Back during the Dot Com boom – before it busted – you couldn’t turn on the news without seeing another upbeat story about some housewife or laid-off factory worker who’d made their fortune as self-taught online day traders. Unfortunately for most, that fortune was ethereal and vanished along with millions of dollar in other electronic assets.
Don’t fancy yourself as a day trader, but would still like to dabble in the stock market a bit? There are a number of online brokerages that let you do just that, at a fraction of the fees and commissions a flesh-and-blood broker would charge.
There are a number of discount online brokerages to choose from, each with tutorials on how they work, details on how to sign up, and backgrounders on how to follow the markets. Applying online for an account with Toronto-based Questrade takes about 15 minutes (you’ll need to have details like your social insurance number, banking info, and a form of identification to set it up). The company requires a minimum $1,000 deposit to open a stocks and options account, but only charges one cent per share for stock market trades (with a minimum of $4.95 and a maximum fee of $9.95 per trade).
Montreal-based Interactive Brokers Canada (a subsidiary of a global trading company) also charges one cent per share in flat fees, with a minimum $1 going up to a maximum of 0.5 percent of the trade’s total value.
You’ll want to ensure that any online brokerage you do sign up for is a member of the Canadian Investor Protection Fund (CIPF), a sort of insurance policy covering up to $1 million worth of your investments should the brokerage go bankrupt.
Big Banks, Brand Names
If you’re looking for something a little more reputable and well known, all the big banks offer online trading options. TD Waterhouse, for example, has the Active Trader platform. As the name implies, this is for fairly active online traders who complete at least 30 trades per quarter. The platform features a customizable, Gordon Gekko-esque desktop with detailed tracking of various stock markets, charts, and streaming headlines.
One unique option is to open an RBC Direct Investing “Practice Account.” This free service lets you try out the full range of options on RBC’s platform with $100,000 in play money so you can get the hang of things before you start investing the real stuff. The one catch is that you need to be an RBC client to sign up for a Practice Account.
Just keep in mind that you’ll pay a slight premium for the brand name. With TD Active Trader, the first 30-149 equity trades per quarter are $9.99 ($7 for 150+ trades), and the same rates, plus $1.25 per contract for stock options. RBC Direct Investing’s rates for their working accounts are nearly identical.
A Balanced Approach
If you do decide to dabble in online trading, try to keep it in context. It's not some sort of video game to play around with. It’s your hard-earned money you’re working with. And remember that most basic of investing tips: diversify. In other words, online trading of stocks, bonds, and the like should only be one part of your overall investment strategy.