JPMorgan Chase & Co. (JPM) is not just an old and storied name in banking — it is one of the largest financial stocks publicly traded.
While it may not have the same level of influence on the US financial system as it did when its eponymous founder bailed out the US Treasury in 1895 – it is still a large financial services company, and a vast and sophisticated operation. There is a part of the US economy that JPMorgan has not touched in one way or another, which is a strong investment for many investors.
And that’s not to mention its recent historic performance: it’s up over 70% in the last five years. If all of this makes you ready to buy JPM’s shares, here’s what you need to know.
How To Buy JP Morgan
1. Choose a brokerage
If you already have a broker used to buy and sell stocks, this step is easy enough – you probably want to use your existing platform and move on to step two or three.
If you don’t have a broker, meanwhile, research some different online brokers and investment apps and consider your options carefully. Check to see what types of accounts each platform offers, such as a tax-free savings account (TFSA), registered accounts such as a Registered Education Savings Plan (RESP). Registered Retirement Savings Plan (RRSP) and General Tax Investment Accounts.
Even if you decide to work with any organization, you should review the fees and costs associated with trading in JPM and other equities. Ideally, you want a brokerage that charges no trading fees and has zero or zero minimum balance requirements.
2. Evaluate JPMorgan’s finances
Before you buy JPMorgan stock, take the time to examine the company’s finances. This will help you determine how it is being managed and whether you are comfortable with the risks involved in its operations.
You can find information about the company’s finances, including US Securities and Exchange Commission (SEC) filings and other disclosures on the company’s investor relations page or SEC database. You can supplement it with insights and research you can find at trusted Canadian third-parties, such as your brokerage or Globe Investor or Financial Post.
3. Calculate how much you want to invest
Once you know what you want to invest in JPMorgan stock, the next question is how much to buy. To determine, think about your overall finances and the role you want to play in your overall portfolio.
Do you have enough to cover your cost of living? How about an emergency fund? Are you saving enough for retirement?
If the answer to those questions is yes, then you may want to stop buying JPMorgan stock until you increase your finances. But if it is, you are free to invest in the difference in JPM and other stocks.
As you proceed, you want to keep in mind JPM’s share price. Since it recently traded at around $ 206 ($ 160 USD) per share, you may want to buy what are called fractional shares so you can divide your money around most companies. If you are planning to do this, be aware that only Wealth Simple and Interactive Brokers offer the ability to do so.
4. Determine the type of your order and place your order
To purchase JPMorgan, you need to log in to your investment account and order. Then you have to decide what kind of order you want.
For early investors, there are two main order types to consider: market and limit orders.
With a market order, you buy shares at the current market price when you enter your order.
On the other hand, the limitation order allows you to set the price at which you are willing to pay for the shares and your order is executed only if the shares can be purchased at the price you entered. This can be especially helpful for stocks that expect you to experience wild price fluctuations even when you order and execute them.
5. Keep track of currency conversion fees
If you are buying US-based stock from Canada, you are subject to a 1% to 4% currency conversion fee on a regular exchange rate. These fees apply when you buy a stock and convert it to Canadian dollars and when you sell the stock and convert American dollars into Canadian.
Fortunately, these fees can be bypassed with the following strategies:
- US Dollar Bank Account – Put money used to buy US stocks in a US dollar bank account in a Canadian bank. This way, you never have to make a currency conversion.
- Norbert’s Gambit – This is when you buy stock or ETFs that are interlinked on American and Canadian stock exchanges. You buy Canadian shares of that stock, then you ask your brokerage to “journal over” your Canadian shares and convert them into American shares of the same stock, then you can sell your American shares and use US dollars to buy any American stock you want like JPMorgan without converting the currency ETF.
6. Be aware of withholding tax
If your US stock pays a dividend, you are subject to a 15% withholding tax on income from the IRS. Thanks to a tax treaty with the US, Canada actually pays less withholding tax than other countries because the standard withholding tax is 30%.
7. Evaluate JPMorgan’s performance
After you buy your JPM shares, make a point to keep an eye on the stock’s performance and any news about the company.
Stock prices change every second of the working day — and usually late nights and even early mornings. So you want to avoid constantly monitoring it for peaks and dip. Instead, look at its percentage return in regular periods, say, every six months or so, to see how it stocks up to other types of stocks and broader market indices, such as the S&P 500.
Be sure to monitor how your finances change and grow over time, such as the filings you saw when you bought JPM in the first place.
How to Sell JPMorgan Shares
As with all investments, inevitably, the time will come when you can sell. To do so, you will need to log in to your investment account again, enter the number of shares or dollars you want and select the sales order type.
While this process is pretty easy, you should keep one important thing in mind: taxes. If you buy shares in a general investment account (such as an IRA or non-taxable thing like 429), you will have to pay taxes if you make a profit.
If you’re looking for substantial windfall, be sure to talk to a tax professional about how you can reduce the capital gains tax you pay. In the case of Canadians like you, if you own more than 5% of the US corporation and the corporation’s primary asset is non-US, you owe 50% of the capital gain value to the CRA, even on US investments. Real estate based.
You also have to pay IRS estate tax if you have $ 5 million USD or more in US investments after you die.
Other ways to invest in JPMorgan
Trading individual stocks is not for everyone. Because you are focusing your money on the performances of only a few companies, successful research requires considerable research and risk tolerance.
That is why financial experts recommend that most people focus on index funds and exchange-traded funds (ETFs). These investment vehicles allow you to buy hundreds or even thousands of companies with a single share exposure.
Fortunately, JPMorgan is incredibly easy to find in index funds. It is the 11th largest unit in the S&P 500 by weight. This means that in most S&P 500 Index funds and ETFs, you only own 1% of JPM’s per share. If you want to gain a little more JPMorgan exposure in a variety of investments, you can consider sector-based index funds.
Disclosure: As of this writing, the author owns shares in JPMorgan.