring the broker a wide range of fees and commissions, from high to low. As a general rule, the more income a broker earns from selling a particular investment, the weaker the match between the investment and the interests of the client.
While on the topic of brokers, let me remind you of a couple of our most valuable Successful Investor rules:
First, a healthy sense of skepticism is your most valuable analytical tool.
Second, the greatest risk you face as an investor to fall victim to a conflict of interest.
When I raise these two intertwined ideas, friends of mine who work as brokers sometimes say, “You must have an awful opinion of brokers, judging by the terrible things you say about us.”
That’s a misconception. Brokers are human. Some are people of high integrity; others, not quite so much. But the core of the problem is that the financial industry offers its salespeople incentives to give clients bad advice.
Overall, investors lose more money to conflicts of interest than to any other single risk. That’s not a comment about the average broker’s sense of ethics. It’s simply a matter of frequency of exposure times risk per exposure, coupled with the low standards presented by the suitability rule.
So, maintain a healthy sense of skepticism. Learn to distinguish between fact and opinion. Watch out for opinion that is tainted by conflicts of interest. You don’t need to settle for investments that are merely “suitable” for you. Hold out for investments that are in your best interest.
How to buy stocks in Canada: Avoid frequent online trading
Buying and selling stocks online is a great way for investors to bypass brokers and save money on commissions.
However, while online trading seems like an easy and convenient way to invest, it can also be an easy way to lose money.
Some investors may look at online trading as a fairly quick and convenient way to build wealth, but there are many hidden dangers that may not be easy to spot at first.
The main risks of online trading come from the fact that it all may seem deceptively easy. The lower costs and higher speeds of online trading can lead otherwise conservative investors to trade too frequently. As a result, you could wind up selling your best picks when they are just getting started.
The apparent ease of online trading may even encourage conservative investors to take up short-term trading or day trading. That’s just another danger of trading stocks online—there’s a large random element in short-term stock-price fluctuations that you just can’t avoid.
Use our Successful Investor approach while buying stocks in Canada
With or without the use of a broker, we recommend investors build a portfolio mostly comprised of well-established companies. As well, some of the biggest profits you ever make will come from buying stocks before they find their way into the limelight.
Above all, we recommend using our Successful Investor approach. One key part of our three-part investing program is to diversify—spread your money out across most, if not all, of the five main economic sectors. They are Manufacturing & Industry, Resources & Commodities, Consumer; Finance, and Utilities. Diversifying your stocks across the five sectors is more than just a safeguard—it will significantly improve your chances of making money.
How to buy stocks in Canada: Include value stocks in your diversified portfolio
Value investing is an investment approach that follows the basic model set by the pioneers of conservative investing, Benjamin Graham and David Dodd. Value investing is also the preferred investing method of famed modern-day investor Warren Buffett.
Value stocks are typically stocks trading lower than their financial fundamentals suggest. They are perceived as undervalued, and have the potential to rise.
At the core of the value investing approach is identifying well-financed companies that are also well-established in their businesses and have a history of earnings and dividends. They are likely to survive any economic setback that comes along, and thrive anew when prosperity returns, as it inevitably does. Value investors typically have long-term mindsets when it comes to investing.
What type of success have you found through buying stocks online?
What do you look for in a broker? Or do you prefer to buy your stocks online?
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Changes to this Policy
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Legal Notices and Disclaimers
The contents of this web site and our publications are based upon sources of information believed to be reliable, but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion reflects the Successful Investor’s judgment at the date of publication and neither the Successful Investor, nor any of its affiliated companies, nor any of their officers, directors or employees, accepts any responsibility in respect of the information or recommendations contained in the publications or on this web site. Moreover, the information or recommendations are subject to change without notice.
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