Page 181 - A Canuck's Guide to Financial Literacy 2020

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Trading Stocks

Millions of stocks are bought and sold each day in the stock market. Shares of public
companies may be sold to other shareholders who might be interested in being a
shareholder of a particular company. Stock exchanges connect buyers and sellers together
through electronic communication networks (ECN) in order to facilitate these transactions.

Buying a Stock

There are several methods on how stocks can be bought. The two most common methods
are either through a online brokerage or through a stockbroker. It all depends on your
comfort level and knowledge of stocks.

▪ Online Brokerage – Interested individual can open an investment account at an online
discount broker. These discount brokers typically charge less than $10 per stock
trade. They do not give investment advice and are not responsible for the
performance of your investments. Discount brokers are for individuals who are
sophisticated and can do their own fundamental research on a company’s profitability
themselves.
▪ Full-Service Brokerage – If you’re not comfortable in doing your own stock purchases,
you may utilize a full-service brokerage. These full-service brokers typically charge a
higher commission per trade but also provide you with investment advice and a
personal touch. Brokers can be found at banks, wealth management firms, credit
unions, etc.

Selling a Stock

Selling a stock is similar to buying. When you sell, you have to be aware of any capital
gains that may be triggered. Capital gains are triggered if you’re purchasing your stocks in a
non-registered investment account. Selling a stock also involves a commission that gets
paid to the broker.