List of the largest stock brokers and investment companies in Canada: trading firms rating and rankings, commissions, minimum to open an investment account.


Broker Website Type Stock/ETF
Commission
Broker Review
BMO InvestorLine Discount $9.95 BMO InvestorLine Review
CIBC Investors Edge Discount $6.95
Credential Direct Discount $8.88
Edward Jones Traditional 2.00% Edward Jones Review
HSBC InvestDirect Discount $9.88
Interactive Brokers Discount $1+ Interactive Brokers Review
Presidents Choice Discount 0.65%-1.40%
Questrade Discount $4.95+
QTrade Discount $8.75
RBC Direct Investing Discount $9.95 RBC Direct Investing Review
Scotia i-Trade Discount $4.99-$24.99
Tangerine Discount 1.07%
TD Direct Investing Discount $9.99
Trade Freedom Discount $9.95
TradeStation Discount $1+ TradeStation Review
Virtual Brokers Discount $9.99
WealthSimple Robo advisor 0.0%-0.5% WealthSimple Review


What Are Mutual Funds And How Do They Work

Full service brokerage firms listed above mostly invest their client money into mutual funds. So what are mutual funds and how do they work? Let's find out.

A mutual fund, in simple terms, is a way for people to invest in the stock market without having to worry about their own level of expertise in buying and selling stocks. Mutual funds allow investors to have a professional fund manager handle their investments, and do so in a way that protects the investor by ensuring that the fund is well diversified. Mutual funds are not for the short term investor, but for someone who plans to take a long term view toward investing their money.

Mutual fund companies have many types of funds available for the public and are managed by someone who is a professional in their area of expertise. Investment managers may manage securities such as bonds, money market funds or general securities. Being an expert in their field allows them to select stocks that they consider will help the portfolio grow.

Another advantage of using mutual funds for wealth management is that portfolio managers are usually privy to stock offerings that may not be available to the public. When a large company decides to go public, such as Facebook, mutual fund managers are usually the first to buy into the IPO. By the time the offering actually comes to market it is often completely sold out, leaving the small investor no chance to get in at the bottom.

There are two main types of funds that the best mutual fund brokers offer an average investor to use. One is an open end fund that allows investors to cash in their fund at any time, at the end of the business day. At that time the fund will have calculated its NAVs (Net Asset Value) and the investors worth may be liquidated at that time, either in whole or in part. This allows investors the ability to have cash available quickly, should the need arise. Many investors like having this kind of liquidity available to them.

The second type of common fund the best mutual fund brokers will offer is a closed fund. Closed funds are comprised of shares that are offered to the public, usually through an IPO (Initial Public Offering). These shares are then bought and sold on the stock exchange, and any investor who wants to liquidate their position must then sell it through the market to another investor. Often these funds are sold at a "discount" and not at the Net Asset Value. This type of fund is also managed by a portfolio manager the same way as an open ended fund.

Mutual fund managers often have a number of different styles of investing. A wise investor, who is considering a mutual fund investment, should interview their fund manager to ensure that they are comfortable with the manager’s style of investing. This will also depend on your assessment of what you want your portfolio to achieve. There are number of different approaches and each come with their own risk/reward features.

Some managers take a basic fundamental approach and base their stock picks on the intrinsic value of the security. Intrinsic value can be affected by economic factors and how those factors may affect the company or the industry sector in general. In this instance a manager is looking for undervalued stocks that will rise over time, while watching stocks in the portfolio that may be overvalued.

Then there are managers that use a psychological approach. In this case the manager looks at the overall mood of investors and how they are influencing the price of stocks. This is a very emotional approach to the market. When markets are in flux, as they were in late 2008, investors who became anxious about the economic mood were likely to get out of stocks and go into cash or bonds. In this case they see stocks and bonds as a safer place to have their money until the market returns to normal. On the other side of this scenario is the bull market. People become euphoric and begin buying stocks because they want to get in to a bull market. At this time a fund manager may be selling over valued stocks in their portfolio.

These two styles of investment are common approaches to investing. There are also managers who look at the markets in a more academic way. They tend to view stocks by their intrinsic value which is assessed by looking at prices in the current market. This method is not a popular one and is still being evaluated by professionals.

Then there is the portfolio manager who has an eclectic style to managing their fund. They tend to take an approach that encompasses all of the above styles. They see weaknesses and strength in the above three approaches and look to exploit those that will work best for their fund.

Although it will take a bit of research, it's important to understand your level of risk before choosing a fund manager or online mutual fund broker to invest with. Once you understand this, then you can search for a fund manager that will suit your style of investing as well as your risk level.