Discount Brokerages VS Traditional Investment Banks
In today’s low interest rate environment the big banks of Canada are competing for consumer mortgage loans at incredible low rates. They are starting to make up for this loss of revenue with increased over draft charges, increased monthly fees, and commission/exchange rate fees. With the average commission at 20-25$ and a 1-2% exchange rate fee in Canada, protecting yourself through low commissions and taxes can be vital to obtaining above average gains.
Discount brokerage, Questrade is my personal favorite and I have recently transferred my TFSA from Scotiabank to Questrade. With an average price of 5$ commission fees and below 0.5% exchange rate, individual investing is made possible saving a bulk amount of principal on transaction costs.
A TFSA can be a very useful investment tool for small individual investors looking to protect capital gains and dividend tax. I would advise talking to a financial planner about opening one A.S.A.P, but be aware that Discount Brokerages do offer better alternatives and lower prices for individual investors. These small fees when left unnoticed can accumulate to be over 4% of your purchase price, decreasing returns before you even start. Discount brokerages can offer far better promotions and lower fees because of the lack of competition and low percentage loan portfolios (using margin calls to guarantee loans are re-paid).
Capital Gains tax is only realized when you sell and close a transaction, so be aware the best holding period is long term to avoid excessive tax on your earnings. A TFSA is also a tax shelter protecting all gains, but is only available in Canada. These are all my personal opinions and tips for teaching/helping new and individual investors travel on the road to financial freedom while saving you the trouble of learning from experience.
For further understanding conduct research and contact trusted advisors.