Young Canadian Investor #9 – Useful Investing Tidbits
1. Why own stocks? Because owning one is equivalent to buying into the productive power of that company’s employees to sell products/services and make money. The better they perform, the higher the stock’s price, the more wealthy you become, and the quicker you can do as you please with your time.
2. Talking heads on financial television always come with an agenda, whether that’s sugar-coating the strengths of an investment they already hold or plan to, or supporting federal or monetary policy they would end up benefiting from. The same goes for interviewees espousing the benefits of spending within your means and making regular contributions to a retirement portfolio of stocks and bonds. One avoids being whipsawed by conflicting advice by having a financial plan and sticking to it.
3. Anytime you hear anybody make a prediction about where the stock market will be in the future, you can be sure that they’re mistaken, or lucky if they turn out to be right, regardless of the credentials they hold. Consistently predicting the future isn’t within the purview of human intelligence.
4. Unlike the USA, where buying stocks commission-free has been widely adopted, Canadians still pay anywhere between $5-$10 per buy or sell order. The best exception here is Questrade, where you can buy ETFs for free.
5. Much maligned for offering mostly super-expensive mutual funds, and fees for advice that only the gullible or misinformed should pay, Canada is slowly improving in terms of providing everyday people with access to fairly-priced investments and the information they need to understand them. Common Sense Investing and The Plain Bagel come to mind as two sources worth your eyeballs. If you’d rather read, MoneySense is a good place to start.
6. The worst thing you can do with your stocks is find yourself having to sell them when they’re down because you need the money. Another way to put this is that you should only invest money you don’t need to cover your expenses, including emergencies. That way, you’ll be able to hold on during good markets and bad and take advantage of compound interest.
7. Technical analysis, or investing based on the price movement of assets like stocks and commodities, is the financial equivalent of LARPing, or choosing to inhabit a world that runs by whatever principles you choose. Its basic premise, that you can predict buyers’ and sellers’ motives by studying price charts, refers directly back to numeral 3.
8. If you’re interested in picking individual stocks as opposed to or in addition to owning index funds, you need to be willing to dig into companies’ financial statements. In Canada, you can find them on SEDAR, or the System for Electronic Document Analysis and Retrieval.
9. Canada’s economy is made up of roughly 35% Banks, 20% Oil and Gas, 10% Industrial Manufacturing, and 10% Basic Materials like lumber and metals. Technology is only around 4%, with Health Care bringing up the rear at 0.5%. In the USA, on the other hand, Technology represents about 20% of the economy, and Health Care is 15%, which demonstrates the benefits of diversifying your investments beyond your home country.
Disclaimer: This article is meant for general education purposes only. It does not constitute financial advice as I am unaware of your personal situation. Consult with a professional who abides by a fiduciary standard before making any investment decisions.