What is an 'online broker' and how does it work?
An online broker is a platform that allows you to buy and sell investments like stocks, bonds, and ETFs over the internet. Instead of calling a human broker, you place orders directly through their website or mobile app. They act as the intermediary between you and the stock exchange. Choosing a good online broker in Canada is your first step to becoming an independent investor, giving you control over your portfolio.
What are the typical 'broker fees' I should be aware of?
The most common fees are trading commissions, which you pay each time you buy or sell a stock. However, also look for account maintenance fees, inactivity fees, and currency conversion fees, especially if you plan to invest in US stocks. Some brokers offer 'zero-commission' trading, but they may have wider spreads or other costs. We teach you how to analyze the full fee structure for true transparency.
What does a 'risk warning' on a broker's site mean?
A risk warning is a mandatory disclaimer that informs you that investing involves risk and you could lose money. It's there to ensure you understand that past performance is not indicative of future results. The 'investment risk disclosure' provides more detail on specific risks associated with different products. Reading and understanding these is a critical step in responsible investing, not just a box to tick.
Why is it important to choose a 'licensed investment platform'?
A licensed investment platform is regulated by Canadian authorities, such as the Investment Industry Regulatory Organization of Canada (IIROC), and is a member of the Canadian Investor Protection Fund (CIPF). This provides a layer of security and oversight, protecting your assets up to $1 million in case the firm goes bankrupt. Never use an unlicensed platform, as you have no recourse if something goes wrong.
How do I compare different brokers effectively?
Effective comparison goes beyond just looking at low stock trading commissions. You should evaluate the range of investment options, the quality of the trading platform (is it easy to use?), the level of customer support, and the educational resources they provide. Create a checklist of what's important to you—be it mobile access, research tools, or specific account types like a TFSA or RRSP.
What are the main challenges of investing in US stocks from Canada?
The two main challenges are currency conversion and taxes. You'll need to convert Canadian dollars to US dollars to buy the stocks, incurring a fee. When you receive dividends, a 15% withholding tax is typically applied by the IRS. Holding US stocks within an RRSP can often mitigate this tax, which is a key strategy our guides explore in detail to help you invest more efficiently.