Investing 101

We have all heard of investing, that investing is good and everyone should start at an early age, but a majority of the people never look into it because they think it is complicated, they don’t know much about it, or because they just can’t save enough to start investing. If those were the reasons to not start investing, then we have you covered.

 

WHAT IS INVESTING?

Investing is to commit money with the expectation of achieving profit by putting it into securities with a long-term goal in mind. You set aside a sum of money and put it into companies that give a return on your investment. The goal is to let your money work you, as Warren Buffet (a well-known investor) once said:

“… the process of laying out money now to receive more money in the future.”

 

HOW MUCH TO START?

The best thing about investing is you don’t need a lot of capital to start. You can start investing with as low as $100 initially and it is recommended to add a recurring payment into your brokerage account so that you keep on accumulating an amount to invest. However, the more money you start with, the more buying power you will have, and ultimately, the more return you could get.

 

WHAT TO INVEST IN?

Try to keep it simple, invest in companies you as a consumer utilize services or products from constantly. This could be a utility company, soap or shampoo manufacturer, a bank, etc. It could also be a big-name brand, or perhaps in a category, you are knowledgeable in.

 

HOW TO INVEST?

As a beginner, it is suggested that you should go with well-established companies that offer a good dividend yield and have a good track record.

Dividends are a great form of return on investment because it is like getting paid to own the stock and on top of that you attain growth on your stock. Although it may seem like an insignificant amount of money in the beginning, it is extra money, that can be reinvested into buying another share.

With reinvesting, you can be compounding your returns. As Albert Einstein said, “Compound interest is the eighth wonder of the world …”, and there is no denying this, compounding your money can do wonders. For example, your initial deposit is $1,000 plus your monthly contribution of $100.00 at an annual interest rate of 10% will be worth $23,073.41 after 10 years when compounded quarterly, where you would have gained $10,073.41 in interest.

 

WHY YOU SHOULD START ASAP?

Investing early has many advantages, it means you are saving money that would otherwise get spent, you can get a more favorable price and potentially earning something on your investment in the form of growth. Furthermore, if you are holding on to dividend stocks, then you could be generating some extra cash and compounding your investment.

Lastly, your cash will always be losing its value sitting in a bank due to inflation, as inflation will almost always outpace the interest rate in your savings account.

 

TYPES OF INVESTMENT

Investing could be in anything, but here are some common types of investing:

TYPES OF INVESTMENTWHAT IS IT
STOCKA share in a company that can be bought or sold.
BONDSA bond is a fixed income instrument usually issued by governments to fund projects and operations. It is thought of as an I.O.U where the government borrows the money from the investor and returns the money with a fixed interest rate.
ETFA security that owns a collection of stocks. Instead of owning each company, an investor can own an ETF, which would contain a collection of stocks. ETFs can be bought and sold daily just like stocks.
MUTUAL FUNDSA professionally managed pool of money collected from investors to invest in stocks, ETFs, bonds.

 

WHAT ARE SOME GOOD PLATFORMS?

Almost all banks offer their form of investment management, which is good but they also charge a management fee. We would suggest doing it on your own to start just so you have some knowledge of how things work beforehand.

Here are 2 great online brokerages:

WEALTHSIMPLE:

Are a great online brokerage that offers no fee to buy and sell any security. They are however limited to only Canada but offer securities from US and Canadian stock exchanges. You can get an additional $10,000 managed for free for 12 months using our referral code: SHEVEQ

QUESTRADE:

I personally use QuestTrade, they have the best customer service, really great insights tools and are overall well organized. They offer their services in both countries the US and Canada. Signup using our link and you can get $25 when you open an account.