Getting Started
1. Choose a trading platform
A trading platform with low or no fees is ideal.
If you're in Canada, check out Wealthsimple for commission-free trades. (Highly recommended!)
2. Research into the type of account best for you
If you're in Canada, take a look at my blog discussing the types of accounts best for your savings such as RRSP, RESP or TFSA.
3. Deposit a $100 and wait for money to become available for trading
This may take longer on your first deposit.
If you use this referral link to signup at WealthSimple*, you'll get a bonus of $10 upon trading a $100. That's 10% profit right away!
Stock Picking
1. Don't put all your eggs in one basket
If you fail to plan, you plan to fail!
Plan your trading strategy with diversification of stocks across different sectors.
As a beginner, my personal advise would be the following Investing plan;
- 30% Individual Stocks (Med-High Risk)
- 30% ETFs (Low Risk)
- 20% Gold/Metal/Bond (Recession Haven)
- 20% Cryto-currency (Very Volatile)
2. Tips for Individual Stocks
When your taxi driver tells you to buy a stock, it's time to sell it!
Don't chase the popular stocks which have already achieved their saturation point, always do your own diligence by having a look at company's financials such as yearly and quarterly earnings, debts, news and investors analysis. (You can get all this information in a snap on Yahoo Finance!)
Don't believe the hype!
Heard about a stock which everyone is after? Consider the following!
- Is this just a hype (meme) stock?
- Has this stock already gone up more than 30% in last 3-5 days?
- Is the company even profitable?
- Is the stock at its 52-week high?
- Is it in a downward trend following negative news?
If the answer to any of the above is yes, stay away!
Always invest in the intrinsic value of the company and the pick stocks which you feel are under-valued.
3. Tips for ETFs
Spread the Risk!
Another way to invest in the stock market is through ETFs. ETF is basically a basket of stock, with multiple stocks within a particular ticker.
This is one of the safest ways to invest due to the risk spread over multiple stocks and the fund itself managed by an institution. It's great to grow your investments in a gradual risk-free manner.
The downside to it is that ETFs may charge a small fee as MER % and lower risk means lower return on investment.
There’re a variety of ETFs trading on the stock market and you can find one for every industry. But a good strategy to invest in ETF is by researching its portfolio and looking at its MER %.
Some popular ETFs with low management fees;
CAD Market
XIC | VCN |
ZCN | HXT (non-reg) |
Int’l Market
XEF | XEC (emerging) |
Bonds
ZAG | VAB |
4. Risk Management
Opportunity & Risk come in pairs!
Leaving a little bit of money for highly volatile crypto-currency market is advised with caution as it can offer big returns but can also incur in huge losses. Now you can use your registered savings accounts to buy cryptocurrency via ETFs such as $EBIT, $BTCC & $BTCX.
Therefore investing a portion of your portfolio in Gold/Bond market is also advised in case there’s a market crash or recession as experienced recently in March 2020 due to corona virus. These are safe havens for investors when they lose confidence in the stock market.
Buying & Selling Strategy
1. Buying
There’re a few different ways to buy a stock on most platforms:
Market Buy - Buy at ongoing Market Price (not ideal due to volatility).
Limit Buy - Buy when the price hits a particular price point BELOW the current price.
Stop Limit Buy - Buy when the price hits a particular price point ABOVE the current price.
Always use Limit Buy or Stop Limit Buy to purchase at price you feel is right after doing your due diligence.
When’s the best time to Buy?
Firstly, make sure you’ve done your due diligence on a stock and if everything looks good, it's ideal to buy under following conditions:
- When the stock is near its 52-week low,
- When the stock price is climbing and trending upwards,
- When the earnings are due to come out in upcoming days,
- Check out the trend of ex-dividend dates and buy a couple of weeks before the next expected ex-dividend date.
2. Selling
Just like Buying, even Selling is done in a few different ways.
Market Sell - Sell at ongoing Market Price.
Limit Sell - Sell when the price hits a particular price point ABOVE the current price.
Stop Limit Sell- Sell when the price hits a particular price point BELOW the current price (stop loss or take profit).
Always use Limit Sell or Stop Limit Sell to make sure you get your desired level of return.
When’s the best time to Sell?
Once your stock becomes profitable, start using Stop Limit Sell to secure your gains. Make sure you keep adjusting it to take in account the price fluctuation while also increasing your gain.
3. Realize Your Gains & Reinvest
Pay-tience gets you Paid!
Monitor how your stocks are performing either through an excel spreadsheet or through Yahoo Finance where you can get a live snapshot of how your stocks are doing and get the latest news regarding your stocks.
Never sell due to the emotion of losing money and never buy due to fear of missing out. Control your emotions, be patient and focus on the financials.
Realize your profits and reinvest according to your initial investing plan to rebalance your portfolio.
Remember, you only lose money on a falling stock when you sell it!
More to follow... What's your best investing tip?
Nauman Wasif
*Wealthsimple Trade is Canada's first $0 commission stock trading app – sign up now and we'll both get $10 to trade.
The information in this blog is for knowledge sharing only. Please do your own due diligence before taking a position in any market.
I may update the content of my posts from time to time to make them look better and understandable likewise my thoughts and opinions may also change as the market conditions evolve.
The views expressed here are my own and do not necessarily reflect the views of any other individual, business entity, or organization. The views expressed by visitors on this blog are theirs solely and may not reflect mine.
No comments:
Post a Comment