What Is a Stock?
A stock represents a fractional ownership interest in a company. Shareholders may benefit from price appreciation and, where declared, dividends. Prices move based on supply and demand, earnings, interest rates, economic conditions, and investor sentiment.
Basic Concepts
- Shareholder rights: may include voting rights (varies by class) and the right to receive dividends if declared.
- Price formation: continuous auctions on exchanges; news and fundamentals can shift expectations quickly.
- Order types: market, limit, stop, and stop-limit orders have different execution and risk profiles.
How Canada’s Markets Work
Canadian equities primarily trade on the Toronto Stock Exchange (TSX), the TSX Venture Exchange (TSXV) for early-stage issuers, and the Canadian Securities Exchange (CSE). Indexes like the S&P/TSX Composite track broad segments of the market.
Trades settle on a standard cycle (generally T+2). Fees, commissions, and taxes may apply based on your dealer and province or territory.
Common Account Types (Canada)
- TFSA (Tax-Free Savings Account): investment income and capital gains earned in the account are generally tax-free; contributions have annual limits. Check current rules and your available room.
- RRSP (Registered Retirement Savings Plan): contributions may be tax-deductible; withdrawals are generally taxable. Rules vary by income and plan.
- FHSA (First Home Savings Account): designed to help eligible first-time home buyers save with tax advantages.
- RESP (Registered Education Savings Plan): education-focused savings with potential government grants.
Tax rules can change. Refer to official CRA guidance or consult a qualified tax professional regarding your situation.
Key Risks to Understand
- Market risk: prices fluctuate with macro conditions, rates, and earnings.
- Liquidity risk: thinly traded shares can be harder to buy or sell at desired prices.
- Issuer risk: deteriorating business conditions can lead to significant losses, including total loss.
- Concentration risk: lack of diversification can amplify volatility.
- Currency risk: foreign holdings and a changing Canadian dollar can affect returns.
Past performance is not indicative of future results. Consider independent research and, where appropriate, speak with a registered adviser in your province or territory.
Frequently Asked Questions
- How much do I need to start?
- Most Canadian brokers allow you to purchase as little as one share of a listed company plus fees. Some also offer fractional shares—check your dealer’s features and costs.
- How do I open an account?
- You can open an account online with a Canadian dealer by providing identification and completing required disclosures. Account features and fees vary, so compare options carefully.
- Where can I verify a firm or individual?
- Use official registrant search tools from Canadian regulators to verify registration and disciplinary history in your province or territory.