How to Start Investing Online in Canada

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how to start investing online in canada

If you’re a first-timer to investing, it can feel daunting to figure out how to invest 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” in Canada?

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 brokerages.

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?

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 know-how 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 comes down to your individual needs and preference. While that might seem overwhelming at first, this comparison of a few online platforms can help get you started down the right path.

But to help narrow it down, let us give you our two cents after extensive research comparing what's on the market today. For robo advisors, our top pick is Wealthsimple and you can read our full Wealthsimple review to find out why we love it. However, if you want to compare robo advisors in Canada head-to-head, check out our handy chart below and read our Complete Guide to the Best Robo Advisors in Canada.

For online brokerages, our top choice is Questrade because the fees are extremely low and you can design your own portfolio. Read our full Questrade review to find out why we’ve rated it the best online brokerage in Canada.  For all the info on online brokerages, read our Ultimate Guide to Canada’s Discount Brokerages.

Online Investing PlatformService typeBest ForYoung and Thrifty Readers PromoMore Info
Wealthsimple ReviewRobo advisorBest Overall Robo Advisor in CanadaGet your first $10,000 managed for free for a yearLearn More
Questrade ReviewOnline brokerageBest Overall Online Brokerage in CanadaGet $50 in free tradesLearn More
BMO SmartFolio ReviewRobo advisorHuman TouchGet your first $15,000 managed for freeLearn More
Questwealth PortfoliosRobo advisorCompetitive FeesNoneLearn More
Modern Advisor ReviewRobo advisorExpert-Assembled PortfolioReceive $50,000 managed for free for one yearLearn More
Nest Wealth ReviewRobo advisorMature InvestorsTry Nest Wealth free for the first 3 monthsLearn More
Just Wealth ReviewRobo advisorInvestment VarietyReceive a cash bonus of up to $500 when you open a new Justwealth accountLearn More

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

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 Questwealth Porfolios and BMO Smartfolio, 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 with an Online Broker or Robo Advisor

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.

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 a 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.

Disclaimer: Young & Thrifty has entered into a referral and advertising arrangement with Wealthsimple US, LTD and receives compensation when you open an account or for certain qualifying activity which may include clicking links. You will not be charged a fee for this referral and Wealthsimple and Young and Thrifty are not related entities. It is a requirement to disclose that we earn these fees and also provide you with the latest Wealthsimple ADV brochure so you can learn more about them before opening an account.

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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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