Short Selling

There are so many different ways to make money in the stock market. The most basic way with stock shares is to buy them low enough and then sell them at a higher price later.

Did you know that it’s possible to make money in the reverse? You can sell shares in the market at a higher price first and then buy them back at a lower price later. This is called short selling.

The concept of short selling had me confused at first. I’d only heard that it was something a lot of traders did when they anticipated a drop in stock prices. None of it made sense until I executed my first short sale.


My First Short 

Many years ago, a certain company messed up royally and was getting a lot of bad press. Shareholders were selling in a panic and the share price was dropping in high volumes. I saw that the price was at around $76 and I believed it would go down more. I lined up my order to sell 600 shares at the current market price and I hit, “Short.”

After that, the price fell considerably. In the order box I clicked on, “Cover,” and I bought back 600 shares at the new market price of $74.75. That is a share price difference of $1.25. With 600 shares, I made $750, excluding commissions.

Broken down, it looks like this:

  • I short sell 600 shares for $76 per share (600 x $76 = $45,600). By doing that, I’m borrowing the shares from my brokerage to sell in the market for that price;
  • The share price falls;
  • Then I buy back (or cover) 600 shares at the current price of $74.75 (600 x 74.75 = $44,850)
  • At the end of my trade, those borrowed shares are returned to my broker. I get to keep the difference in the short sale for a profit of $750;
  • $45,600 – $44,850 = $750.

Despite the order at which the transactions occurred, the concept of buying low (at $74.75) and selling higher (at $76) is still preserved.


The Downside of Short Selling

As great as it sounds to make money when share prices are heading down, short selling is a riskier practice. Here are some reasons to consider:

1.Many investors don’t short sell or even know what that is. This means you don’t always have the majority of the market on your side.

2. Shorting is made possible when your brokerage firm has the shares to loan you from its own inventory of stocks. These stocks are either from the firm’s own positions or from the positions of the firm’s clients. If your broker doesn’t have the shares to loan you, you cannot short sell the stock. You end up missing out.

3. The market is generally optimistic. This means the fear and panic don’t always last as long as you might hope to support your short sell. Price reversals can happen fast. You generally need to have a shorter time horizon for shorts and you need to be watching your positions more closely.

4. When you buy a stock in the standard fashion, the worst thing that can happen is that your share price drops to zero before you’re able to sell it. In this scenario, the most you can lose is the entire amount of your investment. When you short a stock, the share price can go up indefinitely — this means you can lose more than the entire amount of your original position. Potential unlimited losses is what makes shorting considered a high-risk practice.

5. Profits from short selling are normally taxed as income rather than as capital gains. This is not favourable taxation.

6. If the company that you’re short selling is paying out a dividend, you have to pay the dividends owing to your firm or to the client those shares are being borrowed from.


Why I Don’t Short Sell

The reasons above are enough to discourage me from shorting, though there are many more that I haven’t mentioned. Short selling is a more advanced way to make money in the stock market and is best left to the pros. I don’t short stocks anymore because I prefer to own them.

I normally don’t discuss short selling because it’s not for most people, not to mention it’s really confusing. I only feel like it’s relevant to discuss shorting in a market like the current one so that new investors can understand the additional reasons why the prices of their stocks might be going down so much. It’s not just from investors collecting profits or abandoning their stocks out of fear of losing more — it’s also from short sellers trying to profit.

After the short sellers have had their fun and after all the panic selling and pessimism have subsided, it usually takes a while for a stock to recover before going up again with more investor confidence. I’ve got my wish list of stocks to consider buying when all the selling is over, so I’m just waiting for good setups and a better market.


Alternatives to Short Selling

Even when the whole market is negative, I don’t always want to sell my stocks, nor do I short any stocks, as you already know. Sometimes to combat the downward funk, I will buy shares of inverse ETFs to make money in the interim.

Inverse ETFs are exchange-traded funds made up of more complex financial instruments that generate money when the market is moving down. Like a regular ETF, its movements mimic the market index ETF it is modelled after, however, it’s designed to go in the opposite direction. Basically, when the market index goes down, the inverse ETF goes up. 

Index ETFs are often created in a way to move up to 3 times more than the index performance or up to 3 times less. These differences in performance can either enhance your trade or really hurt it when you’re wrong.  You have to be careful and consider this when selecting ETFs.

I still regard buying an inverse ETF a very risky strategy as it’s still in theory ‘shorting’ the market. Also, inverse ETFs tend to have higher management fees because they consist of higher maintenance assets than most regular ETFs. Higher fees and MERs in funds diminish their value and overall returns. For this reason, I usually only buy and sell them for shorter-term swing trades.


Before investing in an inverse ETF or deciding to short sell anything, please consider the risks. At this point in time (it’s December 2018), I think the market will go up a bit more before it goes down again early in the new year. We’re so close to the year’s lowest trading levels of the US markets. I don’t think things will really start moving up again until we at least break below those 2018 levels first.

I know a lot of investors who have been feeling beat up and want to do something to save their portfolios. If you’ve been feeling this way for the last few months, the best thing to do at this point is to think of your future strategies for your portfolio and be ready for them once the market is more positive.

Remember that downswings and bear markets are a normal part of the cycle for stocks – nothing goes only in one direction forever. Going short now after the market has gone down so much is not only is riskier, the returns won’t be as great had you gone short in early fall.

My Best Investment

Back to school

I always get nostalgic this time of year.

Once upon a time, in a faraway land, I was a fretting teenager about to finish high school. While all the other girls were obsessing over prom and what college they were going to, my own world was crashing around me. My boyfriend dumped me two weeks before prom, leaving me dateless. That was also the year my father became chronically ill and was ordered to go on medical leave. There would be no college fund to support me. I was admitted to the university I had set my sights on, but I had no idea how I was going to afford it.

Humiliated and defeated, I opted to lowball my expectations on everything. I wouldn’t go to prom and I wouldn’t go to university. I had some great excuses to stop caring, so I leaned into them. My friends became my fairy godmothers. One took it upon herself to find me a date. Through her grad date, she managed to set me up with a model/actor (or actor/model?). My other friend made me copy and study her year’s worth of notes for my Biology 12 exam, the most demanding subject I had to study for that year. Because of my friends’ clutch support, I was motivated to keep going.

With Starbucks’ chocolate covered coffee beans to keep me jacked, I crammed like a champ. I aced everything that counted and I finished with honours. My grad date, whom everyone ogled that night, turned out to be a seasoned partier. Instead of binge-drinking at a house party with the other grads after prom, my friends and I followed our dates to a rave in Vancouver’s Downtown Eastside where we danced until four in the morning. I took a cab home with my bestie as the sun was rising. I finished high school feeling like a rock star.

My next problem was going to be going to university. I got a job, but I couldn’t qualify for a student loan because the tax year prior to my dad’s medical leave stated he made a lot. The financial issue was moot as I didn’t even know what I was going to study even if I could afford school. With no money and no clear ambition, it made no sense for me to go to study at all.

I continued to work. Without any goals to anchor me, I spent my money faster than it came in. I was living the Gen X dream buying beer, candy, and cigarettes, watching movies all day, wondering about the future. I’ve told this story many times before and it’s because it was critical to everything I’ve ever done thereafter. My boss saw how much money I was quickly wasting after each payday. She gave me a talking to and told me how to start saving and investing. Her persuasive sisterly coercion got me going to the bank and getting started. Then after saving for a while, things changed. With money in the bank, I saw school as a possibility. Determined to go to law school, I reapplied to university.

I finished my bachelor’s in record time (thanks, Starbucks coffee beans!). By the end of it, though, I decided not to go to law school. With good financial habits and the benefit of going to university when it was still affordable, I graduated with no student debts. I traveled a lot and lived overseas for a few years but came back to Canada. Even though my studies in humanities was never directly applicable to any line of work I sought, having a degree gave me better job options.

After ten years of drifting, I was still by definition a slacker, but at least I had savings. I brainstormed many possibilities on where I was headed next. I found I was most curious about opening a business. This led to my part-time studies in business school and eventually, further studies and pursuits in investing and the stock market.

Today, I am once again a student. I am deeply curious about how the stock market works on the inside. I know what it is to be a trader/investor, but what happens behind the curtain is what I really want to know next. I am currently enrolled with the Canadian Securities Institute, working towards my Certificate in Equity Trading & Sales. I don’t know exactly where studying this will take me; whether I trade for others or still just myself, I will always be a trader, only a more educated one.

Whether you achieve your career peak and hit your financial goals, learning should never stop. You can take courses or just read books that will help you develop in parts of your life that you feel need focus. In the long run, being dedicated to your personal and professional development really is the best investment.

Money Talks

 

Recently, I did a presentation at the Toronto Public Library on investment basics. I had no idea how it would turn out, but I ran through my head a number of best and worst-case scenarios. It was better than I could’ve ever imagined.

I’d never seen a more diverse audience in age, background, and investment interests. Each person was comfortable enough to engage or ask questions – great questions, I might add. To all those who attended, I’d like to offer my deepest gratitude for your participation. This was the conversation I’ve been dying to have with people. This is the type of conversation more Canadians need to have with each other.

Today I’m going to share with you the questions that I can remember. I’ll add parts of my original answers, but I want to answer the questions more fully. These are in no particular order.


How long does it take for you to do your investment research each week?

Now, it’s a few hours a week, anywhere from two to six hours. But I also apply up to 20,000 hours of previous learning and experience. I hope that I can help others enough so that you don’t have to take as long as I did to learn how to invest.

I’d like to also add that many of my decisions result from bouncing ideas off my man, JP. He has put in the time and discipline to learn as well. We have the advantage of combined knowledge and experience. I share a lot of these very ideas in my weekly blog.

As much as I’d like to spend more time doing research and trading more actively, I would become more prone to micro-managing my trades. I’ve done a lot better with a more passive and hands-off approach.

How did you get a 70% return last year?

2015 was a terrible year for the Canadian market. The loonie and the Canadian economy were weak. We patiently waited for the market to stop going down. This happened around late February 2016. We looked for stocks that we knew traded actively and had suffered huge drops in share price. It was a very good time to get into the market. These opportunities don’t come very often.

We bought shares in TECK.B.TO, ECA.TO, BBD.B.TO when they were really cheap, and then in April, bought some APH.V (now APH.TO). We bought a few other stocks, but these few alone did very well after just a few months. We kept selling shares incrementally each time the stocks surged in order to secure profits (called ‘selling into the strength’), but they kept going up. We could’ve done much better had we just kept the shares in and moved up our stops (selling prices). It became a decision between banking on certain profits and waiting to see what will happen. We did a bit of both and we still have shares in all those stocks.

I don’t anticipate as big a return this year, unless the market has a major correction, soon after which there’ll be many more big buying opportunities (a bad and selfish thing to wish and wait for, I know, but…). My US portfolio, though, has been my big winner this year because I had the same idea with US tech stocks last summer.

One of the things I always say is that investors are always looking for new opportunities.

What ETF should I buy?

Many financial institutions create ETFs. Some are:

  • BMO
  • Horizons
  • Vanguard
  • iShares
  • Claymore

When doing your research, consider your investment objective – dividend income, market index performance, sector selection (like banking), fixed income, etc. Also consider the MER, share price, distributions, and frequency of distribution payments, to name a few things. You can look up this information on the ETF info sheet. For me, I only select among ETFs with higher trade volume.

Market ETFs can swing a lot in price because of the demand of traders in the market. So the ETF might be worth more (or less) than its actual value (NAV). Would it make sense to put some money in a market index ETF and some in an index mutual fund (which will be less prone to price swings)?

If you want to invest in the market, consider an ETF or an index fund – or both. The major distinction between these is the MER as it’s a lot higher for mutual funds than it is for ETFs; however, it can be more affordable to buy units in an index fund than it would be to buy shares in an ETF.

An actively traded market ETF can experience more volatility than the actual index it’s based on. Its price will vary based on the demands of buyers in the market. If buyers drive the price up, it’s possible for the ETF to be worth more than the net asset value (NAV) of its assets, so you’re paying a premium in share price. If investors are fearful, heavy selling can drive its price down below its NAV, so it’ll be trading at a discount. For index funds, the NAV is what it is after the market closes. At the end of the day, you shouldn’t notice a big difference between similar index funds, be it an ETF or a mutual fund. (If you do, the mutual fund will likely be underperforming because of the MER.)

What’s most important is that you’re 1) comfortable in what you’re investing in, and 2) you’re not paying too much in fees.

What do you think of mortgage-backed securities?

These have had a bad reputation as these were hugely responsible for the 2008 recession, but mainly because they were deregulated. They’re just bundles of mortgage loans that pay investors interest.

If you’re after real estate income, the REIT (real estate income trust) is great because it can pay investors their share of the distributions which will come from a mix of rent, mortgage interest, capital gains, as well as return of capital. You can also get real estate ETFs. Because of the mixed forms of investment income that come from these, they’re best held in registered accounts. Also, keep in mind the MER. I own a couple of these to add diversification to my portfolio. Other than the value of real estate happening in my own backyard, I don’t really follow the real estate market as much as I should.

What brokerages do you use?

I have opened accounts in the past with Disnat Direct and Questrade. I now have accounts with Virtual Brokers and Interactive Brokers. I’ve been with the last two for years.

What do you pay in commissions per trade?

With Virtual Brokers, I pay 1 penny per share. It’s less if the stock price is under $1. With Interactive Brokers, it’s 1 penny per share, but a minimum of $1 per trade. So if I buy 125 shares, I pay $1.25 plus any market data fees.

Both of these accounts were opened as margin accounts – trading on margin means you need to open with and maintain a minimum amount of cash in the account which allows you  3 times the buying power. So if you open with $25,000, your buying power is $75,000. To attract active traders, the commission fees are very low.

I also have TFSA and RRSP accounts with Virtual Brokers (VB). Thanks to JP’s slick skills in negotiation, we managed to have the same awesome rates extend from the margin account to our registered accounts. Often with registered accounts, you get charged a quarterly administrative fee. With VB, they do charge $25 plus HST unless your account has a minimum of $5000 in it.

I am an active FOREX trader. How should I be doing my taxes every year?

With an accountant. I did our taxes the first couple of years we started day trading. I had the advice of a friend who’s an accountant. She gave me samples on how to calculate the adjusted cost base of securities and their exchange rates, etc. It was actually a really good exercise in learning about taxation for the self-employed and how to factor in fees and expenses; on the other hand, it was a total headache. After that, we started using an accountant who magically does it all in a few days.

What is your take on robo-advisors?

They’re great if you don’t know what stocks or ETFs to buy, or when to sell them. They take away from you the inconvenience of guessing and researching and they make those decisions for you. I’d just be cautious about the frequency that the portfolio is rebalanced and focus on the ones that meet your criteria and charge the lowest fees. As you get more comfortable and savvy with reading the market, you should compare how your portfolio is performing against it and decide then if you might be better off investing in an ETF.

What is your advice for women and their investment choices, especially as they age?

Women have developed a reputation for being great long-term investors because we typically make conservative, less risky decisions. I feel that the financial markets have shifted so that being conservative could work against us in the long-term. Those traditionally conservative decisions, like owning a lot of GICs and low-risk mutual funds, could leave us with less money than what we actually need to have, especially as we live longer and longer. We should be thinking about how our portfolios need to keep generating income as we age. In my opinion, we should consider dedicating more of our portfolio to more medium-risk choices, like blue chip funds or stocks that pay us a dividend.

I know I have a pretty aggressive approach when it comes to making money, but I’m careful with most of my money and more risky with a smaller amount of it (or maybe that’s just what I tell myself and it’s more like half and half). A big part of my own early retirement plan is to live off of dividends, although I still want to make money on capital gains if I have to sell my shares to rebalance my portfolio.

What are good websites that could tell me more about Canadian securities?

I drew a blank – thank you to the audience members for their helpful input. Motley Fool Canada and Retire Happy were mentioned. I also think that Canadian Couch Potato and My Own Advisor are excellent.

You must have a really diverse portfolio?

Yes. It not only keeps things interesting, it spreads and reduces the risk factors within my portfolio. A lot of my trade decisions come from looking at the sector or industry first. That’s why the economy is a big part of my book. I have stocks and ETFs across many different sectors.

I risk very little for each stock, so I’m not worried if it turns out to be a dud (a rare occurrence). After a while, if I like a stock enough, I’ll buy more shares if there’s a new entry (called scaling in).

How do you research fundamentals?

I said I cared about two things: the price I got in at and dividends. I’ll admit, it was a shortcut answer. I don’t pay as much attention as I should to the fundamentals mainly because I learned about stocks from traders who studied price charts and used only technical analysis. When it comes down to it, even if a company’s fundamentals look good, if the stock price has gone too far up or isn’t trading well, I just won’t enter.

I use technical analysis for all my decisions and I apply very general guidelines when considering a company’s fundamentals. One day, I’d like to take the time to figure out how to use both forms of analysis to become an even better trader. For now, I rely on good charts that indicate signs that a trend is about to start; I look at the sector the stock is in; and I compare the stock to other stocks in its sector. Then I cross my fingers hoping that the rest of the market catches on and buys the stock up.


We all have different ideas on what we want to do with our money. There are so many different ways to apply strategies, even between people who have similar takes on risk and opportunity. What I think we all need to have is a general basis of knowledge and from there, we each can branch out and find our own approach to investing.

Thank you, TPL! I had a wonderful evening.

 

 

My Book, One Year Later

 

Happy Anniversary!

It was just a year ago that I got my book from the distributor in the mail. There were a lot of things running through my mind as to what my next moves were going to be to promote Loonie to Toonie. When I first started writing my book, I was just more set on writing it really well and getting it done. I figured the rest would take care of itself once it was published.

So much has happened in the last year. After doing a lot of new things, I certainly learned a lot about myself. I figured out what I’m comfortable with and what I actually dread. I found myself leaning towards what I’m most passionate about, which is helping and educating people who are really excited about investing.

There are many components to writing and publishing a book. Would I do it again? Maybe. I dedicated a lot of hours figuring things out, so the next time around, it should be easier. I’ll share my journey and process, and hopefully, offer some insight to any budding authors out there.


The Writing Process: Ego vs. Audience

There is a huge amount of ego required to take on a huge project such as writing a book and seeing it to its completion. Your ego is what fuels your drive; this is not a bad thing – it’s actually necessary. Use it to feverishly brainstorm, explore your ideas, flesh out your concepts, and challenge what you’ve already come up with. At some point, your ego will have to step aside so that you can ask yourself objectively, “How can I write this better?”

To tighten up your work, you’ll have to consider your audience. Once you hook in your readers, what will it take for them to keep turning the pages? You need to find a way to consistently engage them. For me, this was a challenge because I prefer fiction. I’m a die-hard story-loving reader, and the last person you’d ever expect to be a stock trader. To write a book on finance was a complete departure from my personality. I realized that given my skills in stock picking and interest in writing, I had to somehow turn my non-fiction piece into my own art form.

I’d written long and short screenplays in the past, so I became more sensitive to voice, tone, and consistency. I absolutely love movies! However, because of my screenwriting experience, I can no longer watch them without breaking down theme, tone, voice, character, setting, pace, beats, cinematography, editing, soundtrack, etc. I tapped into this habit of analysis to get me out of my writing funk, which came and went after each writing attempt over the course of five years.

When I was beginning to write my book, all I could do was introduce each topic by talking about my own relationship with money and the experiences that turned things around for me. It was one self-centred page after the next. I feared that only some readers would appreciate my experiences while others would be thinking, “Okay, you too sucked at money management. Move on and tell me how I can make money.” There are a lot of great personal finance books out there, but many are inundated with anecdotes. If I wanted to write for the wider, more diverse audience of Canada, I needed to consider that not everyone will have the same cultural and generational references.

I felt I couldn’t do justice to the book I wanted to write, so I decided to quit. As a last-ditch effort, I re-wrote a stripped down version of my chapter on the economy. I liked its simplicity. Then I did the same thing for my section on money. I unexpectedly found the voice necessary to write for my intended audience: new investors who didn’t know where to start and didn’t have time to waste comparing financial lessons and life experiences.

The Writing Schedule

I was committed to writing and getting this book done ASAP. To free up my time, I re-focused my trade strategies on holding stocks for longer periods of time. This way, I wasn’t required to log on to the markets every day or watch them all day long.

I had my own office space for trading, but I felt I couldn’t write there. I created a special writing space in the corner of my bedroom. I arranged all my reference books so that they could be readily and easily accessed. I organized all my information and research into folders and I had a whole filing system going on. I became my own office assistant!

Given my drive to write and the number of hours I could dedicate outside my job of managing a neighbouring property, I figured I could write a chapter each week. I also had the huge hurdle of being self-conscious of writing something that the public will one day be reading. To get over it, I signed up for a free blog site on WordPress and I committed to blogging and publishing a chapter every Tuesday. I did this for a few months for the first half of the book. After that, I continued to write a chapter per week, only I didn’t blog them.

What I found good about blogging my work wasn’t just the regular schedule, but it also gave me a real sense of accountability for publishing information. The rush of putting out your work for your friends to see gave me a glimpse of what it would be like to have my blood, sweat, and tears made public and available to criticism. It exposed me to the vulnerability of being an author. It also made me realize the accountability that comes with misinformation. It would take me one to two days to blitz-write a chapter and the next five days fact-checking against the clock until blog day. I vigilantly challenged every sentence’s construction, every idea I thought was true, as well as the proper usage of financial terms (the semantics are often very different from regular English).

Getting Professional Assistance

I didn’t have the time nor the experience to figure out how to publish my book. I personally knew a lot of smart, creative people who wrote books, pitched publishers, and then…waited for their rejections. For me, my traditional publishing options were even fewer because I was writing non-fiction with a focus on personal finance. I’d be approaching publishers who already published books for celebrity financial planners and famous business tycoons. I also feared that a publisher wouldn’t dedicate much marketing efforts for an unknown author. I couldn’t risk any of those things. I knew what I wanted to be done for my book and I was the only person I could trust to do it. Plus, I wanted to keep all of my royalties. Self-publishing was the only way.

I looked around and found Tellwell Talent, based out of Victoria. Their website alone was so informative as it broke down the process of publishing on your own. On top of that, you got to keep all of your royalties. A lot of other self-publishing services take a cut of your royalties. You pay for Tellwell’s extensive services (ISBN, cover design, interior layout, editing, marketing and publicity consultation, distributing, etc.). Once you publish, you keep the money your book makes from sales after your distributor takes its cut for printing your book.

I was set up with a project manager (Hi, Erin!), who was the go-between me and the designer and editor. They were all so helpful and informative throughout the whole process. I’m sure I was no cakewalk to deal with either! While I was still writing my book, I worked with the designer for my cover until I was ready to give my draft for editing.

I often wondered if other authors felt the same way, but there were times when I felt utterly alone as I was writing. I had a lot of support from friends and my man, JP, along the way, but I felt alone in that no one really knew what I going through. Once I signed with Tellwell, I felt I had a team behind me and it made a world of a difference as I completed my book.

Getting Published – Finally!

Once I finished the book and signed off on everything, it was a matter of getting set up with the different distributors. I knew I wanted to have a print version of my book, as well as the eBook. You can have one or the other, but I wanted both. For the eBook, I published through Smashwords (who distributes your eBook title to a bunch of other eBook retailers), Amazon Kindle, and Kobo.

For my printed book, it would’ve been a bit more complicated if I distributed through both Amazon Publishing and IngramSpark. Amazon Publishing would have to give you a separate ISBN along with different loyalty agreements with you while taking a bigger POD (print-on-demand) cut. The main upside was that Amazon Publishing would’ve promoted my book through Amazon. I went with IngramSpark because with them, I was able to affordably print my book in the glossy cover with the weird dimensions that I wanted. (I’m not a Type A, but I really was when it came to my book’s format.)

Ingram could also distribute to most major retailers all over the world. This means if a retailer agrees to place your title in its bookstore, they could order easily through your book distributor. Most retailers have accounts with Ingram, so I felt like I picked the right one. With Ingram, I could still sell my book through Amazon as a retailer, just like anyone who has a product, so it made more sense for me to just have to market one book in print with one ISBN. Thankfully, Tellwell set it all up with the distributors and I (mostly) didn’t have to deal with the headache of all that.

The Most Difficult Part: Marketing My Book

I feel like this warrants a whole book to describe what I went through. This is where an author’s love for his/her book gets tested. I consulted extensively with Sandy, Tellwell’s ebullient marketing consultant. I couldn’t have had a nicer, more encouraging person shake me up with the biggest wake-up call ever. She didn’t just tell me what I had to do – she gave me a real sense of how competitive the book market actually is.

Under Sandy’s guidance, I created a very ambitious marketing plan; I learned later, it would’ve actually required two of me to execute everything. JP was so supportive of what I had to do and he was cool with letting me sidestep our life plans so that I could dedicate myself to getting my book out there.

Even though I’ve long since used up all of Tellwell’s publishing services that I paid for, we’re still in touch. We still email each other with questions or things we discovered that could help each other. I admire a business model that is always evolving. They’ve got a great blog going that informs new authors and features some of their own published authors (scroll down the blog and check me out!).

Your Author’s Platform

Not everyone will want to blog or maintain their own website. I found that if there’s one thing I love doing – out of all the things I’ve done to promote my book – it’s blogging. Blogging might not make sense for all authors or their books, but it’s probably the best way to engage with other readers and to work on your writing. I’ve been very lucky as I was approached by Investor’s Digest of Canada to publish columns for them. It’s a great process for me to be able to step away from blogging sometimes and write to a different audience of investors and industry professionals.

There is no shortage to the discussions surrounding personal finance and investing. I just love writing about money and exploring the different themes that are related to money. I realized that my commitment to the topic of finance goes beyond my book. If you’re a fiction author and into fiction, then you might want to blog about other books or movies in your genre.

If there was one thing I wish I’d done before writing my book, it would’ve been establishing my platform first on loonietotoonie.com. I couldn’t have foreseen the importance of this, but it would’ve been helpful to have been established this way first. I say this because as you pitch media, bookstores, and libraries, they need a place to check you out. If you already have a website with subscribers and your own following on social media, it’s easier for them to say yes to an interview or to carry your book.

Retailers

You should know where you want to see your book sold. “Everywhere” is the obvious answer. However, you’re not a publishing house with a long-standing reputation and established connections to the various retailers out there. Before you pitch anyone to carry your book, you should create your own Marketing and Publicity Plan for your book. Your strategy should outline what you’re going to do to generate buzz, win over readers, the selling points for you and your book, and your book’s information. You can find some good template examples of other authors’ marketing and publicity plans if you do a search on Google Images.

I used Word to create mine and I sent its PDF to a discount printer to print a bunch of glossy copies. I also designed a bookmark to print as well. If you have a good colour printer that will print well on glossy paper and cardboard, use that instead. Otherwise, print this stuff out in bulk.

One of the most recommended and realistic routes to getting your book in bookstores is to consign them. I didn’t do this because there are very few bookstores where I live in the countryside of Southern Ontario. It would be challenging for me to check in regularly to see how my sales are going or to supply new books. Most of my book sales are from online purchases and at Indigo bookstores in BC and Ontario.

If you want to know what is expected of you when you pitch a bookstore, visit Barnes and Nobles because they have excellent guidelines that will help you professionally approach your pitches. Some retailers are more explicit with what they expect of you than others. Once you have your Marketing and Publicity Plan, you can submit that or work off that to give bookstores what they’re looking for.

Libraries

I submitted my book to my library to carry as a title. After it was accepted, I asked the librarian on what I should do to get it out there. She recommended a few librarian distribution sites located in Ontario. I contacted these places and they agreed to list my book and its information.

I did for libraries what I did for bookstores. I made a list of 100 Canadian cities and contacted most of their major university and college bookstores (because my book is educational) and their city and regional libraries. Some libraries require very specific formats for title submissions, while others don’t. So check each library’s website to find their key contact people. Some libraries have title submission forms that you simply fill out online. For libraries without online forms, I did title submissions by email or letter mail (get stamp rolls from Costco to save on postage!) directed to their key contacts.

If you want to have a good idea of what kind of information you should provide when requesting a library to carry your book, then visit Toronto Public Library’s web page that explains their process well. If you do this, you’ll have ready at your fingertips what you’ll need for most other libraries’ title submission requirements.

TPL was actually one of the first libraries to accept my book and they bought 11 copies. They also contacted me and asked me to do a presentation as part of their Personal Finance Program Series this summer! I’m super excited. People are already signing up months in advance, so if you’re going to be in the Toronto area on June 20th, book your spot now!

Other Marketing Moves

There is no end to the different ways to get people to hear about you. I’ve done radio and podcast interviews, had book giveaway contests, applied for book awards, did book signings, created podcasts and videos. I also tried out many strategies on social media.

After a year of marketing, I’m still plugging away at all this. The difference is, I’m now able to focus my energies using strategies that I most enjoy doing. Some things (like book signings) just made me flat out uncomfortable. Other authors will have a different experience. You might surprise yourself, but you won’t know until you try out different things.


Going Forward

Towards the end of last year, I stopped seeing myself as an author and more of a financial educator. (I think I missed my calling as a teacher out of fear of ending up with a student like me.) This shift was very subconscious. My stocks were doing very well, a lot better than my book sales! Rather than worry about boosting sales to make a career as an author, I just started to focus on what I was able to get done with the time that I actually had. I was getting nowhere worrying about what little time I had to do every little thing.

The best way for me to approach this was to prioritize doing the most important things first. I found that regardless of the things I set out to do, I ended up only doing the things I really wanted to do, which is to write and invest. I’m now showing readers who are ready to make money a lot more advanced stuff with stocks. I’m revealing my very own strategies that have made me money. I think it’s just a matter of time before most investors turn to stocks and ETFs, so I’m more than happy to be positioned early on where I am with a number of teaching tools readily available to anyone who wants to learn.

I hope more than anything that I can help people reach their financial goals. I still think it’s important that new investors read my book so they’re not left behind, so I still do a lot of marketing to put my book out there. If you already have my book and want to know where my head is at any given time, just read my blog.

 

 

 

 

 

 

 

 

 

Earnings Seasons for Stocks

There are a few things that can rock the stock market positively or negatively: a major world event, a major company gets caught up in a scandal, election results, or company earnings.

Four times a year, publicly traded companies announce their quarterly earnings results. Some companies (like Apple) are such sector and market giants that their earnings will affect the whole sector – and sometimes entire market.

Earnings season definitely adds an element of uncertainty. If a stock you’re interested in buying is scheduled to report its earnings, buying it beforehand could work for or against you in a big way. Suddenly it feels like you’re placing a bet instead of making an investment.

It’s great if it gaps up in price. Your portfolio will glow thanks to this stock’s incredible move. You’re an amazing investor and have become unstoppable at picking stocks. It’s in your destiny to be the sage investment advisor among your peers.

If the stock gaps down, the feeling is the complete opposite. You’ll be spending your time looking into why the company had good earnings, yet it still came down hard in price. What horrible luck were you just cursed with?

Financial analysts are always trying to predict the earnings results of major companies. What happens then is that traders start to take their positions and buy shares in anticipation of the price going up in a big way. When the actual earnings report comes out, if the predictions were correct, the price usually goes up by a lot because other investors who were waiting on the sidelines are now acting on the correct information. If the predictions are off by a lot, it can send the share price down – even if the company had a better quarterly earnings report than the analysts predicted.

This doesn’t seem to make sense until you start thinking about the psychology behind pricing. There is one thing you should never lose sight of: Stocks move in price based on investors’ perceptions. Analyst predictions are important because they shape people’s perceptions on what they think is a fair price for shares. So, even if the earnings are predicted to be weak earnings, investors can decide on what is a fair share price based on those predictions. People like predictability, even if the information isn’t always good. We don’t like unpredictability because it increases uncertainty. The root of risk lies in uncertainty. 

If you’re planning on buying a stock that has yet to report its quarterly earnings, you can either wait until after its earnings report comes out, or just buy a fewer number of shares to lower your exposure to risk. Sometimes, after an earnings report, the share price stays the same. If it’s higher or lower in price by a significant amount, then I recommend waiting until it settles down before buying more shares. Any big move will trigger a lot of action before it gets quiet again. The trading volume will eventually go down and the daily price ranges will go back to being average. Refer to any of my lessons on price consolidations under the category, “How I Find and Pick Stocks.”

If you own a stock for a while, you’ll know that the big ups and downs from earnings come and go like the seasons of the year – it does happen four times a year, after all! You need to recognize that you buy a stock for more than just its quarterly reports. You invested in the company because you like its product or service, its sector, its dividend, and hopefully, the low price you got it at (thanks to all the techniques I’ve been trying to teach you!).

Stock Video!

Watch the Loonie to Toonie Stock Video!

Finally! My stock video is ready for the world – specifically the world of people interested in reading stock charts, which I believe is a small, yet growing world. My hope is that one day, reading charts of investments is no longer a practice unique to investment pros, but a basic skill that we all have.

You can hit it big in stocks without ever having to read a chart, but for me, it’s key to my decision process. I created this video to provide a more visual supplement to all the information that I’ve been sharing on how I find and select stocks. 

I’m often asked where to find stocks. I feel it’s important to not only tell you where I find stocks but how I decide on which ones to pay attention to. I hope this helps you in your investment endeavours! 

Book Giveaway!

giveaway

I’m giving away FIVE FREE PAPERBACK COPIES of my book, Loonie to Toonie ! I will hold a draw at the end of the month and the lucky winners will receive their very own signed copy!

To enter, CONTACT me and tell me about your biggest financial goal(s) and what you’d like to learn most about investing!

Finishing Strong: A Year in Review

Our household’s stock portfolio had a strong year-end finish, our best year yet. However, looking back at a “good year” doesn’t happen without some wincing. Hindsight is always 20/20, and I have to try really hard not to obsess over what more I could’ve made or what I should’ve done instead.

I do believe that improvement is more about recognizing what you’d do more of and less of rather than operating under a rigid set of rules. There is no exact science to investing and I learned over the years that overanalyzing mistakes and errors could lead to more errors or even worse, create fear and the inability to take action when the opportunity arises. 

For the markets, it was a positive year, but things change from year to year. Not every stock or sector did well, though. My biggest winners were from the Canadian market. They were mostly stocks of typically strong companies that got beat up in 2015. Did I sell some stocks too soon? Yes. Did I sell some too late? Yep. Did I enter much too late on some? O00h yeah! Did I take too much risk in some? Definitely. 

I’m not a psychic, I can only stick to my plan and go with what generally works in given circumstances. Given how busy I was with publishing and marketing my book, I allowed myself to be less disciplined (read: lazy) in the stock department, and I’d been benefiting from my main man JP’s expertise and efforts in stock searches. I’ll admit, the “doing less” attitude was intentional; now that I have data to work with, I can see where that hands-off attitude paid off and where it didn’t. Going forward, I can use this experience to my advantage.

Other than my recurring list of resolutions to workout more, eat better, sleep more, drink more water, meditate, do daily yoga, etc., there are definitely some investment-related goals I’d like to follow-through with for 2017:

  1. Finally finish filming and upload my stock video – gulp! (Many apologies – I almost got it done but then I didn’t as it’s been hard to film day-to-day because the charts always change!)
  2. Have a weekly list of stocks and ETFs to watch and post it on my blog.
  3. Regularly share my analysis and thoughts of the markets and economic news.
  4. Do transparent investing for my RRSP starting with $1000 (it’s ready to go!). 
  5. Put even more of my income regularly into my investment accounts.
  6. Properly document my trades (rather than sloppily jotting them down on post-its) by always (not sometimes) recording my entries, expected exits, and short and long-term plans for each stock. 
The Transparent RRSP Challenge

I got big plans for 2017 which can make me or break me (see #4 above). I feel it’s important to show how a new stock investor could invest a small workable amount such as $1000 and make it grow through regular contributions (for the benefits of compounding, increasing buying capacity, and tax deductions) and from picking appropriate stocks and ETFs.

My intention isn’t to show how I would invest in my own RRSP. Instead, my aim is to put myself in the shoes of a new stock investor by using my own money to invest in the very suggestions I’d make to a dear friend.

It would be cool to show the difference of investing for a TFSA. JP is considering opening another TFSA for the sake of doing a parallel Transparent TFSA Challenge. I’d do it if I had more time, but it would be too dizzying for me to manage my other investment accounts on top of TWO experimental ones. I’ll stick to one. 

Why am I doing this? I feel there’s still a lot of taboo around stocks as being too risky. Many years ago, that was truer than it is now. These days, with lower interest rates on top of inflation, you can no longer get ahead with the standard GICs or mutual funds with high MERs. Despite the shorter-term ups and downs of the stock market, it has shown over the long term very steady growth. In my opinion, investing in the stock market through stocks and/or ETFs is inevitable.

I realize that people generally crave certainty and fear uncertainty and having to deal with variables. That’s perfectly normal, but often this sentiment translates into higher levels of consumer debt (due to the instant gratification of shopping) and less in financial assets (because of longer wait times for the money to come in). It’s never too late to start, but you have to start somewhere with a little something. I’m doing the Transparent RRSP Challenge because I want to be right there with you, offering you all that I know, as you start your journey. You can think of me as that personal trainer who works out with you, by your side.

LET’S DO THIS!

Honour of the Month

Thank you to Tellwell Publishing for naming me Author of the Month! 

 

It has been quite a journey. I just love that beyond writing a book that I can continue to share, motivate, and help educate others on achieving their financial goals through savvy money management, wise spending, and smart investing.

I’m looking forward to sharing more in the new year!

New to Investing? Everyone Was at Some Point

Everyone who invests had to start somewhere.

Folks who have invested for much longer than a new investor started at a time when investing looked a lot more different. I’ll tell you about my investment journey that began over 20 years ago. I’ll also give some tips intended to give you things to think about as you read on.

The ’90s vs. Now: GICs and Term Deposits

20+ years ago, I opened an RRSP and my first investments were term deposits and GICs. These did all right as I was only interested in saving part of my pay cheques and not spending the money. This was at a time when interest rates were better. They were paying me 4.5% to 5%. It made sense for me to start out this way.

Now, putting your money in these is mainly just to lock it up. Interest rates are very low and these only offer a better rate with longer investment terms. It’s safe from you when you have spending urges, but not safe from inflation. If the inflation rate is 1.13% and your investment is paying you at 1.20%, then you’re not getting much of a return. If inflation rises to 1.5% during the term of your investment, you’ll find out the meaning of “inflation risk” the hard way!


If you’re new and nervous about investing and like the guaranteed aspect of GICs, you could get a variable rate GIC if current interest rates are low. You could also get an escalating rate GIC, particularly if you wanted to keep the money invested for a while, like up to five years. If you’ve always wanted to get into the stock market but was nervous, you could get a market-linked GIC. If the market goes up, you can make more money too (although there’s usually up to a maximum amount that you can get). If the market goes down, you get your principal back and you don’t lose any money, just time.

Because the returns aren’t that great with these cash investments, investing in an RRSP at least allows you to claim your contribution and get back more on your tax return.


The Early 2000s vs. Me: Mutual Funds

As my savings grew, I moved onto mutual funds. I had:

  • a Canadian bond fund
  • a Canadian index fund
  • a monthly income fund
  • a Canadian blue chip equity fund
  • a balanced growth fund
  • and a dividend growth fund.

These did all right, but I felt my portfolio should be doing better. I was regularly putting money into my RRSP – these additions seemed to mask the actual mediocre performance of my mutual funds. Little did I realize it was the high MER fees that were negatively affecting my returns.

When I asked an advisor about rebalancing the funds so that they could perform better, he told me I shouldn’t because he’s seen people doing much worse than my portfolio. Wow! That didn’t help me or encourage me. He just said he wouldn’t change anything – besides, I’d lose money from all the load fees I’d have to pay if I did move things around.

I was so frustrated because my online account made ‘switching mutual funds’ look commission-free and as easy as clicking a button. I didn’t know the difference between one fund from another. That’s why I went to the bank to ask for help. Advisors are supposed to be more helpful and if not, at least informative, right? So, I went to another branch and saw another advisor who was even more useless and uninterested in my concerns. It was so different from my experience when I had a big chunk of savings that I didn’t know what to do with. I had received such great service then. After I made the investments, it seemed no one wanted to assist me. 

I was much more angry with myself because I didn’t even know how to have the conversation that I wanted to have when I met with these advisors. I lacked the knowledge and vocabulary to know how to drive the conversation to get what I really wanted. I couldn’t tell you what a bond was. I didn’t know what “equity” meant. Is it an advisor’s job to teach me? Or was it more advantageous for them if I knew nothing? I don’t mean to rag on mutual funds and advisors. It really was just a situation that I outgrew and became frustrated with. Sometimes growth just ain’t pretty.


I actually think mutual funds are great for new investors who don’t have much in savings yetIt’s great to be able to buy shares or units in a fund and co-own assets (wait–does that explain the essence of the term “mutual”?) that you wouldn’t be able to afford otherwise. As you grow your money, you’ll be able to afford to buy the actual assets directly. Until then, take advantage of automatic deposit options to enjoy the compounding effects of regular investing.

Mutual funds are so easy to get at your bank. The advisors can help you find the right balance of funds based on your risk tolerance. Just be sure to ask about the fees! Only opt to pay lower fees, but preferably go with the no-load fee options. If you’re deciding between two similar funds, choose the one with lower MER fees. I think mutual funds are best in the RRSP, not just because of the bigger tax return you could get for claiming contributions, but also because if some of your funds have US stocks, the dividends aren’t taxed in your RRSP.


The Late 2000s to Now: In Love with Stocks

I was frustrated enough to cash out my mutual funds and say sayonara to my bank. I parked my money in a discount brokerage and took the free stock trading program that came with opening an account. I took business and financial courses, including the Canadian Securities Course, to become more educated about money. I badly wanted to know what the financial industry knew and how the world of money worked.

The more I learned the more stoked I got about investing, particularly in stocks. While I’m still working on where I want to be financially, I now see my long-term financial goals happening a lot sooner thanks to stocks. And I’m still educating myself and trying to learn.


If you’re new or too busy to know what stocks to buy, get an index ETF for the Canadian and US markets. If you want a bit of diversification, get a sector or international ETF. If you want income, get a fixed-income or dividend ETF.

If you’re new but ready for more than just ETF investing, you can pick blue chip stocks that pay a nice dividend. As your financial knowledge increases, you can build a nice diverse portfolio with a suitable balance of cyclical and non-cyclical stocks.

If you have a US ETF or stock, invest it in an RRSP so the dividends aren’t subject to withholding tax. If your financial goal is more short-term and you’ll want the money in a few years, invest in the TFSA so you can withdraw the money without getting taxed. You can invest your money between both the RRSP and TFSA according to your different goals and needs. If you run out of contribution room, then hold your Canadian equities in a non-registered account to benefit from the favourable taxation on capital gains and dividends.


The 2010s: Educating Others

Once people knew that I was really getting into the markets, the inquiries starting pouring in. I didn’t feel that what I knew was applicable to my friends’ various situations, though. As much as I believe everyone should own even just some stocks, stocks aren’t ideal or applicable to everyone and for every situation.

I began to ask at my bank (not the one I ditched) questions on behalf of my friends. The advisors were so friendly and receptive. Sometimes they’d sit down with me if they felt the questions were more involved. Other times, we’d all be just talking about investment options. I was always impressed with what they knew, how willing they were to answer questions – even if I wasn’t going to invest my own money – and how much more focused they were on the client relationship aspect.

I’m not sure if the great random service I was getting at any given branch was the bank itself, if it was because I knew what I was talking about which led to better, more informed conversations, or simply because financial advisors now are supposed to be more focused on building relationships with clients for their VARIOUS needs, rather than just selling them investment products.

I actually wrote my book for my friends. I wanted the information to be easy enough to access and understand so that even if they had a general concept of how investments worked, they could seek and get incredible assistance from the pros. My book is meant to help liaise between the client and the financial industry and ultimately help investors navigate their available options.

I still get questions from my friends, mainly the ones who haven’t read my book yet! That’s okay. As my confidence over my own investments grows, so does their willingness to learn from me about how their money can make them money.