What are stocks?
A stock represents a small ownership share in a company. When you buy shares of a company, you become a partial owner and can benefit from the company’s growth and success. Companies issue stocks to raise money to support operations, fund new projects and expand their business.
Stocks can offer the potential for higher returns compared to some other investments, but they also come with more risk. You can make money by selling a stock for more than you paid or by receiving dividends, which are payments some companies make to shareholders. Stocks may be a good option if you’re comfortable with market changes and have a longer-term investment goal.
Why choose stocks?
Participate in a company's success
Stock prices rise as the company does well.
If the company you invested in is doing well, its stock price will go up in value. Higher returns help grow your money and can also offset the impact of inflation as it can affect your investments over time.
Take advantage of lower tax rates
Registered accounts shelter your capital gains.
If your stocks are held in a registered account like a RRSP, RESP, or TFSA, your capital gains aren't taxable.
Receive dividend income
Some stocks pay you every quarter.
If you own dividend-paying stocks, you may receive extra income in your portfolio each quarter. Dividends are paid to shareholders out of the company's earnings.
How does it work?
Stocks are bought and sold on stock exchanges through a brokerage account. When a company becomes publicly traded through an initial public offering (IPO), investors can buy and sell shares of that company. You can use different investment accounts, including registered accounts like a TFSA, RRSP or RESP, to hold eligible investments.
There are two main types of stocks: common stocks and preferred shares. Common stocks are the most commonly traded and may include voting rights, allowing shareholders to have a say in certain company decisions. Preferred shares typically provide regular dividend payments but generally do not include voting rights.
The value of a stock can change based on many factors, including how well a company is expected to perform, economic conditions, supply and demand, interest rates and investor confidence. Because stock prices can fluctuate, it’s important to consider your goals, timeline and comfort with risk before investing.
Is this right for you?
Right for you if:
- You're okay with unpredictability. You'll need to keep your risk tolerance and capacity in mind. While stocks have historically the highest growth, they also have the potential to have high losses. Markets can be unpredictable, so make sure you understand what your goals are with stocks.
- You have long-term goals. Stocks are often a good choice for those with long-term financial goals, such as retirement planning or building wealth over several years. Over the long run, stocks have provided the potential for significant capital gains.
- You want to diversify. Stocks can play a crucial role in diversifying your investment portfolio. They can help spread the risk and reduce portfolio volatility.
May not be right for you if you:
- You have short-term financial needs. If you have immediate financial needs or expect to require access to your funds in the near future, stocks may not be the best choice. Stock prices can be highly volatile in the short term, so you could be forced to sell at a loss if you need the money right away.
- You have low risk tolerance. Stocks are riskier than some other investment options, like bonds. If you have a low risk tolerance or are uncomfortable with the potential for significant fluctuations in your investment's value, you may want to consider more conservative investments.
- You don't have time or the expertise. Being successful with stock investing often requires time for research, analysis and monitoring. If you don't have time or the knowledge to research stocks on the market, you might want to consider other investment options like ETFs, which provide diversification without the need for stock picking.
Tools to help you reach your goals.
Common questions.
Here’s what people ask us the most.
-
There are two main ways to earn money from stocks. You may earn a return if you sell your shares for more than you paid, or you may receive dividend payments from companies that share a portion of their earnings with shareholders. Not all companies pay dividends.
-
Yes. Stocks can provide the potential for higher returns, but their value can fluctuate based on company performance, economic conditions, market trends and investor sentiment. Because of this, stocks are generally better suited for investors with longer-term goals who are comfortable with market changes.
-
There are two main types of stocks: common stocks and preferred shares. Common stocks are typically traded on the stock market and may include voting rights. Preferred shares generally provide dividend income but usually do not include voting rights.
-
Yes. Stocks can be held in eligible registered accounts, including TFSAs, RRSPs and RESPs. Holding investments in a registered account may provide tax advantages depending on the account type and your situation.
-
Stocks are bought and sold through a brokerage account, which allows you to choose and manage your investments. Conexus members can work with an advisor to explore their options or use Qtrade Direct Investing® to buy and sell stocks online on their own. The right option depends on how involved you want to be in managing your investments and the level of support you need.
We're here to help.
Not sure which investment option is right for you? Our advisors can help you understand your choices, explore different options and create a plan that fits your goals and financial situation.
