If you are the type of person that procrastinates, which most of us do sometimes – I hope you take action and implement after reading this blogpost.
You probably heard from family, friends, co-worker or on social media about investing in the stock market. However, you just ignored that idea and made excuses – too complex, don’t have time to research or don’t have enough capital.
Well, fear not! I can honestly say that investing these days is relatively easy, quite simple and available to anybody.
Investing is hard and requires a sizeable capital
I can still vividly remember when I started investing in the stock market a few years ago that I thought it’s only for the more affluent or for those people who have the financial resources. Something that I have procrastinated for a long time due to same reasons like many most of you have. It was considered as a high barrier to entry and not for everyone.
While, this was very true about 5-10 years ago. For someone to start investing, a brokerage may require a minimum deposit of $5,000 or higher. Additionally, you also have to pay higher fees every time you buy and on average $5.00 – $10.00 per trade. A very valid reason why many people didn’t want to start investing.
No Commission Trading Brokerage
A breakthrough finally came to Canada within the last 2-3 years. The emergence of No commission online trading brokerage. With the quick advancement of technology, online discount trading brokerages have now been very competitive and a few offer $0 minimum and $0 commission trading platforms. All in all, these are welcome news to any new and seasoned investors.
There are three discount online brokerages that offer $0 commission trading in Canada at the time of this writing as far as I am aware.
- National Bank Direct brokerage
- Desjardin Online Brokerage
- Wealthsimple Trade
Among these three listed brokerages I have first hand experienced with WS Trade as I am a client myself. It’s slick, simple, and mobile accessible which most of us own nowadays. More recently you can also access it using your PC which is great for investors who prefer a wider screen and comfortable using home computers.
Additionally, with no minimum balance requirement this become very attractive to investors who are just starting or have less capital. Furthermore, not paying any commission to trade means your money will go a long way. Moreover, with those fees being eliminated, it will help grow your investments faster.
If you have been a follower and reader of my blog. I try to keep everything so simple – the same way I write my blog for everyone to understand.
What if you want to Invest in the US stock market?
Diversification is the key to reduce the risk of allocating investments to various sectors and geography (home-bias). Our Canadian Equities are heavily concentrated in financials and commodities while lacking in technology and almost non- existent in the healthcare sector.
While we have established and solid name blue chip companies such big banks: Canadian Imperial Bank of Commerce(CM), Royal Bank (RY), Bank of Montreal (BMO), Bank of Nova Scotia (BNS), Toronto Dominion Bank (TD) and National Bank (NA), Enbridge (ENB), Loblaws(L) to name a few. It can’t be denied that south of the border there are way bigger companies that we are also very familiar with and household names the likes of Apple (AAPL), Microsoft (MSFT), Home Depot (HD), Costco (COST), Pfizer(PFE), and many more. (Full Disclosure: Not advice – own all stocks mentioned!)
As many of you who follow my blog, I consider myself an individual stock investor. I love to pick and research the company that I would like to invest in and focus on dividend growth companies.
In order to diversify my portfolio, I invest in the US stock markets in sectors that are mainly lacking in Canada. However, one of the biggest problems as an individual stock investor buying stocks in the US is the currency exchange.
While you can request your brokerage to journal your account into a USD account there is always an initial cost of converting your CAD to USD. If you have not journaled your investment account in USD most brokerage will cost an exchange rate that includes a fee of 1.5% and round trip 3% if you want to sell.
Furthermore, when you make frequent deposits and frequent trades it adds up and it will hurt your wallet over time. However as an investor, it was not my primary concern in the past as I want to stay invested all the time. Quite simply, I just buy and hold household name blue chip companies. Over time I will recoup those costs involved if I hold these companies for a long time.
Other ways of reducing forex costs is investing in cad hedged ETF and some investors using Norbert’s Gambit strategy. However, for a smaller amount it wasn’t worth in my opinion as several occasions in the past I have only $1,000 USD and I still buy US stocks as I want to stay invested all the time rather than keeping my cash in a savings account.
CAD-HEDGED US STOCKS BREAKTHROUGH WITH NEO EXCHANGE
More recently one of Canada’s big banks Canadian Imperial Bank of Commerce (CIBC) made some big moves and made US stocks easily available for Canadian investors.
Kudos for CIBC who is the first to introduce cad-hedged individual US stocks. You can now buy US household name blue chip stocks with your Canadian dollars. Among the few household name blue chip stocks are APPL.NE, MSFT.NE, COST.NE, VISA.NE, HD.NE, and few more. These US stocks are now available to be bought at NEO exchange. (Full Disclosure: Not advice – own all stocks mentioned!)
While currently there are only a few stocks available to be bought in NEO exchange, it is a very good start and I believe that there will be more US stocks added in the future.
Hence, If you are familiar and already using Wealthsimple Trade then you are able to buy these cad-hedged stocks in NEO exchange – commission free.
Henceforth, more recently in my effort to lessen my costs of buying US stocks I have stopped funding and converting my $CDN to USD in my main brokerage and just concentrate on slowly building and buying these cad-hedged stocks offered in Neo Exchange in my RRSP account.
While I haven’t accounted for the costs of currency exchange in my investment in the past I’m certain it was a sizable amount. Yet again as an investor I want to stay invested and I believe as a long term investor I will recoup those costs by just holding and not selling.
Having this option of eliminating the costs of converting CAD to USD by buying US companies is an excellent opportunity for Canadian investors to invest in US individual companies using Canadian dollars.
While it’s still in its infancy stage I believe more will be available in the future. Uniquely, as no one has a crystal ball and should not time the market I believe that US stocks are currently at a discount. My personal strategy is not a secret – it is simply dollar cost averaging!
So what are you waiting for?
If you sign up using this link and add money to a non-registered personal account, you will earn a cash equivalent of two random stocks and I will earn a cash equivalent of one stock. See more details with this link .
|
|
More Reading:
One of my recent blog posts highlighted our mistakes in buying our first home in Canada. With those lessons learned we felt we were equipped with much-needed information this time around buying our recent home using leverage instead of selling our investments to use as a down deposit. In doing so, we improved our total current net worth without dipping into our long term investments.
Earlier this week we renewed our home insurance. We made a massive savings by switching our home insurance to Square One up to 30%. If you are looking to renew your home insurance or for a new property, why not check them out and see for yourself if you can also get a huge discount on your home insurance.
Moreover, we also made dramatic changes in our lifestyle and embraced minimalism hence we perceived that living less is more. A few simple money saving tips we have done are reducing our cell phone bills and switching to No fee bank accounts. Similarly, I find dividend investing easy and more fun and you can choose a no fee trading account either as a new or seasoned investor.
Finally, when we are employed, we receive a regular income and a feeling of financial security. However, jobs are not guaranteed and can be also lost and taken away beyond our control as many have experienced during this pandemic due to an abrupt closure of businesses. Therefore, it is very important to create multiple sources of income to protect ourselves from these unfortunate events.
DISCLAIMER: Everything I have shared in my blog is wholly related to my personal experience. It is for entertainment and educational purposes only and should not be construed as advice.
This site may contain affiliate links and I may receive a bonus if you take an action after clicking one of those links at NO additional cost to you. Similarly, you may check my recommendations and by using our referral link this will help me maintain this site and encourage me to create more money saving and investment tips. Thank you so much for all your support.