(DISCLAIMER: This entry contains an affiliate link which I stand to profit from if acted upon by the reader. As stated, this blog post is my journey and based on my own experiences, and it will be clearly stated when I use products myself, or when I have simply learned about them)
The decision is made. I’m going to invest in the stock market. Now what? How do I get my money from my pocket into a stock?
That requires a broker and here in Canada, the two most popular are Questrade and Wealthsimple. There are others. Or you can give your money to someone who can invest it for you, but the idea is to control your own future and not make someone else rich through fees and commissions.
Here are some key comparisons between Questrade and Wealthsimple to help you decide which platform to use:
Funding the Account
The first difference is Questrade requires a minimum of $1000 to start investing on their platform. Wealthsimple has no minimum. This gives Wealthsimple the advantage, as those of you out there who are literally starting from scratch can open an account with $10 and start investing.
Fees
Wealthsimple has no commission fees. Questrade charges 1 cent per share, with a minimum of $4.95 and a maximum of $9.99 every time you buy or sell a stock. At first glance, this is another advantage for Wealthsimple. And this would be true if you plan on investing strictly in stocks listed on the Toronto Stock Exchange (TSX). But if you want to buy American stocks, Questrade offers something interesting.
You can hold both Canadian and American dollars in your Questrade account. Wealthsimple only allows Canadian dollars. This becomes a major factor with conversion fees, which are usually between 1.5-2% for most platforms. With Questrade, when you buy an American stock, you pay the 1.5% conversion fee to convert your Canadian money to American. But after that, the currency will be held as American money in your account. With Wealthsimple, you will have to pay the 1.5% fee when you buy, but when you sell you will have to pay the fee again to convert the currency back to Canadian dollars. Those conversion fees can add up and in some cases end up being more than Questrade’s flat fee.
Investment Options
Questrade offers more options for investing than Wealthsimple. Not only with the types of accounts, but even the stocks themselves. There are some businesses you won’t be able to invest in (Disney being a common example). Wealthsimple only offers the basics such as TFSA and RRSP, but Questrade gives you more variety such as Mutual Funds, GIC’s, Currencies, and even IPO’s. But if you are just planning on keeping it simple and just opening a TFSA/RRSP (like me), then this really doesn’t factor in.
Dividend Reinvestment Plan
Those of you who will want to invest in dividend stocks, this may be something to take into account. Wealthsimple does not have a Dividend Reinvestment Plan (DRIP), which means the dividends you receive cannot be automatically reinvested. You will receive the cash and have to manually reinvest. Some prefer this anyway, so not a big deal. I like the DRIP because the dividends automatically buy you shares in the company, and you are not paying the commission fees when the shares are bought in this manner. And if you have a solid dividend company, it’s a good way to grow your shares (and in turn, your dividends) over time.
Analysis Tools
Questrade has the advantage when it comes to Analysis Tools. You can do a lot of research on stocks within the Questrade platform. You will have access to financial statements, news, and comparisons to comparable companies. Some of the bigger companies will also have analyst reports where they break down the pros and cons of a stock and provide what they feel the stock is worth. This provides more of a one-stop shopping experience to those of you who will want to research your own stocks and then purchase them all in one place. With Wealthsimple, you will have to use another source to research stocks.
Conclusion
If you are just starting out and plan on keeping it simple; say, opening a TFSA/RRSP and investing solely in Canadian stocks, then the commission-free Wealthsimple is a great way to go. Wealthsimple also has the robo-adviser, which allows you to be truly hands-off. Just deposit your money and it’s automatically invested for you.
If you want more flexibility and plan on taking a more active role in your investing, Questrade provides the more advanced option. I use Questrade and have been very happy, but I know people who use Wealthsimple and they are happy with that platform as well.
To create your Questrade account, click this can you facetime to get started: https://www.questrade.com/?refid=6026efcfe034a
To get started with Wealthsimple, go to: https://www.wealthsimple.com/en-ca/