The zero-commission frenzy that swept the United States came to a halt at the Canadian border. Questrade’s fees are lower than those charged by most other Canadian brokers and banks, and refunds on subscription costs imply that active traders can completely eliminate or substantially offset market data fees. Questrade has a number of valuable tools for fundamental investors, and the platforms are very user-friendly.
How can I go about purchasing an ETF directly?
Because you can’t just go to the store and buy a basket of ETFs, you’ll need to open a brokerage account first. However, before determining where to open your account, think about your objectives. Certain types of accounts are better suited to specific objectives.
- Taxable: These are “normal” accounts that do not offer any tax benefits. This makes them excellent for achieving goals before reaching the federal retirement age of 59 1/2. When you sell your investments, there are no restrictions or penalties, but you must be cautious of taxes. You’ll owe them whenever you make a profit on an investment or receive dividend payments.
- Traditional IRAs and Roth IRAs are tax-advantaged retirement accounts that allow your investments to grow tax-deferred—or even tax-free in the case of Roth IRAs. As a result, they’re effective tools for saving for retirement. The IRS, however, imposes particular contribution limits and withdrawal criteria for IRAs as a result of these tax benefits. You can’t contribute more than $6,000 every year ($7,000 if you’re 50 or older), and you can’t access your IRA assets until you’re 59 1/2 without incurring a 10% penalty—plus taxes on any money that hasn’t been taxed previously.
- 529: A 529 account is a wonderful place to start if you want to use ETFs to save for college: Money invested in a 529 plan grows tax-free and isn’t taxed when it’s withdrawn if it’s utilized for approved school costs. 529 plans can now be utilized for pre-college expenses such as private school tuition and trade school fees. While funds maintained in 529 accounts cannot be withdrawn for non-education expenses without incurring a penalty, they can be transferred to another relative without penalty.
- Custodial: If you want a more limited means to save on behalf of a child, custodial brokerage accounts are a good option. You can invest and manage money on behalf of a child beneficiary using these investment accounts. Custodial accounts have no tax advantages, except that up to $2,000 of investment income is taxed at the child’s reduced rate, and money can be spent much more broadly than 529s. A 529 plan’s funds can be used for any purpose that benefits the child. However, once the minor reaches the age of majority (typically 18 to 25 years old, depending on where you live), they will have complete control over the account.
Is it possible to buy ETFs on my own?
To purchase and sell assets like ETFs, you’ll need a brokerage account. Many brokerages have no account minimums, transaction fees, or inactivity penalties, so this can be done entirely online. It may seem intimidating to open a brokerage account, but it’s really no different than opening a bank account.
Questrade offers which ETFs?
We’ll need to buy three separate ETFs from Questrade to create a Canadian Couch Potato passive index fund:
If you don’t know what target allocations you want for your portfolio, I recommend checking out the Model Portfolios on the Canadian Couch Potato website and making sure you know what approach you want to follow.
For my Questrade portfolio, I use an aggressive approach, with 25 percent Canadian bonds (ZAG), 25 percent Canadian equities (VCN), and 50 percent US and international stocks as target allocations (XAW). So, with a beginning portfolio of $5,200 dollars, I’d like to distribute it as follows:
One thing to keep in mind is that, unlike TD e-Series index funds, you can’t buy partial shares of ETF funds, so you’ll have to acquire whole shares to come as close to your target allocation as possible.
What is the procedure for purchasing an ETF in Canada?
In Canada, you can purchase ETFs using a trading platform or a robo-advisor. You’ll have to choose the ETF(s) you want to buy yourself if you use a trading platform. However, if you hire a robo-advisor, it will purchase ETFs on your behalf, based on your investing objectives and risk tolerance. There is a third option, which is to acquire ETFs through a financial counselor, but this is uncommon and ineffective.
Each strategy has its own set of advantages and disadvantages, which primarily boil down to how much control you have over your ETF buying process (and portfolio) and how much it costs.
Are ETFs suitable for novice investors?
Because of their many advantages, such as low expense ratios, ample liquidity, a wide range of investment options, diversification, and a low investment threshold, exchange traded funds (ETFs) are perfect for new investors. ETFs are also ideal vehicles for a variety of trading and investment strategies employed by beginner traders and investors because of these characteristics. The seven finest ETF trading methods for novices, in no particular order, are listed below.
On Questrade, how can I buy US stocks?
Let’s say you wish to acquire Tesla stock, which is traded in the United States (and not a Canadian stock). Assume you only have funds in your Canadian bank account. There are a few major approaches to this.
Whether you have a registered account (such as a TFSA) or a non-registered account will determine your options.
First, if you have a registered account, Questrade will instantly convert your funds.
When you trade Tesla stock (or any other US company or ETF for that matter), you’re allowing Questrade to convert the currency from CAD to USD at their discretion. They usually charge between 1.5 and 1.99 percent. Then you accept whatever exchange rate Questrade offers, even if it isn’t the most competitive.
This approach is convenient, but it is not the most cost-effective (more on that later).
You can also trade US equities on margin as a different option. Allow me to explain. When you trade on margin, you are essentially borrowing money. Questrade will borrow the cost of Tesla in US dollars for you, even if you have CAD, and you will pay interest on that US dollar sum.
Let’s imagine you have $5000 in your account and decide to invest $1000 in Tesla shares. Questrade will borrow US money and keep your Canadian account unchanged, even if you have enough money in your Canadian account to buy Tesla stock.
Of course, you’ll have to pay interest on the money you borrowed. This isn’t the most cost-effective method of purchasing US equities.
Is Questrade suitable for newcomers?
Questrade is a broker that we can suggest for novices based on our rating methodology. The web platform of Questrade has a lot to offer: User-friendly. A wide range of order kinds is available.