A Beginner’s Guide on How to Invest in the Stock Market

The first step before buying a stock is to consider your broker. Brokers are licensed individuals and/or entities that are authorized to buy securities (stocks, bonds, contracts, etc.) either for themselves or other people. Think of them as an intermediately connecting buyers and sellers to the stock exchange. .

Traditional Traders (usually the most expensive option): Full Service Broker

This option requires the investor to approach an advisor (offered by most banks/credit unions, brokerage firms, investment funds, or independent advisors). With a traditional full service broker, you have the opportunity to discuss your specific investment goals and have your advisor create a tailor made investment plan specific to your needs.

Robo Advisors (set it and forget it approach)

Robo advisors are tend to have lower fees due to commission-free trading option. These are computer programs that will trade ETFs (exchange traded funds) given the investors individual risk analysis. It has been proved time and time again that ETFs have higher returns in the long run vs picking stocks or mutual funds. With this option your entire portfolio can be managed online or with an app on your phone. Robo advisors have lower fees and they do balance your portfolio on regular basis which makes them an ideal choice for new investors, or for investors that do not wish to spend much time on researching, balancing, and making trades.

My favorite pick for a robo advisor is Wealthsimple, they offer:

1. Low fees;
2. Clean UI for mobile app and website;
3. Option to have a responsible portfolio (socially responsible, clean tech, low carbon, and halal);
4. Automatic contributions (daily, weekly, monthly, etc.); and
5. Automatically invest your spare change (roundup).

Discount Brokers (picking stock)

With a discounted broker, investors can buy and sell various securities (stock, bond, ETF, mutual fund, contract, etc.). This option has lower fees when compared to a full service broker, but higher fees when compared to a robo advisor. Typically, a discount broker will charge you a fee whenever you place a trade (either buy or sell)

My top picks:

1. Questrade: eclipsing other discount brokerages in terms of customer service and a supposedly unparalleled mobile experience. This one seems to be for the modern investor who wants to click a few buttons on their phone during their lunch break. Again, absolutely not I, and probably no one reading this article. (Thus far, don’t worry, we’ll get there my mini Buffett’s).
2. TD Direct Investing: the largest discount brokerage firm in Canada. This brokerage has impressive depth and availability of market data including technical analysis, quotes, and market notifications and you may be eligible to use the thinkorswim software.
3. Wealthsimple Trade: be aware that Wealthsimple Trade has a delay and does not have the tools to research or analyze a stock. However, they do not charge a commission on trades. If your account is small and you are not day/swing trading, you can do your research elsewhere (ie Thinkorswim paper money) and then manually execute your orders on Wealthsimple Trade by placing a limit order. This will allow you to save some money that you would have to pay otherwise and grow your account.

If you have any questions, please leave a comment and I will get back to you.

Originally published at https://equitybulldog.com.