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Jessica Moorhouse’s first attempt at do-it-yourself investing was anything but empowering. When her bank introduced the option to buy mutual funds online without going through an advisor, she decided to give it a try – and she quickly felt out of her depth.
“I didn’t understand what I was investing in,” says the certified financial counsellor and author of Everything but Money: The Hidden Barriers Between You and Financial Freedom. “And I got scared.”
She decided to move her investments to a bank with an advisor.
“I thought that was the smart, adult thing to do,” Ms. Moorhouse says. But after educating herself, she realized she was paying high fees for products she didn’t want. Her experience has been a catalyst in how she helps others find the right platform for DIY investing.
“People come to me and say, ‘Hey, I want to do DIY investing, where should I open up an account?’” Moorhouse says. “For me, that’s actually not the first question – it should always start with ‘what’s the goal and what’s the strategy?’ Then ‘what are the platforms that fit both of those aspects?’”
Diving into DIY
Ms. Moorhouse’s story is a familiar one. The pandemic-era investing boom drew in thousands of Canadians, many opening their first trading accounts, lured by social media and zero-fee trading.
According to a 2024 Canadian Securities Administrators survey of 7,200 Canadians, 45 per cent of investors said they had a self-directed account, and 30 per cent of these DIY investors first opened that account between 2022 and 2023.
For many DIY investors, convenience is the main draw, says Jean-Paul Bureaud, executive director of FAIR Canada, an investor rights organization. But convenience comes with trade-offs.
“It only takes about five minutes to open up a trading account … a lot of people might jump in right away without really thinking about it,” Mr. Bureaud says. “There are a lot of DIY investors who probably don’t have the level of knowledge and literacy that they should have, especially when they start engaging in some fairly complex investment strategies.”
Start with your strategy
Before choosing a trading app or brokerage, investors should first understand how – and why – they plan to invest, Ms. Moorhouse says. That means deciding whether to build your own portfolio of stocks and exchange-traded funds (ETFs) – a basket of assets – or take a hands-off route through a robo-advisor or all-in-one ETF that rebalances automatically.
“You’ve got to think about your comfort level, risk tolerance and education level, but also, how much time do you want to dedicate to this?” Ms. Moorhouse says.
For those who prefer simplicity, a passive, hands-off option often makes the most sense, she adds. “If you are someone who genuinely enjoys researching and you honestly believe you could beat the market, even though it’s unlikely you will, hey, good for you, go ahead.”
Finding the right fit
Once investors understand their strategies, the next step is to pick a platform that aligns with their goals and style.
Options range from commission-free mobile apps to bank or independent brokerage accounts. Key differentiators include fees, usability, account types such as tax-free savings accounts (TFSAs) and registered retirement savings accounts (RRSPs), educational resources and customer support.
“The simplest for most Canadians who use the big banks is to use the associated brokerage platform,” says Russell Sawatsky, a certified financial planner and owner of London, Ont.-based Money Architect Financial Planning.
There are also independent platforms that don’t charge commissions on products such as ETFs, a real benefit if you are buying in small amounts, Mr. Sawatsky says.
Ms. Moorhouse cautions that there’s been a deluge of new trading platforms trying to carve out a part of the Canadian market.
“I’m always more interested in maybe working with a company that’s kind of proven themselves because it makes me feel like they’re less likely to vanish,” she says.
Navigating the fees
For DIY investors, fees typically come in two main forms: the management expense ratio (MER) on funds, which is typically listed on a fund fact sheet, and trading commissions.
Mr. Bureaud says it’s important to remember that trading platforms are for-profit businesses, so even if they’re offering zero trading commissions, they’re making money in other ways.
“They may not charge you anything for executing a trade, but they may charge you a lot more, for example, if you want to buy a U.S. stock or have to exchange currency,” Mr. Bureaud says. There can also be fees for transferring accounts or leaving a platform. “You have to do your homework and look at the fee structure,” he adds.
Mr. Sawatsky says he isn’t a huge fan of commission-free trading.
“Removing the friction of fees encourages active trading, which is generally detrimental to successful investing,” he says. “Having a commission charged means that most people will tend to think twice before spending that $10 commission.”
Mr. Sawatsky encourages people to at least have $1,000 available before placing a trade. That way, even with a $10 commission, you spend no more than 1 per cent of your principal.
On your own
While trading platforms in Canada are regulated, Mr. Bureaud says DIY investors don’t get the same level of advice or protections that come with working through an advisor. Users are solely responsible for understanding the products they buy, how the platform operates, and the risks involved — including potential losses.
He points to a recent court case, Hao Yu v. TD Direct Investing, where the court ruled that an investor who lost money on trades between order and execution was solely responsible, highlighting that self-directed platforms don’t offer the protections of working with an advisor.
We use the fancy legal term caveat emptor – you’re on your own,” Mr. Bureaud says. “You live and die by your own trading decisions.”