How to choose an online broker in Canada

If you’re already investing in the stock market or want to begin doing so, it’s in your best interest to choose an online broker that best meets your needs. In fact, Canadian online brokers, also called discount brokers, have a variety of service offerings. There are several factors to consider in order to determine which is most optimal for you. So here are some things to consider when choosing a Canadian online broker.

You can also become better equipped to compare what’s on the market by using Hardbacon’s online brokerage comparison tool. 

How much money do you have to invest?

Determining how much money you can invest is essential before selecting an online broker. Some brokers may require a minimum investment amount, while others charge a fee if you don’t maintain a specific minimum amount in the account. For example, a broker that doesn’t require a minimum balance may charge a $25 fee per quarter to clients with balances less than $25,000. It’s therefore important to find this out before choosing an online broker.

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Choosing a type of brokerage account is one of the first steps in your life as an independent investor. A brokerage account is different from a bank account as you can invest in the markets on your own. There may be a price difference between the types of accounts you can select. On the Canadian market, there are various online brokerage accounts available, such as a TFSA, RRSP, RRIF, RESP, LIRA, LRIF, LIF as well as non-registered accounts. Depending on the broker and the account chosen, prices and transfer fees may vary. See our online broker comparison tool for more information.

How much do you know about stock market investing?

Online brokers are accessible to anyone who has a good basic knowledge of the financial markets and wants to broaden their knowledge in self-taught mode (while making money too!). Some brokers provide learning platforms to help you make the best investment choices possible.

How many transactions do you plan to carry out in your brokerage account?

When it comes time to choosing an online broker, you should already have an idea of how many transactions you’ll perform. An investment strategy should take transaction costs into account so that a considerable portion of your return does not go up in smoke. On average, online brokers charge $10 per trade. The transaction costs depend on the amount invested. For example, Scotia iTrade charges $24.99 per transaction for any amount below $50,000, and $9.99 for any amount greater than $50,000.  This online broker is therefore more attractive if you don’t plan on making a lot of transactions or if you decide to invest a larger amount of money.

Are you going to buy US stocks with your brokerage account?

Having a US currency or a multi-currency account is essential for any Canadian investor looking to invest in US stocks. This will prevent you from incurring any currency conversion fees, which are around 2%. For example, if you want to buy $1000 Canadian worth of US stocks, you’d have the equivalent of $980 Canadian left after paying the 2% conversion fee for the first time. At the time of the sale, if you don’t have a multi-currency or US dollar account, you’ll once again pay the fee, and you’ll be left with $960.40 (assuming you have not made a return). If you want to use that money to invest in another US stock, you’ll have to pay the fees again. For example, the National Bank offers dual currency accounts (CAD/USD) and USD accounts.

In what do you plan to invest? 

If you want to buy ETFs, brokers that include free ETF purchases in their offer are going to be more beneficial for you.

Which broker should you choose? 

In order to choose an online broker, it is important to determine the budget you want to invest. Some brokers require a minimum balance to open an account and others charge an annual fee if the balance is below a certain amount. Depending on this amount, a broker may be more advantageous for you and prevent you from paying certain fees. Lastly, evaluating your level of investment knowledge is important when choosing your online broker. There are service offerings designed for every level of investor, so some will meet your needs better than others. Hardbacon’s online brokerage comparison tool is the perfect tool to save you time in your research.