Stock Market & Trading for Canadians

The stock markets are a collection of public markets that issue, buy, and sell stocks. Anybody can buy from these markets, but most people view it as too complex or risky, even though there are plenty of tools and services that help to massively simplify the process.

Industry experts believe that stock markets are a fundamental component of economic development due to the fact that companies can sell stock to the public which in turn helps them to quickly access capital from the public. Stock markets exist to help bring people together towards a common goal and help money to flow to places where it’s needed the most.

North America’s Major Stock Exchanges

There are a total of 13 major stock exchanges that operate in North America, each servicing different types of companies and utilizing different methods of trading. In this short guide, we’re going to look at four of the largest and explore their roles in the financial sector and the companies that use them to trade stocks.

The New York Stock Exchange

The NYSE is the largest stock exchange in the world based on market capitalization. It is an auction market, which means that individuals act between each other and trades are completed on an auction basis. Some of the biggest companies on the NYSE include Berkshire Hathaway, Visa, Johnson & Johnson, and Walmart.

The National Association of Securities Dealers Automated Quotations System

NASDAQ is second only to the NYSE in terms of market capitalization and reached this position after a rapid boost in popularity of the past quarter of a century or so. NASDAQ differs from the NYSE as participants trade through a dealer instead of with each other. The NASDAQ is home to business giants Apple, Amazon, Facebook, and Microsoft.

Toronto Stock Exchange

The TSX is Canada’s largest stock exchange and was founded way back in 1852. This exchange is a subsidiary of TMX Group, a Canadian financial services company. The most valuable companies on this exchange include The Royal Bank of Canada, The Toronto Dominion Bank, and The Bank of Nova Scotia.

TSX Venture Exchange

All trading on this exchange is done electronically, as such, there is no physical trading floor. TSX Venture differs from TSX in the sense that it’s a public venture marketplace for emerging companies. There are over 1,600 companies listed on the TSX Venture Exchange meaning there are plenty of opportunities to invest in up and coming companies.

Types of Stock Market Investments

Trading on stock exchanges isn’t reserved for stocks, there are other types of investments that can be traded. They all offer the same risk / reward philosophy that is behind stock trading, but attract different types of buyers due to the finer details.

Stocks

A single share of stock represents a small fraction of ownership of the company. The fraction of ownership by an individual is in direct proportion to the number of shares owned from the total number of shares issued. This fraction of ownership means that the stock holder is entitled to the equivalent share of the company’s earnings and any proceeds that are generated from liquidation of assets.

ETFs

An exchange-traded fund is traded on stock exchanges much likes stocks are, however, they are a type of fund which multiple people pay in to. It owns assets, such as stocks and commodities, and divides them among its shareholders. They are similar to traditional mutual funds except shares in them can be bought and sold throughout the day like normal stocks.

Bonds

Bonds are used by entities that wish to finance new projects or operations. When you buy a bond, you’re essentially loaning the issuer money who agrees to pay you back the loan on a pre-agreed date. Interest is also paid from the issuer to the buyer, usually twice annually until the period of the loan has elapsed.

Stock Options

A stock option is a contract which gives the buyer the choice to either buy or sell an asset at an agreed price before or on a specified date. The exact terms regarding the final date of purchase depends on the form of stock option. Stock options are a good choice for people who may be hesitant to make the risks associated with other types of stock market investment.

How to Invest in the Stock Market

There are several ways to actually invest your hard-earned cash in the stock market including:

Online Broker Services

There are countless options when it comes to online brokers. A key factor is whether or not you want bespoke advice from your broker service. There are also certain platforms that provide you with the chance to buy and sell independently without advice from brokers.

Robo-Advisors

Robo-advisors are cutting-edge digital platforms that provide automated services based on deeply complex algorithms. These platforms provide you with assistance with planning goals and help you to create a portfolio in a relatively straightforward manner. Some platforms even allow you to borrow against your portfolio as a line of credit when they have reached a certain value.

Do it Yourself Fund Selection

Doing it all yourself is the cheapest method of investing in the stock market. It also offers low initial investment costs and total control of what you decide to invest in and how much you decide to invest. This may be the best option if you’re looking to keep your expenditure to a minimum.

Rules and Regulations Regarding Stock Trading

There are governing bodies in the United States and Canada that are tasked with the responsibility of ensuring that everything remains legal and above board.

In Canada, the Investment Industry Regulatory Organization of Canada monitors all trading on the TSX and TSXV. As it’s an independent third-party company, it has no conflicting interests in the marketplace and has helped to ensure marketplace integrity since it was founded.

The United States has a government agency in place to ensure that the markets based there work efficiently. The U.S. Securities and Exchange Commission is the American equivalent of the IIROC and works in a similar role with stock markets in the U.S.