Investing your hard-earned money is a daunting task, especially during times of heavy volatility. One day your online brokerage account is showing a 3% gain and within a few days, all of the profit has been wiped out — and then some.
With that said, there are many tips and tricks that you can use on a regular basis to avoid the stress associated with logging into your brokerage account. The most important of which is to select a platform that best suits your individual needs.
New investors often choose convenience over practicality and doing so is among the biggest mistakes new investors make. For example, there are a small handful of major banks in Canada and each bank has their own stock broker platform. Signing up for a stock broker account within the same institution could be completed in seconds since the bank already has your personal information so there are likely fewer forms to fill in.
But is this always the right choice for investors? Of course not. Some of the leading online brokerage account Canada are those hat blow major banks away in terms of fees and other features. In fact, an online broker like Questrade offers rock-bottom fees of $4.95 per trade (for up to 500 shares) while big banks typically charge $9.95 per transaction.
New investors that want to save as much money as possible should go with the option that saves them $5 per trade. It might not seem like a lot but if you are starting with just $1,000 then you will save $10 ($5 to buy a stock, another $5 to sell) on a trade which is the equivalent of 1% of your portfolio.
Governments are supportive of individuals putting money away for the long-term and offer people incentives to save. Exact programs vary country by country so it is prudent to take some time and best understand how to take advantage of any programs.
In Canada, for example, Registered Retirement Savings Plans (RRSP) lets an individual earn a tax rebate on the money they invest with an approved online Canadian broker. Contributions made to an eligible RRSP account are tax-deductible up to a predetermined limit. For example, someone that earns $60,000 a year and adds $5,000 to their RSP account can now declare their income to be $55,000.
In most cases, the reduced salary means the individual will receive a rebate come tax season. Also, all gains in the account are not taxed until the funds are withdrawn when the individual retires and enters their golden age.
Canadians can also take advantage of a special account where all interest and profits are not subject to income taxes, known simply as the tax free savings account (TFSA)
A Roth IRA offers Americans a different saving program that offers compounded benefits for young investors. Money transferred to an eligible Roth IRA account can grow tax-free while withdrawals in the future are also tax-free, under certain conditions. An individual must be at least 59.5 years old and have held a valid account for at least five years to be eligible to take distributions and earnings without any tax paid to the federal government.
Online stock brokers once upon a time existed to facilitate trading and nothing else. In other words, investors were at the mercy of their own investment knowledge. Not everyone is up to date with the latest Wall Street news and rumors and have complete confidence in their investment decision.
Quite the contrary. Even highly educated people in fields outside of finance have little to no knowledge on how to invest their money. This includes lawyers, doctors, engineers, and even accountants.
So a great tip to extract the maximum value out of your stock broker account is to take advantage of the learning and research tools. If your broker doesn’t offer free access to news, analysis, and tools then the broker isn’t right for you.
Download the mobile app so you can always be one push of a button away from pulling up live quotes. Or when you have some spare time on your way to and from work, why not read up on the latest news so you are up to date on your finances.
Just as important as staying up to date on news and analysis is staying on top of your portfolio. How exactly is your portfolio performing? Is a 6% annual return good, bad, or just OK? Do you know? Well, your online broker likely knows and makes it very easy to compare your performance with those of a benchmark.
If your broker offers these tools and much more, you have to be foolish not to take advantage of these features.
As any professional investor or trader can attest to, the markets can be subject to extreme volatility and stocks can crash within a matter of minutes. Are you a professional trader glued to multiple computer screens throughout the day? Obviously you aren’t — but that’s ok.
Online stock brokers have multiple features that will allow you to remain well informed about your investments in real time. Leading online brokers have “trading alert” features that notify you of valuable information when you need to be aware of this information.
Alerts are pre-defined so that you get to remain in control of your investments. Want to know if a stock you are following hits a certain value? Your broker will blast out an email alert the second this happens. Want to know if your stock is up a certain amount so you can sell? No problem.
Investing for the long-term by buying a stock just once and holding it for years if not decades can be one of the most profitable and lucrative strategies to maximize profit. In essence, you buy shares of a company that has excellent long-term potential and you don’t even have to check its performance on a daily basis.
In other words, buy a stock once and let it grow in your Canadian brokerage account. Buying a stock once also means you only pay a commission once. The alternative option is something that many novice investors do when they try to “time” a stock by selling shares with expectations of re-buying it cheaper.
CNBC pundit Jim Cramer is an advocate of this strategy and used Apple shares as an example as to why long-term buy-and-hold is the right strategy:
“If you try to trade [Apple shares], you don’t get in. You can’t be nimble enough to get out and get in. You just have to stay in, and you stay in because Apple makes products that are fantastic.”
Not only does this strategy risk buying back shares at a higher cost, but it can also add unnecessary fees in some cases. Unlike global online brokers like Robinhood and eToro, Canadian online brokers aren’t known for offering zero-commission fees.Previous: Investing in Hemp Stocks: Beginners Guide