The best advice for young investors who want to own stocks and exchange-traded funds is to open an account with a trading app that offers trading at no cost.
Two names to note: Wealthsimple and TD Easy Trade, which offers 50 free trades per year and unlimited free trading of TD-brand ETFs. For those who prefer to deal with a more conventional digital broker, here are five deals to note:
CIBC Investor’s Edge: Free online stock trades for clients under 25 who have a Smart Start bank account.
CI Direct Trading: Under the Kick Start Investment Program, students and people who graduated within the last two years can set up a no-cost investing plan that debits money from a chequing account each month and uses it to buy shares in up to five Canadian or U.S. stocks or ETFs. No commissions, and no annual fees. If you don’t meet the age requirements, you pay $50 per year for this service.
Desjardins Online Brokerage: No minimum balances/inactivity/admin fees for investors aged 18 to 30, and transfer-in fees up to $150 are refunded; this broker charges zero to trade stocks and ETFs, as does National Bank Direct Brokerage.
Qtrade Direct Investing: Investors age 18 to 30 pay a flat rate of $7.75 to trade, with no quarterly admin fees; the usual commission at Qtrade is $8.75.
Scotia iTrade: Young investors with a Student Advantage bank account pay $4.99 per trade, down from the usual $9.99, and 10 free trades are available per year under a program where you get a free trade for every commissioned trade you make on the iTrade app; 20 free trades for new clients in the first year; also, annual fees of up to $200 are waived for investors 25 and younger.
The benefits of using a conventional digital broker versus an app include a better class of tools for managing your portfolio and choosing investments. If you invest through your bank’s own digital brokerage division, transfers of money to and from your account are quick and easy.
For more information on all brokers and apps, consult the 2023 Globe and Mail Digital Brokerage ranking.
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Rob’s personal finance reading list
Nutrition myths that can cost you money
At the top of this list of nutrition myths is the belief that fresh fruits and vegetables are always healthier than canned, frozen or dried varieties. Buying frozen, canned or dried can sometimes save you money.
Eight ways retirees can save on tax
A financial planner highlights some overlooked tax-saving strategies. Another reminder of how solo seniors are at a disadvantage to couples in minimizing taxes.
Home sales on the rebound
Could an interest decline later this year or early next reignite the housing market? Some economists think so. They cite rising immigration and a tight labour market as reasons why housing could rise again soon.
A deep dive on dividend funds
If you’re wondering whether dividend funds outperform more broadly diversified equity funds, there are some answers here. Useful perspective for those who insist on the superiority of dividend investing.
Ask Rob
Q: I wonder what your thoughts are on principal-protected notes, where they might fit in a retirement portfolio. Are they much different than the index-linked GICs that the banks sometimes promote?
A: I can’t say I’m a fan of investments that attempt to satisfy the dream of so many people of investing in stocks without risk of loss. The general idea is to offer returns based on the performance of a particular index, sector or group of companies with limited or zero risk of losing money – hence the principal protection. The catch is that the protection of your principal isn’t free. You may not receive the full returns of the underlying stocks, and you may not be able to sell with ease before maturity. There are also embedded fees – make sure you understand the cost before buying. Regular GICs can still be found with yields of 5 per cent or slightly more at best, with no small print and no doubts about how much you’ll actually make.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
How returns for 12 different types of investments have compared on a year-by-year basis since 1985.
Callout alert
The Globe is looking for young Canadians to take part in our Paycheque Profile series, a non-judgmental look at how young workers are spending, saving, allocating and investing their money. To see if you are a good fit for taking part in a profile, please e-mail Globe personal finance editor Roma Luciw at rluciw@globeandmail.com Here are a few recent examples of profiles:
- 26-year-old film worker earns $73,000, but worries about his future
- Calgary engineer, 32, aims to pay down a $150,000 loan debt, money that he used to invest
- B.C. woman, 29, earning $50,600 owes $55,000 from student years: ‘How are we going to afford to get married, buy a house and have kids?’
The Money-Free Zone
Burt Bacharach’s passing reminded me of how much I like the song Walk on By, which was recorded by a huge range of artists. Here are a few of my favourite versions:
Dionne Warwick, of course. The song was written for her
Isaac Hayes, on the great Hot Buttered Soul album
The Stranglers, in a six-minute version with a long, guitar-heavy instrumental interlude that you’ll either like or really hate.
Watch this
CIBC tax guy Jamie Golombeck says in this interview that there’s no downside to the Tax Free First Time Home Buyer Plan, which is expected to launch in April.
What I’ve been writing about
- Five tips for navigating an increasingly tricky GIC market
- TFSAs over RRSPs this year, especially if you’re in debt
- Falling house prices and your retirement: How worried should you be?
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Is the middle class dead for millennials and Gen Z? • Gas prices are soaring. Are electric vehicles an affordable solution? • Crypto is booming, but should you invest? • How are young Canadians dealing with soaring rents? • Inflation is squeezing our finances. What can we do about it? • Is a hot housing market squeezing Canadians out of their small towns?
- ✔️ The housing file: How bad is housing affordability? Even a crash won't help • Sell the family home to lock in profit and then rent? Better not • Why young adults can't afford houses: Hard work got you more in the past than it does now • Five reasons you should not buy a house till you're at least 30 • Now more than ever, owning a house is not a retirement plan
- 📈 Investing: The 2022 ETF buyer's guide: Best Canadian equity funds • The 2022 Globe and Mail digital broker ranking: Does the zero-commission revolution flip the script on who's best? • With bonds sinking, conservative investors are waking up to risks they never saw coming • A five-step plan for dealing with the sad fact that almost every investment is falling lately • The best financial advice in advance of retirement? Work on your marriage • One-year GICs are the best deal in town for safety seekers • What to do if the financial plan you paid thousands for disappoints
- 💰 Your money: Are you prepared for the pandemic wealth boom to blow up in our faces? • This hard-working 24-year-old is nailing it financially. But where’s the happiness? • Who should and shouldn’t worry about the wave of rate increases this year, and what every stressed-out borrower should do right now • Don’t make this potentially costly assumption about the CPP Survivor’s pension
Rob Carrick