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Canadian flag with stock chartThe Toronto Stock Exchange (TSX) is the biggest stock exchange in Canada and one of the top 10 largest exchanges in the world. It has been in operation since 1852. The TSX is part of the TMX Group, which also operates the TSX Venture Exchange (TSXV), an exchange for smaller growth companies, the Montreal Exchange and several other securities-related enterprises. The TSX is notable for listing more mining-related securities than any other exchange, with about 60% of all mining-related issues trading on its exchange. Investing in non-U.S. securities can enhance your returns but getting a financial advisor’s insights first will help you avoid pitfalls.

The TSX has more than 1,500 listed companies with a total market value of approximately 3.2 trillion Canadian dollars (CDN $) for an average market cap of CDN $2 billion. The TSXV has even more companies, nearly 1,700. TSXV companies are much smaller in market cap, however, totaling only CDN $45 billion combined for an average market cap of less than CDN $27 million.

How the TSX Works

The TSX, which is based in Eastern Canada in Toronto, Ontario, operates on the same hours as the New York Stock Exchange. Trades on both the TSX and the TSXV are conducted from 9:30 a.m. to 4:30 p.m. Eastern Standard Time.

In order to be listed on the TSX, companies have to have net tangible assets of at least CDN $7.5 million. TSX listed companies also must report pre-tax earnings of at least CDN $200,000.

The TSXV has two tiers of listing requirements. The more-restrictive Tier 1 requirement is for net tangible assets of CDN $1 million and pre-tax earnings of CDN $100,000. Tier 2 companies need CDN $500,000 in net tangible assets and CDN $50,000 in pre-tax earnings to qualify for listing.

Companies that do not qualify for listing on major U.S. exchanges such as the NYSE and NASDAQ may qualify for listing on the TSX and TSXV. This makes the Canadian exchanges places where investors seek out opportunities to invest in newer, less well-established and riskier companies.

Largest TSX Stocks

Despite the large number of mining companies listed on the exchange, the largest companies by market capitalization on the TSX are mostly financial institutions. And the largest market cap TSX company is a technology firm serving small and medium-sized e-commerce businesses.

The five biggest TSX companies by market capitalization are:

  1. Shopify (SHOP), an e-commerce platform company
  2. Royal Bank of Canada (RY), a global diversified financial company
  3. Toronto-Dominion Bank (TD), a bank serving Canada and the United States
  4. Canadian National Railway (CNR), a railroad and transportation company
  5. Bank of Nova Scotia (BNS), a banking company serving the Americas

Special TSX Considerations

Toronto Stock ExchangeCanada is one of the world’s largest economies and the largest trading partner of the U.S., which has the biggest economy of any country. Canada is also notable for having an unusually stable economy and has not experienced the rapid expansions and downturns that many other countries have. The stability of the Canadian economy attracts investors to shares of companies that base their operations there.

The stability means that investors are less likely to experience strong market declines, but also that the growth prospects may also be limited compared to other, more volatile economies.

How to Invest on the TSX

Many companies listed on the TSX are also listed on U.S. exchanges such as the NYSE and NASDAQ. This makes it as simple to trade securities of hundreds of TSX-listed Canadian companies as it is to trade U.S.-based public companies. Any domestic U.S. brokerage can help clients trade securities of companies listed on both TSX and U.S. exchanges.

Many U.S. brokerages also enable U.S. investors to directly buy and sell securities listed on the TSX, even if they are not listed on U.S. exchanges. A number of major online trading platforms provide similar capabilities. A client of one of these brokers or platforms can trade TSX securities much like trading securities of U.S.-based companies.

It’s also possible to invest in exchange-traded funds (ETF) that invest in TSX securities, including index funds. For instance, the S&P/TSX 60 Index includes the 60 largest TSX companies by market capitalization, weighted by sector. A number of ETFs are linked to this index.

Bottom Line

Toronto financial district

The Toronto Stock Exchange is one of the world’s biggest exchanges and the largest in Canada. It has a special emphasis on mining companies, with more mining-related securities than any other exchange. It is open for business the same hours as the NYSE and NASDAQ, and many TSX-listed companies are also listed on U.S. exchanges and can be traded by U.S. investors using domestic brokers and online platforms. The TSXV is a division catering to smaller growth companies.

Tips for Investing

  • Before investing in Canadian companies through the TSX or TSXV, consider consulting with an experienced financial advisor who can help evaluate whether trading on these exchanges is a good fit for your situation and objectives. Finding a financial advisor  doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
  • Make sure your investment assets fit your risk profile. SmartAsset’s free, easy-to-use asset allocation calculator will help align your assets with your risk tolerance.

Photo credit: ©iStock.com/pictore, ©iStock.com/ronniechua, ©iStock.com/Elijah-Lovkoff

Mark Henricks Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
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