The Brokerage vs. The Account

When beginners want to start investing, they often confuse the Platform with the Account Type.

• The Brokerage (Platform): This is the company that facilitates your trades. Examples include Wealthsimple, Questrade, TD Direct Investing, or Interactive Brokers.
• The Account Type: This is the specific “basket” that holds your stocks inside the platform. Examples include a TFSA, RRSP, FHSA, or a Non-Registered Cash Account.

To start investing, you must choose both.

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Step 1: Choosing the Platform

In Canada, there are two main types of brokerages:

1. Bank-Owned Brokerages (TD Direct Investing, RBC Direct Investing)

• Pros: Integration. If you bank with TD, you can see your chequing account and your stock portfolio on the same screen. Transfers are instant.
• Cons: High fees. The big banks notoriously charge $9.95 every single time you buy or sell a stock. If you are investing $100 a week, a $10 fee instantly wipes out 10% of your money.

2. Discount Brokerages (Wealthsimple Trade, Questrade)

• Pros: Rock-bottom fees. Wealthsimple Trade offers completely free $0 commission trades on Canadian stocks and ETFs. Questrade offers free ETF purchases (though they charge to sell).
• Cons: Transfers from your main bank can take 1-2 business days.

The Verdict: If you are buying Canadian ETFs or stocks, you should exclusively use Wealthsimple Trade or Questrade to avoid $10 trading fees.

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Step 2: Choosing the Account Type

Once you open your Wealthsimple or Questrade app, it will ask you what type of account to create.

1. The Registered Accounts (TFSA, RRSP, FHSA)

These are accounts created by the Canadian government to give you tax breaks. We have covered these extensively in previous guides.

• TFSA (Tax-Free Savings Account): All stock growth and dividends are 100% tax-free. You should almost always fill this account first.
• RRSP (Registered Retirement Savings Plan): Contributions give you a tax refund today, but withdrawals are taxed in retirement.
• FHSA (First Home Savings Account): Tax refund on the way in, tax-free on the way out (if used to buy a home).

2. The Non-Registered (Cash) Account

This is a standard investment account. There are no contribution limits, and no government rules.

• The Catch: You must pay taxes on every dividend you receive, and every time you sell a stock for a profit (Capital Gains tax).
• When to use it: You should only use a Non-Registered Cash account if you have completely maxed out your TFSA, RRSP, and FHSA contribution limits.

3. The Margin Account

This is an advanced account type that allows you to borrow money from the brokerage to buy more stocks (leverage).

• The Catch: If the stock market crashes, the brokerage can issue a “Margin Call,” forcing you to deposit more cash immediately or they will forcefully sell your stocks at a loss.
• When to use it: Never, unless you are an advanced trader who deeply understands leverage and risk management.

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The Perfect Beginner Setup

If you are a Canadian looking to start investing in ETFs for the first time, your setup should be extremely simple:

1. Download the Wealthsimple app.
2. Open a TFSA account inside the app.
3. Link your bank account and transfer money.
4. Buy a broadly diversified Canadian ETF (like XEQT) for $0 in commission fees.
5. All the growth is tax-free.