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Guide to Buying and Selling Stocks in Canada

Buying and Selling Stocks in Canada can be a profitable and lucrative business for you in many ways. Canada has a dynamic, growing, and stable economy, and the country’s stock market enjoys a very good and favorable stability. Many business people or even retired Canadians generate significant incomes by participating in this market. If you […]

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Buying and Selling Stocks in Canada can be a profitable and lucrative business for you in many ways. Canada has a dynamic, growing, and stable economy, and the country’s stock market enjoys a very good and favorable stability. Many business people or even retired Canadians generate significant incomes by participating in this market.

If you are planning to immigrate to Canada, entering the stock trading market can be a great opportunity for you. Moreover, to participate in trading Canadian company stocks, you don’t necessarily have to be on Canadian soil; you can enter international stock markets and invest as a foreign individual and an Iranian citizen.

Contrary to popular belief, buying and selling stocks in Canada does not require a large initial investment, and you can start your work with very small amounts (sometimes even with $100!) and gradually increase your profit margins and capital.

In this article from Hafez Exchange, we aim to share a useful guide for buying and selling stocks in Canada. By reading this article, you will become familiar with a method that can turn into your main and significant source of income. Stay with us.

?What is Stock

Before anything else, we need to understand what stocks are and why buying and selling them can be profitable. In simple terms, a stock represents a portion of ownership in a company. Canadian companies, like Iranian companies, can enter the country’s stock market and offer all or part of their shares to the public.

You can purchase shares of any publicly traded company in various units and become a partner in the profits and losses of that company as a small shareholder.

Since the value of a company’s shares constantly fluctuates, you can achieve significant profits by buying and selling stocks at the right times, essentially acting as a stock trader.

Steps to Buy and Sell Stocks in Canada

To enter the Canadian stock market and start buying and selling stocks, you need to follow these steps:

  1. Open a Foreign Currency Account in Iran
    The first step is to open a foreign currency account in Iran because you will need this account to enter into a collaboration agreement with online brokerage firms and to create a user account.
  2. Create a User Account with a Canadian Online Brokerage
    Stock brokerage firms are platforms that provide you with the ability to buy or sell securities automatically. Using these platforms, you don’t need a human broker in the Canadian stock market to trade your paper securities; instead, you can benefit from virtual stock trading in Canada with just a few clicks.Using online brokerages has several key advantages, including:

    • Coverage of the entire market and the ability to buy and sell any type of stock through online platforms
    • Access to online tools to help determine the best time to buy and sell based on charts
    • Ability to conduct trades with low or no commission fees
    • Flexibility in choosing and managing investments
    • Low management costs (between 0.5% and 1.5%)
    • Immediate access to all market data

    Some of the best and cheapest online brokerages in Canada include Questrade, Qtrade, and Wealthsimple Trade, which not only offer excellent services but also have very low pricing tariffs. However, there are many more online brokerages in Canada, and almost all major banks have their own platforms.

  3. Open an Investment Bank Account

    To buy and sell stocks in Canada, you must have a tax-covered bank account in your name. You essentially have two options: you can either open an RRSP bank account or go for a TFSA.

    The RRSP bank account is primarily for retirees because it does not deduct taxes, and taxes will be paid after retirement. In contrast, the TFSA account deducts taxes but allows for withdrawals at any time.

    Generally, individuals with high incomes are better off using RRSP accounts, while low-income individuals find TFSA accounts more logical.

  4. Funding

    Next, you need to inject funds into your foreign currency account to carry out the necessary actions for buying and selling stocks in Canada. Although you can enter the Canadian stock market with as little as $100, some brokerages have set minimum amounts for entry. Furthermore, the lower your initial capital, the higher commission fees you will have to pay, which may not be economically viable for you.

    Therefore, we recommend starting with at least CAD 1,000 in your account to begin buying and selling.

  5. Define Your Investment Approach

As mentioned at the beginning of the article, there are various ways to earn profits and income from the Canadian stock market. Investing in this market is similar to any other market and can have different income plans. You must determine your investment strategies instead of making emotional decisions that could jeopardize your capital, understanding with which strategy you intend to enter the market.

In general, there are three fundamental approaches to investing in the Canadian stock market:

  1. Index Investing: Instead of actively buying and selling multiple stocks daily, you can buy stocks of a limited number of Canadian public or private companies. This allows you to increase your profits with lower risk margins as they grow economically. This passive investment approach carries less risk and is quite popular among individuals who are not looking for instant large profits.
  2. Dividend Investing: Individuals who wish to have a stable and reliable income over the long term through passive investing typically adopt the dividend investing approach.
  3. Growth Investing: Those willing to take risks and aiming for substantial profits usually use the growth investing approach as part of an active investment plan. In this method, instead of buying safe stocks, you look for stocks of companies that you believe will experience significant growth in the future and can yield high returns. For example, individuals who purchased shares of Apple or Netflix in the past, despite the high risks, achieved substantial profits.

6. Researching Stocks

After selecting your investment approach and defining your criteria, you need to choose a company whose stocks you intend to buy. Before purchasing any stock, you should conduct thorough research and make informed decisions regarding buying or selling.

When buying stocks in Canada, you should consider several key points:

  • What is the current price and value of the stock? Is it worth buying? What is its profit margin over time?
  • Does the company you intend to buy shares from pay dividends? If so, at what intervals? How stable is the company’s performance?
  • What is the status of the industry and the market? Can the company you chose perform positively in the current economic situation?
  • How has the performance of the company you plan to invest in compared to its competitors? Has it provided significant returns to previous shareholders?
  • How do you predict the company’s future performance? Is there room for growth? Do you foresee substantial profitability in the future?

Note that in online brokerage platforms, stock prices are usually reported with a 15-minute delay. Therefore, it’s better to track real-time prices through financial websites and use the brokerage platform only for trading.

Additionally, the most important indicators to consider when analyzing stocks on online brokerages include the current price, the 52-week index, and the stock’s momentary profit.

7. Entering a Trade

In the next step, based on your planned strategy, after selecting the stock, you should proceed to enter a trade. When the Canadian stock market is open (from 9:30 AM to 4 PM Canadian time), you can enter the market and engage in buying and selling stocks in Canada. Always remember to act based on indicators, not emotions.

8. Optimize Your Investment Portfolio

Keep in mind that spending capital in the Canadian stock market is not enough; you must continually monitor your investments and regularly optimize your portfolio. To this end, you can take several actions:

  • You should rebalance your portfolio at least four times a year. Buying and selling new securities and replacing light and heavy stocks are essential for ensuring the security of your investments.
  • Depending on your new economic capabilities, you should always determine your risk tolerance. Sometimes your capital gains reach a level that allows for greater risks and potentially higher returns. Therefore, it’s best not to miss these opportunities.
  • If you have the capacity, you can expand your investment methods and try out new income plans.

Advantages and Disadvantages of Buying and Selling Stocks in Canada

Buying and selling stocks in Canada has its specific advantages and disadvantages, which are highlighted below:

Advantages

  • The potential to earn significant capital gains in dollars.
  • Receiving dividends from companies as an additional source of income.
  • A wide variety of companies operating in the Canadian stock market.
  • Ease of buying and selling stocks.
  • High liquidity of Canadian company stocks.
  • Low investment risk in index company stocks.
  • A low capital gains tax rate (only 50% of your capital gains are subject to tax).
  • The rate of capital gain growth is typically faster than the rate of inflation in Canada.

Disadvantages

  • High volatility in stock markets, influenced by rumors and news.
  • The risk of losing the entire investment in case of a poor investment decision.
  • Requires a significant amount of time for daily trading (for those who engage in active investing and seek high profits).

Final Thoughts

Buying and selling stocks in Canada can be an excellent and reliable way to earn income. If you have capital and want to generate profits from its circulation, the Canadian stock market is one of the best options available to you.

Individuals who have recently immigrated to this country and do not have work permits (under some investment or student immigration programs) or those who wish to have a definite income plan for their retirement can benefit from the advantages of buying and selling stocks in Canada.

You can also engage in buying and selling stocks in the Canadian stock market as a business operator from inside Iran and earn substantial dollar income.

In any case, it is essential to adhere to safety guidelines when investing, and you should approach it with open eyes.

Frequently Asked Questions

Can I obtain residency in Canada by buying stocks?

No, although there are legal pathways for this, practically obtaining residency or even a visa for Canada through investment in the country’s market is not possible. However, active participation in the Canadian stock market and earning income there can expedite the processing of your immigration application, but it will not directly lead to residency.

Can I buy stocks without using a brokerage?

Yes, this is possible, as some companies allow you to purchase their stocks directly through a Direct Stock Purchase Plan (DSPP). You can also engage in the Canadian stock market by opening an online brokerage account, participating in a Dividend Reinvestment Plan (DRIP), and using a direct stock purchase plan.

What is the minimum capital required to buy and sell stocks in Canada?

You can enter the Canadian stock trading market with as little as $1, but our recommendation is to have at least $1,000 in initial capital to begin your activities.

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