How To Invest In Stocks

The stock market can feel like a vast abyss into which you throw your hard-earned money. And, it can be hard to decide how best to invest, much less the best stocks to choose from.

For better or for worse, in Canada, the choice of precisely which stocks to invest in is put into the hands of a broker. With minor exceptions, a broker buys stocks.  That being said, it is vital that you know how they invest your money. In addition, you should be able to say where you want it to go.

how to invest in stocks

How to Invest Your Money

Any financial advisor you meet with encourages you to invest your money for growth. And while it sounds simple enough, it’s important to understand how to benefit from their expertise, and how to invest your money in Canada.

Why Invest Your Money?

When most of us think about the value of investing, we think about how to make money. Earning money off of investments is certainly a benefit. But, there are more reasons to invest than just saving and earning.

Shelter Your Income

Some investment vehicles are tax shelters. This means the money you invest in them is deducted from your taxable income, and thus, untaxed. These investments help you keep more money in your pocket. The more you take advantage of tax-sheltered opportunities, the more money you have to invest and potentially grow. In this way, investing your money is a double bonus. For one, it reduces your current taxable income, lowering your taxes each year. And this, in turn, allows you to keep more of your money to save for the long term. It’s a win-win!

Financial Planning

Setting financial objectives with your advisor is very important. It is key to making sure the money you invest is working towards your personal financial goals — whether that’s starting a business, going on a vacation, or retiring. By investing your money, you meet those goals more quickly by earning money off of your investments.

Make Money Off Of Your Money

Whether or not the money you invest is tax-sheltered, if you invest wisely in managed funds, your returns grow. In other words, the more you invest, the more money you earn! Your investment style determines how much growth you see over a particular period of time. So, if you’re saving for a trip in three years, you might not want to risk losing that money on a higher-risk investment. However, if you’re saving for retirement (which may be a long way off), you may take on more risk for a greater return. That’s because you have more time to recover if the markets falter.

The Best Ways To Invest Money In Canada

There seem to be a lot of investment options out there. But it’s not exactly easy to decide where. The best places to invest change in any given year. And, with precarious investment markets, can change on a dime. The stock market can feel like one of the more volatile ways to invest. But a bit of knowledge and quality management go a long way toward helping your investment grow.

What Is A Stock?

Think of a stock as a share in a company. A company issues stocks to investors in exchange for a share of their business. As the business succeeds, your investments grow. Alternatively, if the company fails, your investment takes a hit. That’s why it’s important to have a solid idea of where to invest. But, how can you know you’ve invested in quality businesses that can help grow your money? Simple. Ensure you have a knowledgeable person or a reliable automatic system managing your portfolio.

Investing In Stocks

It is true that the cost of individual stocks varies on a day-to-day basis. However, the overall truth about the stock market is that it increases in value over time. That’s what makes investing in the stock market a wise choice for long-term investment. Choosing to invest in stable companies goes a long way to help you earn money over time.

How To Buy Stocks In Canada

You don’t need a lot of money to get started in the stock market. But, you do need a little. Even $500 is enough capital to get started.

The ability to invest on your own behalf is a growing trend in Canada. And discount brokerages have been increasingly making their presence known in the market. Some people choose to go it alone. However, others enlist the help of financial advisors to guide them with their expertise.

Discount Brokerage

You might want to take advantage of technology. And Canada has a wealth of highly respected online brokerages that can help you invest your money. An online, or discount brokerage, is appealing to a wide range of investors. That’s because they are more affordable, and the trading fees are quite low.

An online broker allows you to build an account and use that account to invest in high- or low-risk investments. However, how you invest depends on your own personal preference and risk tolerance. This type of investing is all DIY. And that is great if you have a solid grasp of what you’re doing. Or, if you’re investing in lower-risk options. You can most certainly pick higher-risk stocks. But you don’t want to DIY unless you have a solid understanding of the market,

Examples of discount brokerages include Questrade, Qtrade, TD Direct Investing and Scotia iTrade.


A robo-advisor is a newer, automated investment technology. It is a great tool for a newer investor or someone who wants to be more hands-off at managing their investment portfolios. Robo-advisors are a lower cost option because you don’t have the expertise of a specific advisor. That being said, they are an intelligent tool that takes the guesswork and stress out of managing investments. With a robo-advisor, you select your investment style and preferences. And, you select the amount to invest. Then, it automatically builds a portfolio for you. Going forward, the software regularly and automatically updates and calibrates your portfolio. The goal is to make it the most potentially lucrative for the investor.

Investment Advisor

The role of an investment advisor is to make recommendations on quality investments. In addition, advisors analyze securities, such as mutual funds, stocks and bonds. Typically, investment advisors charge a fee. They work with you to build a portfolio of investments that are best suited to your financial situation, as well as your long- and short-term financial goals.

Financial Advisor

A financial advisor advises you on how to manage your money. They are well versed in the market and give advice on necessary savings, investment and insurance tools to invest in. While they do know about the market and can make investment recommendations, it isn’t their main focus. Still, they are a great resource for your overall financial strategy.

Whoever or whatever agency you enlist as your broker, they can help you decide which type of stock investments make the most sense for you. They consider exchange-traded funds (ETFs) and mutual funds as possible savings vehicles that exist within the stock market.

Related Reading: Types of Stock Orders

How Can I Start Investing With Little Money?

You don’t need a lot of money to start investing in the stock market. In fact, $5 is enough to get started to buy a single share. However, ideally, you have much more than that so you see a return on your investment. You won’t make much off of $5. But that is really all you need. And of course, it’s always better to have some money invested than none.

How Do You Buy Stocks Without A Broker?

It is possible, but not easy, to buy stocks in Canada without a broker. Large, well-established companies may allow you to buy a stock from them without a broker. However, to do that, you buy their stock through a direct stock purchase plan (DSPP). The DSPP allows single, low-level investors a chance to buy stock in a company they otherwise might not gain access to.

Regardless of how much, or how, you invest your money in the stock market, it remains one of the most popular investment vehicles for a good reason. It is a great way to bank on, and piggyback off of, the success of businesses and corporations, as well as the overall health of the stock market and Canadian economy.

Getting Started

You decide it’s time to get into the stock market. Now what?

What’s Your Style?

Before you decide how much you’re going to invest, and where, you need to determine exactly what your investment style is. Do you like taking risks? Are you willing to lose money to make money? Or, would you prefer to know your money is safe from massive loss?

You can’t predict the behaviour of the stock market. But you can take steps to mitigate the impact or reap the rewards of wise investing.

Watch The Waves

Long before you commit money to any investment, you need to spend time watching the markets. Make stock market screening a part of your daily routine. And keep an eye out for big movers and reliable stocks. It is important to familiarize yourself with the market before you dive in and become an active participant. Following the market helps empower you with knowledge. In addition, once you’re invested, it’s a good practice to get into, as it helps keep you abreast of the movers in the market.

How Much To Invest?

It is vital not to over-invest in the stock market. The market moves and changes. It can be volatile. Because of that, you should expect any money you invest to ride the market for at least five years. Do not invest money you may need to access before then. Long term, the stock market increases in value, with some certainty. However, short term? You can expect ebbs and flows.

Asset Allocation

When deciding how much to invest, and where, break down what makes the most sense today and into the future. If you are close to retiring, stocks are much less desirable because of their volatility. The general rule of thumb is to take your age and subtract it from 110. That number is the percentage of funds to invest in stocks. And direct the remainder of your allocatable funds into more secure investments that guarantee specific returns.

How To Analyze Stocks

It’s not exactly intuitive to review stocks and understand what you’re looking at. Knowing what the numbers mean and how to gauge if they are a good investment takes analytical review and consideration. There are two methods to use to analyze stocks; technical analysis and fundamental analysis.

Technical Analysis

This type of analysis requires you to look at the stock and its value and movement over its lifetime. You review historical data, including the price of the stock over time. In addition, you check the volume of stocks. Using this method, you consider the future potential of the stock based on its performance along with economic and behavioural changes in the market, over time.

Fundamental Analysis

Fundamental Analysis of stocks is much more specific and based on current conditions. This type of analysis looks at earnings, revenues, return on equity, profit margins and future growth potential. And these help determine the full value and potential of that stock.

When To Buy

If only we had a crystal ball, we’d be able to time buying stocks perfectly. In other words, buy when they are at their lowest, and before they explode. Unfortunately, we can’t see into the future. So we make the best, educated guess. The key is to be familiar enough with the market that you can spot certain trends when they surface.

General market trends are important to recognize. And the biggest winners playing the market know when to spot a stock before it takes off. Keep a keen eye, and look out for significant earnings and sales growth, strong demand for a new product, or a fresh and fast-growing, industry-leading product. Getting ahold of these stocks before the rest of the market catches on is a great way to see a return on your investment. These types of stock purchases can feel like an option for the riskier investor, as they aren’t hot commodities right yet. But if you know what you’re looking at, you can make a solid, educated, less-risky guess that it’s a quality stock to invest in.

Choose a stock

There is a lot to consider when selecting stocks to buy. There are, however, a few key things to help guide you.


You know the saying: don’t put all of your eggs in one basket. Well, that definitely applies to the stock market. Invest across market sectors, and include different types of companies. That way, if one market sector is hit, your whole portfolio isn’t as well.

Understand The Industry

Don’t invest in industries or companies you don’t understand. While they might appear to be solid investments, you can’t manage your investments if you don’t have a genuine understanding of how things work. And it’s also important to know what is going on in the market, and in the business itself.

Start Slow

Don’t get suckered into investing in volatile or more exciting sounding stocks. Get your feet wet with easy-to-understand, reliable stocks. Once you get the hang of buying and selling, you can better manage trickier stocks.

Learn The Numbers

Know what you’re looking at and what the true numbers mean. Learn about the metrics and methods of evaluating stocks that help guide the market.  The more you know about how the market works, the more your investment benefits.

Related Reading: How to Invest $1,000, $10,000 or $100,000

You Picked A Stock. Now What?

You’ve done the research. You’ve looked at scanners and read the analysis. And you know where you want to invest your money. Now it’s time to buy. Whether you go through an investment broker, an online broker, or go directly through the company, there are a few steps to follow.

Open An Account

Step one is to open a brokerage account. It’s simple, and really just as easy as opening any bank account.

Purchase Stocks

If you know what you want to buy, now is the time. Depending on what type of brokerage you use, purchasing stock can be as easy as a click of a button. Just make sure you know exactly where you’re investing that hard-earned money of yours.

Market Order

A simple directive means to order a stock no matter the price. A market order is a direct order that will be a successful transaction as long as there are willing buyers and sellers of that particular stock. It is the most straightforward type of stock transaction. And it is typically used when the stock hits a price at which you want to cash out, immediately, regardless of the future prospects of the stock.

Limit Order

You set the conditions by which a stock is purchased. This includes when, and at what price. And that determination is typically based on an investor’s tolerance for price fluctuations. Or it can be a price at which they are happy to cash out, having earned a certain profit. Or, if the stock has hit a low and you don’t want to lose anymore. At its core, a limit order allows you to play the market, to a point. The point you pick is when the investment is automatically capped and closed.

When To sell

Knowing when to buy is important, of course. But knowing when to sell is as important if not THE key to making money on your investment. Generally speaking, there are two rules to follow when considering when to sell: offensive, and defensive.


This is where you want to lock in your profits. Typically speaking, you’re looking at a stock that has increased in value enough so that you feel it’s worth capping your win and getting out of the stock before it sees losses.


The stock market ebbs and flows. No matter how skilled we are at attempting to predict market trends, ultimately you can’t know when it will drop or rise on any given day. And that’s why there is value in cutting your losses. Your tolerance for taking losses is obviously affected by your own investment style. But there is a point where even if you’re ok with managing some loss, it’s time to cut and run before you lose more money.


It should go without saying that stocks are not a set-it-and-forget-it investment. Therefore, it’s important to follow your portfolio and review its strengths and weaknesses, and adjust as necessary.

Investing in the stock market can be an exciting and interesting way to grow your investment income and follow market trends. However, whether you go it alone or you have an investment advisor guide you, or some mix of both, it’s important to follow due diligence at every step of the process. So, the more you know, the better you can manage your investments. And, the more you can watch your money grow.

Read More: How to Find and Choose an Insurance Broker

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