Stocks

[futboler14]

I've recently taken an interest in investing in a series of different securities such as mutual funds and stocks.

I'm fairly young and have time on my side in terms of bear and bull markets and would like to get an idea of what assets or securties some of you hold? Because of my age, I'm leaning more towards moderate risk investing. It's daunting the amount of options a person can invest in, and I'm just testing the waters right now with some investment simulators. I'm still a little while away from investing, I'm currently trying to save up an "emergency" fund of about 3-6 months worth of expenses before I will be comfortable putting my money in the markets. This money is going into a combination of TFSA and higher interest money market funds. These seem to be the most liquidity oriented holdings for saving money in.

But after this, my first objective is to invest in income oriented stocks. Preferrably companys with a higher yield dividends of about 5% or higher. This attracts me more than growth oriented stocks as I'm still new to the whole process. Some of the best investors can't even see the future value of a company, so how is it that I can? Thats just my view on it right now. After I get my feet wet, then sure, maybe I'll look more into growth.


What do most of you invest in? And what has been your experience? Since 2008, it seems that the markets have kept a slow rise to their previous levels, have your investments recovered? Any information would be awesome.


edited for spelling

[iflyforpie]

Sounds like you are ahead of most of North America.

Low gains for long-term goals (ie: retirement, not get rich quick) are the key. Stocks are great for people who can stand to lose the money (think of it as calculated gambling). If you are anything like me, you can't. There are no $1 tables in the stock market if you know what I mean.

With hindsight it's easy to see where to invest, but we don't have the benefit of that. If so, I would have invested in Apple ten years ago and been laughing.

Money markets and TFSAs are exactly what I use for general savings because of their easy liquidity, but they don't provide a very good return (and c'mon, what's the tax on the interest going to be on what is basically a savings account?) and they can be tempting to raid for other purposes.

I've been a big fan of mutual funds for the bulk of my retirement savings (which sadly isn't as much as I would like it to be). They offer stability in diversity and generally provide better returns. I also used a portion of them for the down payment on my first house, the principle of which has done exponentially better than the investments I've left behind due to the post 9/11 and the 2008 crash. YMMV.

The big thing is to think long term and be consistent in what you put away. Like a logarithmic spiral, you start out with modest gains but it will compound greatly as the funds grow. The earlier you can start the better. I use automatic withdrawals so I am 'forced' to live within the remaining money.

[JakeYYZ]

You might want to do some research on ETF’s. They are very much like mutuals without the management fees and some pay dividends (SPY, as an example). You can buy ETF’s that mirror the various indexes, or you can buy volatility of 2x and 3x the underlying index.
As you seem to be focused on long term, dividend paying stock, I would encourage you to look
into DRIP’s (dividend reinvestment plans). Most that offer DRIP’s, are of the blue chip variety. Google it.
Personally I use stop loss orders with all ‘buys’. (Google that as well.) I never average down.
In the end, it’s all about risk management. As an aviator, I shouldn’t have to define that for you.

[futboler14]

I'm currently reading up on ETF's. The book I'm reading states that they like the options ETF's provide.

Blue chip seems to offer fairly good risk management as these are large cap companys like your Wal-Mart, McDonalds and so on. (they aren't likely going bankrupt anytime soon)

I think when the time is right, I'm probably going to be inversting in smaller cap stocks. I know micro cap (<250,000) is very risky because of the various unknowns. Small cap offers good growth but again still riskier.

I also need to find a good broker. I do not want to be buying and trading all day, racking up huge trading and management fees.

[JakeYYZ]

There are two types of broker: pay for performance and commission.
‘Pay for performance’ requires significant capital and only pays when profitable.
While ‘commission’ brokers make money, win or lose, not unlike a mutual fund salesman.
If you have the money...go with the money manager. Otherwise, educate yourself, or buy Tbills.

[futboler14]

what about discount brokers? I hear they have very small to no commisions.

[JakeYYZ]

Of course the discount broker is my preference.
If your account is 10k or your trades are 60+ over 90 days, RBC, TD ect offer a min. commission of 9.95. There are commissions to be had for as low as 3.99 per trade. Google is your friend.

[square]

Get the Porter IPO!

[v6g]

Mutual funds are only good for when you're starting out - they're very expensive - charging 2%+ in most cases - which over the long term will eat up the majority of your returns.

The only real advantage that mutual funds have is that you can drip feed into them each month for no additional cost. Once you reach a few thousand you're better off buying either ETFs (which charge <0.5% in fees) or individual stocks through a discount broker like Questrade ($5 a trade). Of course the big questions is "Which stocks should I buy?" - well the quickest answer to that question is to look at the top dozen or so mutual funds and see which stocks they invest in, you'll notice that they all invest in the same few 20-30 companies (big banks, oil companies, pipelines, telcos etc...).

Secondly, educate yourself for a few weeks, it's free and will save you tens of thousands over the decades.

Start here: http://taxtips.ca/stocksandbonds.htm

Then go to the library and get out: http://www.amazon.ca/Naked-Investor-Rev ... 0143055437 - it's a quick read that'll turn you away from financial advisors and mutual funds for good.

Then go back to the library and get out: http://www.amazon.com/Stocks-Long-Run-J ... 007058043X - it's a long boring technical book but just skim through it for a couple of days.

By this point you'll be more knowledgable about investing than 99% of the population.

Follow the advice on taxtips.ca and you'll be set for life.

[futboler14]

Thanks for the advice... taxtips.ca is bookmarked

[Lloyd Christmas]

I stay clear of mutual funds, like others have said, they have higher fees and barely beat the market over the long haul. You can create a portfolio simply out of ETF's if you want, and will pay way less fees and likely be more liquid.

Money market type investments(Bonds, GIC's, etc...) I'm not a fan of either, because with interest rates so low, they will likely go up and reduce your profit in the end, atleast at this time in the economy. But the worst part is you pay tax on them like it were income, you pay tax at your marginal tax bracket on any gains made with these type of investments.

Taxes is what I find its all about....what you have to pay the least amount of tax on is where I put my money. So naturally, I like stocks. Money made in a stock is a capital gain, and you only pay on 50% on what you make, by far the best of all investments. Next is dividends, its a slightly complicated formula, but it's # 2 behind capital gains, and you'd be surprised what 12 cents a share(random figure) can add up to over the year.(of course, the company must be profitable to have a dividend).

The best account in the market right now is the TFSA. I would suggest maxing that out if you can in the first month of the year. Any money made here is tax free of course and you can take it out and put it back in with out penalty. You can invest in anything you want with this account, IE penny stocks, higer risk stuff, whatever, lots of people dont know that I find. I'm like you and have time on my side so I do a lot of high risk stuff with this account, but to each his own, we all have our own comfort level.

I use the CIBC investors edge account, i do all my trades at my leisure and on my terms, and they have pretty good rates, and its very user friendly, and if you have questions, just call the help number and they are really great and helpful to talk to.

I guess, in a nutshell, go stocks, that's where real money can be made....but lost aswell, there are no guarantees, but statistically, they provide the best return over the long haul, and you will pay less tax on all of it, to me it makes perfect sense, I dont invest in anything else. Goodluck with your choices,

Lloyd