Toronto Stock Exchange
The Toronto Stock Exchange is the home to the best resource sector investment opportunities in the world. Canada has more than its fair share of natural resources. It also has the talented leadership of professionals to skillfully exploit the resources for profit. This history spans generations. Resource development accounts for a significant part of the Canadian economy and employs nearly a million people in some fashion. Not surprisingly, the by-products of mining activity represent some of Canada’s most notable exports.
Toronto Stock Exchange - The Large Exchange
The Toronto Stock Exchange is the primary exchange for larger resource companies. Stocks that have a minimum amount of trading volume are generally listed here. The TSX, as it’s called, is really the lifeblood of the mining and resource investing world. Toronto, and even Vancouver, are key players in the game. They are essentially the Silicon Valley of the resource sector. Even foreign companies can be found on the TSX, as this is where like-minded banking institutions hang out. Those people who understand the game make funding all the more easy for companies in this arena.
Toronto Stock Exchange – The Small Exchange
In addition to the main Toronto Stock Exchange, there is also the TSX Venture Exchange, which you may see designated as TSX V. This smaller exchange is where you’ll find smaller companies that carry a lower daily trading volume. In some ways, it may be easiest to simply think of the TSX Venture Exchange as the NASDAQ. In this comparison, the big brother Toronto Exchange would be the New York Stock Exchange. These smaller companies may not have much in the way of assets. However, they typically have talented management and enough money in the bank to continue exploration.
Toronto Stock Exchange And Safety Versus Return
Each these exchanges tend to be good places to invest. They are both subject to solid Canadian regulation. They are also both quite liquid, as investors appreciating the opportunities that exist with resource stocks appreciate the reputation the exchanges bring to the table.
The primary difference between the two brings you to consider your penchant for safety as opposed to huge upside potential. This overly simplistic conceptualization is not to suggest that all Toronto stock Exchange listings are necessarily safe, while the TSX Venture Exchange companies are high risk. With trading volume as a primary indicator of where the stocks trade, risk may not weigh in much at all.
Nevertheless, the TSX Venture Exchange is where your smaller, speculative exploration plays reside in what we call the “junior” resource markets. The reality is that the massive natural resource deposits that you later hear household names developing are often uncovered by these smaller explorers. Herein lies the opportunity. These little companies can have a major payday when their detective work pans out and they hit it big. Investing alongside these penny stocks can produce phenomenal returns.
While things can always go wrong, the contrast to the small explorers is the larger producers. Since they are already in production, there is less play in the joints and the opportunity for disaster is more contained. The returns are often more conservative to correspond to this relative safety. However, that’s not to discount these returns. In secular bull markets, rising commodity prices can do phenomenal things to these companies and their balance sheets. As spot silver and gold prices elevate, for example, the internal rate of return can increase exponentially. In essence, the earnings reports are in a near-chronic state of escalation as the reports “chase” the rising bullion prices. In the end, you merely need to assess your risk tolerance and invest accordingly. These larger companies are the ones that populate ETF silver opportunities or gold ETF funds.
Toronto Stock Exchange And The Logistics Of Buying Canadian Stocks
Again, the TSX, as well as the TSX Venture Exchange, benefit from solid regulation, liquidity, and transparency. This actually makes investing in these companies as good, or better, as investing in stocks on the American exchanges. However, a great number of people have never purchased foreign stocks. Some are even intimidated by the process. It’s actually quite simple.
These days, online brokerage firms make it relatively easy to buy foreign stocks. While I’m not recommending E-Trade, I’ll use it as an example. An individual can establish an account and then, with a simple additional application, “upgrade” that account to access foreign exchanges. However, E-Trade doesn’t offer this service to business entities, such as LLCs, and so you will have to investigate other options.
An alternative to accessing the Toronto Stock Exchange is to buy the “Pink Sheet” proxy of select stocks when they are made available in the U.S. While some advise against this, I’ve personally never had a problem. In fact, out of convenience, I find a large number of folks buy the Pink Sheet version of the stocks. The main thing you’ll want to do is use limit orders. The bid-ask spread can be greater, so you don’t want to overpay. The Pink Sheets are also less liquid than the Toronto Stock Exchange, simply because there is smaller trading volume.