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Detail shot of an old share certificate
Detail shot of an old share certificate

Stock basics

How to buy and sell stocks Add to ...

​You buy stocks from an investment firm, commonly known as a brokerage firm. The investment representative or adviser who sells you stocks is commonly known as a stockbroker or broker. You can buy stocks by paying cash, borrowing on margin or reinvesting your dividends.

Where to buy stocks

Anyone selling securities or offering investment advice must be registered with their provincial securities regulator, unless they have an exemption. Check registration through the Ontario Securities Commission or Canadian Securities Administrators. Learn more about working with an adviser.

Opening an investment account

Before you can buy stocks, you have to open an account with an investment firm. There are 2 main types:

  1. Cash account – This is the most common type of account. It allows you to pay cash for your stocks. You will have to fill out an account opening form or an investor profile form (also known as “know your client” information). Your investor profile helps your adviser understand your goals and your tolerance for risk.

  2. Margin account – If you want to borrow from your investment firm to invest, you have to open a margin account. You'll have to read and sign a margin agreement.

You can also buy stock for registered plans, such as RRSPsRESPs and TFSAs. These are always cash accounts – you can’t buy investments for a registered plan on margin.

Learn more about opening an investment account.

Buying and selling stock

You can give your adviser or investment firm instructions to buy or sell a stock in person, by phone or online. This is called placing your order. You’ll pay a commission each time you buy or sell a stock.

4 things you need to place an order

  1. What you want to buy or sell – You may be able to place multiple trades on 1 order. Your adviser or investment firm will confirm your specific choices before placing your order.

  2. How much you want to buy or sell – You may need to buy a minimum amount of the stock. If you're buying or selling a large amount, you will be asked if you're willing to do a partial trade if they can't buy or sell the full amount at the price you want.

  3. The price you want to pay – This will determine the kind of order you place. Two common types of orders are:

    • market order – stock is bought or sold at the latest price

    • limit order – you set a price limit for the highest price you're willing to pay or the lowest price you're willing to sell at. The order will expire at the end of the trading day, unless you specify a longer time limit.

    Learn more about different types of orders.

  4. How you want to pay – You can use money from your cash account, or you can borrow to buy stocks. Examples: buying on marginshort selling. This type of investing is more complex and comes with higher risks.

If you have a complaint: If you want to make a complaint about your adviser or investment firm, here’s what to do.

Reviewing confirmation of your order

Once your order is filled, you'll receive a record of your order by e-mail, fax or mail. It will confirm:

  • what you bought or sold

  • the price you paid

  • the commission you paid.

If you sold a stock, your investment firm will put the money from the sale in your account. If you bought a stock, you won’t receive a paper share certificate. The investment firm keeps these records electronically.

Dividend reinvestment plan (DRIP)

A DRIP lets you automatically reinvest dividends by buying more shares without paying a commission. DRIPs tend to be offered by larger, well-established companies with a history of paying dividends. Check a company’s website to find out if they offer a DRIP. You can enrol yourself in the plan through the company’s transfer agent, or your investment firm may be able to do this for you.

3 advantages of a DRIP

  1. You can usually buy the extra shares for less than their current price.

  2. You can avoid paying a commission.

  3. You can reinvest small amounts, often as little as $10.

If you find an old paper stock certificate

It may still be worth something even if the stock no longer trades under the same name. For example, the company may have merged with another company or simply changed its name. Here's where you can go to find out more about the company and if it is still in business. You may have to pay a fee.

  1. Ontario Securities Commission
  2. Ministry of Consumer and Business Services Companies and Personal Property Security Branch
  3. Cyberbahn Inc. or OnCorp Direct Inc.
  4. Industry Canada, Corporations Directorate Corporations Branch
  5. Office of the Superintendent of Bankruptcy Canada​

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

 

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