How to Buy Canada Stocks
Two factors are making American investors look north of the border to Canada. The first is that, in January 2018, the Donald Trump administration made its intentions clear by frowning on marijuana legalization. The second is that, in the summer of 2018, Canada will be officially throwing its doors open to all things marijuana.
While Canadian marijuana stocks are a big draw—and the main reason for the sudden northbound shift of focus for American investors—there are also other types of Canadian stocks worth looking into.
First, let’s get the big question out of the way: Can a U.S. citizen buy Canadian stocks? Yes.
The thing is, most Americans are clueless about where and how to buy Canadian stocks. Therefore, I will now provide you with enough information to steer you in the right direction.
How to Buy Canadian Stocks Online
The first thing to do is to go to one of the appropriate web sites, such as those of the stockbrokers listed near the end of this article.
For example, “TMX Money,” a sister site of the Toronto Stock Exchange (TSE), provides you with pretty much everything you might need while investing. On the TMX Money home page, click on the Registration/Login button. You can either log in with “Facebook,” “Twitter,” “Google,” or “LinkedIn”—or you can create a brand new profile.
After you log in, you can go to the “Portfolios” section to set up your portfolios. They can be broken down according to industry (e.g. oil and gas, precious metals, or marijuana).
On the site, you can get all the information you need about how to buy Canadian stocks online.
It’s quite intuitive and, once you have logged in to TMX Money (or any of the other Canadian sites listed near the end of this article), you can easily navigate your way through it.
How Can a U.S. Stockbroker Be Used?
Rookie investors who are new to the investing game often ask how U.S. stockbrokers can be used to buy Canadian stocks. Well, if a Canadian stock has a U.S. listing, buying and selling it is no problem.
If, however, you want to trade Canadian stocks that don’t have a U.S. listing, you need to open an account with a new broker.
Some of the big U.S. brokerage firms have subsidiaries that trade on foreign exchanges. These firms, called “participating members,” trade on the TSE and will show you how to buy TSE stocks online. (Source: “Member Firm Directory,” TMX Group Limited, last accessed April 10, 2018.)
These firms also offer accounts that can provide you with global access to stocks that are not traded as American depository receipts (ADRs) on a local exchange. That’s how a foreign stockbroker can be used to buy Canadian stocks.
Over-the-counter (OTC) markets (OTCQX) are for established, investor-focused U.S. and international companies. The companies found on OTCQX are recognized for the integrity of their operations and diligence with which they convey their qualifications.
On October 24, 2016, OTCQX announced the launch of the OTCQX Canada Index (OTCQXCAN), a new performance benchmark for Canadian companies on the OTCQX Best Market.
The OTCQX Canada Index points investors to top-quality Canadian companies that meet the high financial, corporate governance, and disclosure standards required to trade on the OTCQX market.
These include large and small companies from a wide range of industries, from metals and mining to life sciences and biotechnology. These companies, which are traded on the OTCQX—either on the TSE, the TSE Venture Exchange, or the Canadian Securities Exchange (CSE)—meet a minimum liquidity screen.
The OTCQXCAN features more than 120 high-quality, investor-focused Canadian companies that are not available on the U.S. exchanges. It also helps investors identify and track the performance of Canadian stocks.
The OTC market is also helpful for people who want to know, “How can I buy Canadian stocks on TD Ameritrade?”
TD Ameritrade uses a five-character code to identify the security, and it requires foreign-listed stocks to be purchased using the OTC market. If you have never purchased an OTC stock through TD Ameritrade, I suggest you call a customer service agent and get them to explain exactly how it works.
Other brokers, like E*Trade Financial Corp (NASDAQ:ETFC), will allow you to buy directly on the foreign exchange.
How to Buy Canadian Stocks with E*Trade
E*Trade, founded in 1982, is an online broker that serves 3.6 million customers.
When people ask me how to buy Canadian stocks on E*Trade, the first thing I tell them is to convert their U.S. dollars into Canadian dollars. The second thing I tell them is to purchase the E*Trade Canadian stocks directly on the TSE or the Vancouver stock exchange.
|Type of Trade||Standard||30+ Trades/Quarter|
|Stocks, Options ETFs||$6.95||$4.95|
|Short Options ($0.10 or Less)||$0.00||$0.00|
|Margin ($50k Debit Balance)||9.25%||9.25%|
|Broker-Assisted Trades||Add $25.00||Add $25.00|
Buying Canadian Stocks on Scottrade
Scottrade, Inc. is a brokerage firm that provides U.S. investors with a user-friendly online platform for trading Canadian stocks. All you have to do is open a Scottrade account online.
Canadian stocks trade on U.S. exchanges either as ADRs or as ordinary shares (ORDs). In your online Scottrade account, enter the stock symbol, the number of shares, your order type, and your time frame for buying or selling shares.
If a Canadian security is not available as an ADR or ORD, contact your local Scottrade broker for assistance.
Other Stockbrokers for Buying Canadian Stocks
As mentioned earlier, there are also other stockbrokers that offer unique advantages.
- Questrade has a reputation for having a great user experience and for being good for ETFs.
- CIBC Investor’s Edge prides itself on its fee structure, which is similar to E*Trade.
- Qtrade Investor is known for impeccable customer service.
- BMO InvestorLine prides itself on its reporting and recordkeeping.
- Virtual Brokers is reputed to be very good for ETFs.
You can use any of these brokers based on your unique needs.
Final Word on How to Buy Canada stocks
Bear in mind, you have to deal with tax issues and currency risks when trading foreign securities. Under the Canadian-U.S. Income Tax Convention, brokers will withhold Canadian income tax on dividends and stock profits. You can recover this money, however, by claiming the Foreign Tax Credit on your tax return.
Also, when trading on foreign exchanges, your price will be expressed in the currency of that country. You must exchange your U.S. dollars for Canadian dollars to buy Canadian stocks on these sites, and reverse the process when you sell them. If the currency exchange rate is unfavorable, it could affect your trading profits.