How to Start Investing Online in Canada

New to the world of online investing? Here’s how to start investing online in Canada
If you’re a first-timer to investing, it can feel daunting to figure out how to start investing online in Canada. At first, the prospect of trying to decode the process may seem intimidating, and it may seem pointless if you have a small amount of money to invest. But thanks to advances in financial technology (or “fintech”), investing is easier and more accessible than ever, and investing starting small is totally possible.

With a focus on simplifying investing, online brokerages and robo-advisors are leading the charge to maximize investment returns by minimizing costs. Before we get into how to start investing online in Canada, let’s dig into what it actually means to invest online and then look at what to invest in with little money.

What does it mean to “invest online?”

To understand what it means to invest online, we have to take a step back and reminisce about how people used to buy and sell stocks before the advent of the digital age.

Back before the internet existed (gasp!), you couldn’t just pick up the phone and call a company to buy their shares. If you wanted to invest in the market, you had to place an order through a stockbroker either in person or by phone.

Stockbrokers would then enter an order into their system linked to the exchange where the stock was being traded. This service was just one of many provided from these full-service to start investing online in canada

On top of buying and selling, full-service brokerages could help with developing financial plans, offer tax advice, as well as retirement and estate planning. The convenience of having all your financial needs managed through a one-stop shop did, however, come at a premium.

In the late 1990s, use of discount brokerages began to pick up as investors started to buy and sell securities with online trading platforms instead of having an actual stockbroker execute their trade. Cutting out the middle person and limiting service to trading transactions meant that discount brokerages could charge significantly less in fees and commissions.

Fast forward to today, where the latest fintech evolution in professional investment management has made traditional financial services more accessible than ever before. Robo-advisors are doing to wealth management what Netflix did for content streaming— provide an improved digital experience and transparency resulting in new competition driving down costs.

That brings us back to the question at hand: what does it mean to invest online? Investing online in Canada means that you manage your own investments through an online brokerage’s trading platform or you let a robo-advisor manage your investments and do the heavy lifting for you.

Why should I invest online?

If you’re the DIY type that’s interested in making your own investment decisions, an online brokerage is the cheapest and fastest way to buy stocks, bonds and ETFs. They provide advantages over traditional brokers that include:

  • Freedom to choose and manage your own investments
  • Lower per-transaction trading costs, commissions and account fees
  • Better investment selection, including commission-free ETFs
  • Access to real-time data, research tools, reports and analysis

Don’t expect any investment advice from an online brokerage. Their raison d’être is to provide you with the platform to execute trades— that’s it. If you’re a knowledgeable investor and you know what you’re doing, this is the way for you to invest online.

If you don’t feel comfortable managing your own investments and find the appeal of having your investments automated attractive, a robo-advisor can manage your investments for you. Advantages of investing with a robo-advisor include:

  • Investments selected and managed for you
  • Automatic asset rebalancing and dividend reinvesting
  • Low annual management fees
  • A fiduciary duty to keep your financial interests first

Robo-advisors operate in the space between the traditional high cost of mutual fund investing and the daunting route of DIY investing with your own brokerage account. If you’re looking to “set it and forget it” with some help and don’t want your returns to get eaten up by fees, robo-advisors are your best bet.

What do I need to get started?

investing starting small

There are a couple ways to approach online investing. To get started, you’ll need to figure out which investing approach is more suitable for you. Thankfully, both are pretty intuitive:

  • Active investing takes a hands-on approach. Based on research and experience, a portfolio manager (in this case, you) picks a selection of stocks and bonds for your portfolio. The goal is for your investments to make more than the stock market can return by trying to exploit shorter-term price fluctuations.
  • Passive investing means you’re playing the long game. Instead of trying to beat the stock market’s return, you buy-and-hold low cost index based investments to copy market returns. As the market goes up over time, say 20-30 years, so do your investments. This is sometimes referred to as the couch potato strategy but don’t let the name fool you: studies into the effectiveness of passive investing have won multiple Nobel prizes in economics.

As you’ve probably gathered by now:

  • Online brokerages should appeal to you if you’re a DIY active investors looking to make your own buy/sell decisions. They’ll also appeal to savvy passive investors with the knowhow to buy couch potato type investments to manage on their own. With a brokerage, you’d be on the hook for any trading and account fees.
  • Robo-advisors should appeal to you if you’re a passive investor looking for a hands-off investment management approach. When it comes to fees, you’ll pay the robo-advisor’s fee to manage your investment (0.4% – 0.6%), plus the management expense ratio (MER) charged by the ETF investments in your portfolio (0.10% – 0.30%). All said and done, your total annual fee would sit between 0.6%-0.9% of your total balance, a far cry from the 2-3% you would pay if you invested in mutual funds.

While there are a few options to choose from, there is no wrong answer. Pick an approach that works best for you and keep moving. Now that you have an idea of where to start, who should you trust with your investment portfolio?

Which robo-advisor or online brokerage to use?

Ultimately, choosing between an online brokerage like Questrade over robo-advisors like Wealthsimple or Nest Wealth comes down to your individual needs and preference. Read more about Questrade in our in-depth Questrade review to learn why it's our top pick for the best online brokerage in Canada. While that might seem overwhelming at first, this comparison of a few online platforms can help get you started down the right path.

Online Investing PlatformService typeRecommended forFee StructureAccount minimumApply
Wealthsimple ReviewRobo advisorNovice investors· 0.50% up to $100K
· 0.40% above $100K
· + ~0.2 ETF MER
Questrade ReviewOnline brokerageDIY investors· Stocks:
$4.95-9.95 per trade
· ETF: Buy for Free;
$4.95-$9.95 per sell
BMO SmartFolio ReviewRobo advisorLarge portfolios· 0.40% - 0.70%
· MER = 0.20% to 0.35% of the value of SmartFolio account
$1,000BMO Smartfolio
Questwealth PortfoliosRobo advisorNovice investorsFor balances between $1,000 – $100,000: 0.25%

For balances $100,001 and above: 0.20%
$1000Questwealth Portfolios
Modern Advisor ReviewRobo advisorNovice investors· Free up to $10K
· 0.50% up to $100K
· 0.40% up to $500K
· 0.35% above $500K
· + ~0.25% ETF MER
$1,000*Modern Advisor
WealthBar ReviewRobo advisorPersonalized financial planning· 0.6% on first $150K
· 0.4% on next $350K
· 0.35% above $500K
· +0.26% - 0.34% ETF MER
Planswell ReviewRobo advisorFinancial Planning· 0.5% up to $99,999
· 0.4% above $100K
· +~0.20% ETF MER
Nest Wealth ReviewRobo advisorLarge portfolios· $20/mo under $75K
· $40/mo up to $150K
· $80/mo above $150K
· + $100 trading fees
· + ~0.13% ETF MER
NoneNest Wealth
Virtual Brokers ReviewOnline brokerageDIY Investors· Stocks:
$4.99 - 9.99  per trade
· ETF: Buy for free;
$9.99 per sell
$1,000Virtual Brokers
Just Wealth ReviewRobo advisorNovice investors· 0.50% for every $500,000 invested
· 0.40% for more than $500,000 invested
· $4.99/month fee for accounts under $25,000
· Average MER = 0.25%
$5,000Just Wealth
*Funds in account won’t be invested until account balance reaches $1,000.

What if I don’t have a lot of money to invest?

how to start investing online in canada

You can get started with investing online even if you don’t have a lot money to invest. If you’re asking where to invest a small amount of money, consider Wealthsimple. They don’t require a minimum account balance to put your money to work. Technically speaking, they can to build portfolios using fractional shares. The end result means that your eggs can be placed the same broadly diversified baskets regardless of whether you’re investing $100 or $10,000.

In the cases where there is a minimum, like with Modern Advisor and WealthBar, your money won’t be invested until you reach $1,000 in your account. You can, however, set up a recurring deposit that’ll get you automatically invested once the balance reaches the threshold.

Opening an account to get started

When you’re ready, you can set up and fund your account from your phone, tablet or computer. Online brokerages will provide instant access to buying securities. Robo-advisors will take you through a questionnaire and provide access to portfolio recommendations based on your risk tolerance, investing timeframe and financial goals.

You can set up registered accounts (TFSA, RRSP) across all platforms. Taxable accounts are also available if you have your retirement savings stashed away somewhere else.

While you’re at it, take advantage of these exclusive offers for Young & Thrifty readers:

  • Nest Wealth – Try Nest Wealth and Get 3 Months FREE
  • Wealthsimple – No management fees for a year on the first $10,000 of investments
  • WealthBar – $15,000 managed for free for 1 year when you sign up and fund your account
  • Modern Advisor – $50,000 managed for free for 1 year when you open and fund a new account

It’s no secret that you have the most to gain from investing by starting early. Open an account and get investing no matter how small the amount.

What happens next?

Once you have your shiny new account open and ready to go, set up automatic contributions to get into the habit of paying yourself first.

If you go the brokerage route, you’ll have a little more work to do in terms of figuring out your asset allocation, what investments to make and when to rebalance. If you go with a robo-advisor, there isn’t much more to do – everything else is taken care of for you.

History suggests that low cost, broadly diversified, index investments have the best chance of growing over a long period of time. Investing doesn’t need to be intimidating or complicated- you know how to start investing online and that you can start investing with small amount of money. As you continue to save and invest, sit back and watch your investments grow until one day you can have your cake and eat it too.

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Daniel Teo
Daniel Teo is a personal finance expert and travel writer at Urban Departures. He has a passion for financial literacy and a wanderlust that has brought him to over 30 countries. Urban Departures has appeared in The Globe and Mail, the Toronto Star, CBC and on BNN. You can connect with Daniel on Twitter and Instagram.
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