If you are reading this section, it should mean that you’ve maximized your contributions to your RRSP and TFSA and have extra money available to consider an investment account – Congratulations!
But, if you’ve worked hard, you may now be in position to make additional investments outside of the tax-advantaged vehicles mentioned above. In this case, you have many options – from self service brokerage accounts to full service wealth management.
There are 3 major types of non-registered accounts:
With a cash account, you can quickly start managing your investments. When you purchase securities, you are required to pay them later (at the settlement date of the transaction), except for the first transaction where funds in your account must be sufficient to cover the entire cost of the trade
A margin account allows you to borrow some of the market value of the securities held in your account to purchase other investments. The maximum loan varies with the investment type and market value of the securities.
You first have to pay a certain amount of money, called the margin deposit, in partial settlement of the transaction. The sum of the margin deposit and the broker's advance equals the total cost of the trade.
Margin accounts should be used carefully since, in the event of a market downturn, you may be the subject of a "margin call" - a demand to cover losses beyond your original investment.
With a COD account, payment transactions are settled by a broker holding the securities in custody.
COD accounts are often used for new issues, where the broker buys the security and the customer pays on delivery.