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How to buy Toronto Stock Exchange stocks?


October 28, 2021 ( Newswire) First of all, the question you need to ask yourself is why would you invest in the Toronto Stock Exchange in the first place. Well, it is Canada's largest stock exchange and many of Canada's largest companies are traded there. Trading the TSX will open a window for you to invest in Canadian banks, large Canadian corporations, oil and gas companies, and other natural resources and metal companies.

Canada's economy, though correlated with the US economy, has proven to be more stable, and Canada has a much smaller budget deficit compared to the States and therefore has a low and very stable inflation rate. So in fewer words, investing in Canadian stocks is considered safer and will allow an investor to invest in natural resources, but one must keep in mind that it won't offer much diversification, because it resonates with the American economy.

Some brokerage houses and online brokers in America allow trading on TSX, like E*Trade, and Ameritrade. You must verify before you invest that the particular ETFs and stocks you want to buy are traded on your chosen American broker's platform, as there's usually only a partial list available. The most convenient way is to look for the stocks or ETFs you want to buy, and then check if they're available. Read below on Canada's best ETFs and stocks to invest in 2021.

How to invest in Canada with ETFs?

The easiest way to invest in the Canadian Stock Market as an American will be to buy ETFs and if you're new to Canadian stocks, it's also the most reasonable thing to do. The Canadian ETFs you could invest in can track the whole Canadian economy, or it can track specific industries, and by investing in funds you'll minimize your exposure to risk. With time you could track and analyze specific Canadian stocks, but ETFS are the best way to start.

The most popular Canadian ETFs are:

  • Xtrackers MSCI Canada UCITS ETF 1C
  • iShares MSCI Canada UCITS ETF (Acc)
  • iShares MSCI Canada UCITS ETF (Acc)

These ETFs track Canada's largest and most liquid stocks with more than 30% annual return.

If you want to take advantage of the increasing oil and gas prices, you might want to invest in energy ETFs, and here are some of Canada's most popular ones:

  • Horizons Crude Oil ETF
  • Horizons BetaPro Crude Oil Leveraged Daily Bull ETF
  • BMO Junior Oil Index ETF

Another approach to investing in Canadian ETFs is to buy dividend ETFs, and get paid as well. Here are our top picks for Canadian dividend ETFs:

  • S&P/TSX Canadian Dividend Aristocrats Index Fund (CDZ)
  • iShares Canadian Select Dividend Index ETF (XDV)
  • FTSE Canadian High Dividend Yield Index ETF (VDY)

You can check here for the full list of Canadian dividend ETFs (and get a glimpse of individual Canadian stocks).

Best Canadian Stocks of 2021

Once you get familiar with the TSX, you might want to start investing in particular stocks you monitored. Investing in stocks helps you avoid the high Management Expense Ratio (MER) of the ETFs. Here you also have the option to choose between growth stocks and dividend stocks, depending on your desired portfolio. Here you can find information about the best TSX growth stocks and dividend stocks to invest in 2021.

However, when investing in TSX one should take into account the difference in capital gains and exchange rates. Therefore unless you're highly experienced you might want to have a consultant helping you getting started with mixing your portfolio with TSX stocks.

Trading Canadian stocks Composite ETFs and ADRs (and ADSs)

There's a simpler way to start investing in the Toronto Stock Exchange as an American. One can buy American listed ETFs that have TSX components in it, or S&P 500/TSX 60.  Another way is to buy ADRs, which is trading receipts of the Canadian companies' shares - the most common way foreign companies get traded in the US stock markets. In this manner you'll avoid the hassle involved with exchange rates and foreign capital gains.

Here are a few of the most popular composite ETFs with TSX component in them:

  • iShares Core S&P/TSX Capped Composite Index ETF
  • MSCI Canada Index Fund (NYSE: EWC)
  • S&P/TSX Venture 30 Canada ETF (NYSE: TSXV)

You can search for more composite ETFs that invest in TSX for the full  list of options. When you want to buy into specific Canadian companies, here is the full list of the Canadian companies traded in the American stock markets as ADRs.

Final thoughts

Trading in TSX will diversify your portfolio with attractive opportunities to invest in a stable and robust economy. Many of Canada's traded corporations are in the natural resources and energy industries. As an American one can buy TSX stocks directly via the most popular American brokerages and broker apps, or by investing in composite ETFs and ADRs.

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