No matter your level of investment, it's not a bad idea to know a thing or two about the Toronto Stock Exchange, Canada's biggest stock market. So here's a roundup of things you likely don't know about it. If it doesn't help you invest better, at least it'll give you something to talk about at your next dinner party.
1. There are a lot of companies to choose from in Canada
Canada has two main exchanges: the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSXV). The TSX is meant for companies with more than $7.5 million in net tangible assets; the TSXV is for companies with less than that.
In total there are 3,985 companies listed on the exchanges, 1,561 on the TSX and 2,424 on the TSXV. It's the TSX where you'll find Canada's most well-known companies, like Research in Motion and Suncor Energy. The TSXV has smaller, mostly unknown businesses.
2. Most of the Canadian market is concentrated in two sectors
Most investment experts say it's not a good idea to only invest in Canada. That's because our market is heavily weighted to just two sectors: energy and financials. The entire market capitalization of the TSX (it's a calculation investors use to measure the size of a company or market) is about $2.12 billion. Of that total, 22 per cent is in financials, 23 per cent in mining and 18 per cent in oil and gas. If you want to be exposed to other business sectors, such as technology or health care, you'll have to invest elsewhere, such as in the U.S. market.
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3. The TSX has more than stocks
It's not just companies on the TSX -- at the end of last year, 174 exchange-traded funds (ETFs) were listed as well. ETFs trade exactly like companies do -- they're essentially stocks that track an index -- which is why they're listed on the TSX.
Between 2000 (when only four ETFs were listed) and 2010, the number of ETFs on the TSX grew by 4,250 per cent. Of the ETFs listed, just over 20 per cent are sector-specific funds, 20 per cent are international, 16 per cent are commodity ETFs and 16 per cent are fixed income funds. Other ETFs include those that track the S&P/TSX Composite Index and currency ETFs.
4. The TSX has a 150-year history
The TSX was created by 24 men in October 1861. There were only 18 stocks listed on the exchange, mostly banks and real estate companies. According to Invetopedia.com, at that time there was one daily 30-minute trading session, during which just a few transactions would take place.
At first it cost only $5 for companies to list on the Toronto Stock Exchange, but that increased to $250 a decade later. (It now costs between $500,000 and $1 million after all fees are accounted for.) By 1901 there were 100 companies on the TSX and in 1913 the exchange moved into its very own building. By 1936 the TSX was North America's third largest exchange.
5. There are other exchanges in Canada, too
The TMX Group, which owns the TSX and TSXV, also runs a number of other exchanges, including the Montreal Exchange, which was actually the first Canadian exchange. It's now a place where people trade derivatives, like options and futures. It also owns the NEX, which is a place where people can buy and sell companies that are too small to list on the TSXV, as well as the Boston Options Exchange, a U.S.-based derivative exchange.
While none of this information will make you more money on its own, it's always a good idea to know who or what you're dealing with when you're investing. The better you understand how our markets work, the better an investor you'll become.
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