Canadian Stock Market 101: Investing Tips from Start to Finish

The Canadian stock market is less important than other world stock markets. But now, it has more oil and gas and mining companies than other stock exchanges. It also ranks 8th largest among the world’s stock exchanges in terms of market capitalization.

If you live in the U.S., you can buy stocks from Canada by using American Depository Receipts (ADRs). This lets you own stocks from other countries. You can buy 103 of the largest companies on the New York Stock Exchange (NYSE) and another 73 on the NASDAQ.

There are two ways to buy Canadian stocks: through a regulated Canadian stockbroker or an international broker. If you live outside of the United States or Canada, then the international broker is your best choice.

There are different ways to trade stocks on the stock exchange. You need Canadian dollars for this. If you don’t have them, think about how expensive it will be to buy them. The Canadian dollar is the 5th biggest currency in the world. It accounts for 2% of Central Bank reserves. The “loonie” as it’s known is also the 7th most traded currency in the world.


About the Canadian Stock Exchange

-The Canadian stock market is home to some of the world’s most successful corporations, including those in the technology sector. Canada has a solid economy and offers relatively low corporate tax rates for businesses that are listed on its exchanges.

A number of major companies have headquarters or divisions located here such as: Bell, Rogers Communications Inc., BlackBerry Ltd., CIBC, Manulife Financial Corporation Limited, Bombardier Inc., Bank Of Montreal And ScotiaBank. 

-In 2016 it was ranked fourth overall among global equity markets according to total capitalization ($350 billion). 

-Homegrown stocks account for more than 75% of all trading activity while international entities make up only about 15%.  

-The Canadian stock market is on the Toronto Stock Exchange (TSE). 

-Market capitalization of all stocks listed in Canada was $326 billion as at September 2016.


How to Buy Canadian Stocks

Investing in the Canadian stock market can be a bit intimidating for beginners, but it’s not as difficult as people may think. There are many different types of investments that you can make when buying shares and getting involved with stocks.

First off is understanding how to get started by opening an account at any one of Canada’s financial institutions such as BMO (Bank Of Montreal), TD Bank, Royal Bank-The Peoples’ Banking Company, CIBC – The Canadian Imperial Bank Of Commerce or Scotiabank. 

Next you will want to decide what type of investment would suit your needs best: individual stocks; equity traded funds (ETFs); derivatives like options and futures contracts; mutual funds which invest in securities on behalf of investors and are managed by a professional portfolio manager; or GICs (Guaranteed Investment Certificates). 

Individual shares are the simplest form of investing in Canadian stocks. It’s not for everyone, but it provides investors with access to direct ownership into industries they feel passionate about such as technology companies like Apple Inc., Alphabet Inc. and Microsoft Corporation. There is no minimum investment cost when buying individual shares, other than brokerage fees that apply on all transactions – these can be minimized by splitting larger purchases in half over time so you are only paying commissions once instead of twice. A major drawback to this type of stock purchase is we have little control over how the company performs because it represents a tiny fractional interest of the whole company. One way to combat this is investing in a wide cross-section of stocks so that you are not too heavily invested into one company.

The next type of investment is an equity traded fund (ETF). Canadian ETFs do the work for investors by trading shares from hundreds of companies at once, allowing them to invest in whole sectors and industries with minimal effort. The benefits include diversification across many different types of investments without having to buy each individual stock yourself, which can be time consuming and costly if your portfolio grows large enough. ETFs also provide access to international markets through their holdings as well as other major financial centers like London or New York City – but remember there will always be some correlation between these internationally held securities and what’s happening over here in Canada.

Lastly, Canadian stocks can be bought through derivatives such as options and futures contracts. These are complex financial instruments that allow investors to either buy (call) or sell (put) the underlying securities at a specific time in the future for an agreed upon price – called buying ‘on margin’ which means borrowing money from your broker to do so – with little upfront outlay of cash. The benefits include speculation on market fluctuations without investing any capital up front; but there is some risk involved because if you guessed wrong and held onto these investments too long, it could affect other parts of your portfolio like mutual funds by bringing down their value when markets go downward instead of going upward. 

Finally, we have GICs or Guaranteed Investment Certificates. These are a type of fixed-income security that offers investors the opportunity to earn interest in a low risk environment. They come with contractual guarantees for your principal investment amount and provide peace of mind, but these investments do not generate any income on top of their return when they mature or become due.



When investing in Canadian stocks it’s important to find an approach that suits you best – whether it’s buying individual securities; equity traded funds (ETFs); derivatives like options and futures contracts; mutual funds which invest in securities on behalf of investors and are managed by a professional portfolio manager; GICs or Guaranteed Investment Certificates – all have different benefits and drawbacks depending how much time you can put in, how much risk you are willing to take and what your goals are.

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