Investing

INVESTING

Investing does come with risk, but if you know what your doing and are properly prepared to make a trade then the odds of success greatly improve. Selecting a good company or companies is obviously one of the most important things to do if you want to see your account grow. There are a few basic tips and tricks that can help you make the right pick at the right time.

Top 3 Investing Tips for Beginners in 2021

1. Watch the News
The biggest tips for investing come from what happens in the news, so you must to stay on top of it! One of the most important things to watch for in 2021 is political news. Everyone knows the current political situation in the US for extreme and with new president Biden we should see some big changes. I would look for some environmental plays as I feel he will implement incentives in the industry.

3. Keep Commissions Low
There has recently been a big push toward low or even no fee trades. Platforms like Wealthsimple and Robinhood have blown up because of the way they promote their no fee trading. They also offer an enticing free stock when you open an account even though most of the time these are under $10 its free money if you were looking to start trading anyways! A no fee trading account is a great place to start and it helps to see more profits in the long run!

2. Think of the Future
2020 started off being a big year for the tech industry. We saw lots of innovative and exciting new products coming from tech; combining this with relatively cheap stock prices, tech had lots of room for growth. At the end of 2020 we saw the market hit all-time highs as COVID continued to amplify the desire to work from home and the move toward tech. As for 2021 I see a continued trend toward tech and environmental plays. Ontario, Canada recently banned all 1 time use cutlery and straws and with Biden now in power the trade should continue allowing this industry the flourish.

Who

Anyone can trade stocks and build a portfolio. If you're in school or already graduated and starting your career, you can start to investing.

What

Investing is a way to help your money grow. There are many ways to invest and build your wealth, you just need to find whats right for you.

When

Investing can be done at any age, but i wouldn't recommend just jumping in when you've saved up your first $1000. You should start trading after you've learned the basics and know the risks.

Where

You can invest in many different things like Housing, Bonds, Index Funds, Mutual funds etc, but if you want full control over your money getting into the stock market is the way to go. Opening up a TFSA investing account is one of the best ways to start building a portfolio!

Why

There are many reasons to invest your money, saving for retirement, school, buying a house but they all involve growing your wealth. Building your wealth opens up doors to many things and if you start early enough all these doors will be open when the time comes.

What I Wish I Knew Before I Started

1. There is a Risk
There is no guarantee that you will make money on every trade. You are more than likely going to lose money at one point in your investing journey, but don't let this discourage you. Even the biggest hedge funds and the most knowledgeable investors lose at one point or another. The one thing that separates you from an expert is that they cut their losses short and wait for another buying opportunity.

2. Know When to Cut Your Losses
This is very important when it comes to building your wealth. You need to be able to manage your risk to reward when it comes to trading.
A successful investor sets price targets before they even commit to a trade. You need to be able to stick to a reasonable loss and cut your profits when it hits that target. On a trade you should have your loss margins much lower than your profit margins to allow for big gains with little loss.
e.g. After you've researched a company and determined a buying price of $10 in expectations the stock will rise to $15. Your stop loss should be $8 or above. This is a very generic example that allows for a $5 profit and only a $2 loss.

3. Know When to Take a Profit
This is just as important as knowing when to cut your losses. Not taking a profit when you have the chance is something you will come to regret. This has happened to me more often than you would think, watching the market open after a big press release from a company and watching the stock go up 10%. Being greedy and waiting for another 5% gain only to watch it come back down to where it started. If you've read the news and predict that there is more profits to be made but aren't 100% sure, a good rule taught to me is to sell half of your position and let the other half ride. This will minimize your risk on the investment. Bulls, Bears make money when pigs get slaughtered. Don't let this happen to you and take your profits.

4. Fear of Missing Out
The fear of missing out leads to big losses. Do not impulse buy a stock because it has gone up a large amount in a short period of time. Sure it could go up another 5-10% but most of the time its going to come right back down. Most of the time this is because the stock was hyped up by media and is not backed by real data. Remember that there will always be another buying opportunity with a better price and with even more profits to be made.

General Investing Definitions

Ask - The highest someone is selling a stock
Bid - The highest price someone is offering for a stock
Bull Market - Stock market that is going up
Bear Market - Stock market that is going down
Capital - The amount you have invested
Dividend - An amount paid to a shareholder from the company
Inter-day trading - Trading during the day
Inter-day high - The peak a stock hits during one trading day
P/E Ratio - Price to earnings ratio, Market value per share / Earnings per share
Share - A small part of a company