How to Start DIY Investing in Canada

When you first start thinking about investing in the stock market on your own it can be a strange and scary place. With so many stocks and ETF’s to choose from where do you begin. Starting in 2020, I took my own portfolio from a $1000 initial investment to taking control of all my managed RRSP accounts and contributions to over $80,000 in about a year. Here are the steps to get you started investing. Keep in mind past performance does not necessarily mean continued performance. See my investing page to find out if you’re ready to invest.

Step 1: Choose a broker

The best DIY investing options for brokers in Canada are Wealthsimple and Questrade. Click to see my articles on them.

Step 2: Make Your First Deposit

Make your first deposit. You can deposit as much or as little as you’re comfortable with. I recommend starting with at least $100. If you’re hesitant about investing $100, a self-managed account isn’t for you. You can link your Wealthsimple account directly to your bank account. For Questrade, you have to setup up a payee from your bank account just like you would pay your other online bills. Here’s how it looks:

Payee Name: QUESTRADE INC

Account Number: XXXXXXXX, 8 Digits provided by Questrade

Questrade requires a $1000 minimum deposit to open an account.

Step 3: Market Research

“An investment in knowledge pays the best interest.”

— Benjamin Franklin

Research might not sound sexy AF but it will help you make solid financial decisions. Let’s begin with the 11 Sectors of the Stock Market.

1. Technology

   This is the largest sector in my portfolio. Technology is the most disruptive and transformative sector. This sector deals with manufacturing electronics, software development, or products related to information technology. This sector often has the highest growth and volatility. Many of these stocks have very low dividends or none at all. My top 3 performers are:

   1. NVIDIA Corporation (NVDA)

   2. Advanced Micro Devices, Inc. (AMD)

   3. Square, Inc. (SQ)

2. Financials Services

   Think of the big banks, insurance companies, credit card companies, and investment firms. Most of the companies in financials that I own pay good dividends and have been around for a while. My top 3 performers are:

   1. Mastercard (MA)

   2. Bank of Nova Scotia (BNS.TO)

   3. CIBC Bank (CM.TO)

3. Health Care

   This sector includes hospital management firms, biotechnology companies, pharmacies, medical device manufacturers, and marijuana product companies. There are defensive plays such as hearing aid companies and riskier growth plays such as genome sequencing or vaccine companies. My top 3 performers are:

   1. CVS Health Corporation (CVS)

   2. Canopy Growth Corporation (CGC)

   3. The Valens Company Inc. (VLNS.TO)

   As of the date writing this, I still have negative returns in this sector.

4. Real Estate

   This sector consists of companies that own both residential and commercial (office buildings, hotels, and malls, etc.) real estate. A lot of companies in this sector are real estate investment trusts (REIT). These are companies that own or operate properties that produce income derived from collecting rent. Because they make money from rent and are less concerned with growth, they can pay higher dividends.

   I don’t currently own any REITs because I prefer to actually own property. But I did own RioCan Real Estate Investment Trust (REI-UN.TO) before and it performed pretty well.

5. Energy

   This sector consists of companies involved with oil and gas exploration and production, refineries, and various other energy-related operations. Many of the better-performing companies are switching toward green energy.

   I do not currently own any stocks in this sector.

6. Basic Materials

   These are companies that own or mine for gold, copper, or other raw materials. They may also be involved with refining materials, steel, and forestry. Basic materials never go out of style but tend to be a safer play and lag other sectors of the market for growth. My single holding in this sector is:

   Liberty Gold Corp. (LGD.TO)

7. Consumer Cyclical

   This sector includes retailers, apparel companies, hotels, cruises, consumer durables, media companies, and consumer service providers. These stocks were hit hard during the pandemic. Now that North America is starting to get back to normal, it could be a good buying opportunity for some of these stocks. My top 3 performers are:

   1. Tesla, Inc. (TSLA)

   2. Amazon.com, Inc. (AMZN)

   3. Alibaba Group Holding Limited (BABA)

8. Industrials

   This sector consists of construction, machinery, manufacturing, fabrication, defense, and aerospace companies. There are some well-known companies like Caterpillar Inc. (CAT) which should be relatively safe. They there are completely speculative space exploration companies that are very risky. My top 3 performers are:

   1. Virgin Galactic Holdings, Inc. (SPCE), Just dropped over 14% in one day

   2. Air Canada (AC.TO)

   3. Delta Air Lines, Inc. (DAL)

9. Utilities

   This is a great sector for companies with slow stable growth but high dividends. The sector consists of electric, gas, and water companies. Utilities are something everyone needs regardless of what the economy is doing. My top 3 performers are:

   1. Capital Power Corporation (CPX.TO)

   2. ATCO Ltd. (ACO-X.TO)

   3. Hydro One Limited (H.TO)

10. Consumer Staples

    This sector has companies that supply everyday items like toothpaste, deodorant, food, and beverages. They are known to be very safe plays. Warren Buffett famously invested a large amount in Coca-Cola Consolidated, Inc. (COKE). This is a good choice for stability. However, because I am a relatively young investor I prefer to take more risks. My top 3 performers are:

    1. Costco Wholesale Corporation (COST)

    2. Loblaw Companies Limited (L.TO)

    3. Dollarama Inc. (DOL.TO)

11. Communication Services

    This sector contains cable companies, internet service providers, satellite companies, and wireless providers. Similar to utilities, these companies have recurring revenue from subscribers that pay for these services every month. Unlike utilities, there is more need for communication services companies to spend more on growth. For example the 5G rollout. These companies still managed to pay high dividends. My top 3 performers are:

    1. Zoom Video Communications, Inc. (ZM)

    2. Facebook, Inc. (FB)

    3. Alphabet Inc. (GOOG)

Now that you know all the sectors you can choose companies to research that align with your values, risk level, and goals. There’s a lot more to analyzing stocks but that should be enough to get you started.

Step 4: Buy Your First Stock or ETF

I recommend buying stocks in well-known companies with a good track record of raising their dividends every year or that have consistent growth. Stick to large-cap companies. If you want the easiest method to start, buy an ETF like Vanguard S&P 500 ETF (VOO).

When it comes to buying the stock or ETF make sure you know if it’s in Canadian or USD. Enter the quantity you want and select buy at market price. That’s all there is to it!

Step 5: Reinvest Your Dividends

I suggest checking if you received dividends at least once a month but I check much more often. They will automatically be added to your cash balance in the same account you use for investing. It’s nice for a company to pay you for a change. If you have enough money you can buy more stocks. If you don’t, wait until you deposit more money or receive more dividends. Remember to be consistently deposite money.

Summary

That’s it! you’re off to the races. Before long you will be making money and thinking about what to do when you reach FIRE. The steps are:

1. Choose a broker

2. Make Your First Deposit

3. Market Research

4. Buy Your First Stock or ETF

5. Reinvest Your Dividends

Let me know in the comments if this works for you.