The Transparent RRSP: Vacay

The week of November 27
  • I deposited $150 into the RRSP ahead of December. There is $351.89 cash in the RRSP account.

JP and I are going away for a week to Costa Rica (we’re going to the Pacific side). We decided to only bring our tablet and phones. Neither of us has plans to trade while we’re away. Our main focus is to relax, enjoy the warm weather, check out the real estate situation there, and read and swim at the beach. I might squeeze in some study time whenever I can. Derivatives and options have my brain turned in on itself – to take a week off could mean excruciating reviewing when I return.

The airfare was too hard to turn down: $770 CAD for both our tickets! Yes, we’re travelling at a time when the weather isn’t totally unbearable in Ontario yet. We do, however, plan to go to Florida in late February. That’s usually when the cabin fever is at its most intense and could use a warm disruption. Before I take off, I must, of course, look at the markets.


 

November markets

SPY, QQQ, DIA, XIU ETF charts on freestockcharts.com

 

I don’t know how the market will trade after the US Thanksgiving holiday. December could be positive because of a stronger retail sector around this time. The bearish correction in the fall that I was bracing/hoping for never came. (And that is why we trade the trend, even if we don’t believe it’s still there.)

The trade volume in the US markets seems to be coming down while the prices are going up. The confluence of those two factors often means that: 1) savvy investors start to take profits, and 2) the public starts asking those investors if it’s a good time to buy Apple. The best thing to do is wait for 3) to happen, which is an actual correction.

I was in the Caribbean on my first and last cruise in early 2015 when this happened:

Caribbean

XIC ETF on freestockcharts.com

When JP and I checked our email for the most expensive 10 minutes of our lives, we also checked the markets. At the time, we were only day trading, which meant we were holding no positions in our accounts. Although we weren’t losing money, we figured good opportunities would be short-lived. We were concerned about entering a more hostile trading environment in which small fish like us would get eaten by the bigger, well-funded fish.

After we returned and got our sea legs back, we looked at Canadian companies that traded on both Canadian and US stock exchanges. We discovered they were CHEAP. We bought just a few to hold long term and had a gangbuster year. I doubt the market will do that in the week that we’re gone. Perhaps next January?


I have some stock charts worth checking out:

  • FIRE.V (New and risky, but cheap. Take fewer shares.)
  • IMH.V (Same as above.)
  • TCW.TO
  • SSL.TO (I already have this in my RRSP.)
  • SMF.TO

Please check the company, the sector, the earnings, the market, and the fundamentals that you think are important. Always do your due diligence to trade with confidence while respecting your risk tolerance. I do think that the market could pull back early in the new year. You could wait until then before buying or take fewer shares now and more later.

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.

The Transparent RRSP: Post #5

Actions Taken the Week of January 30th

  • Deposited $150 into the RRSP, which now has $1316.50

The RRSP’s only security so far is ZPR, my ETF darling. It has been steadily going up since I bought it at $10.86. It’s up 0.34 cents as of yesterday, making me $16.50 so far (after paying 0.50 cents in commissions). I have yet to receive my first dividend payment from this stock, but it’ll come soon.


zpr

The charts for ZPR still look healthy. I can’t help but think I should have bought 75 shares instead! The idea was that I wanted to find another stock to invest in late January, but I just didn’t find anything suitable.

The best charts for the right prices were in the gold sector. For me, gold is more of a swing trade to actively watch – I didn’t feel that would be a suitable choice for new investors. I recognize that gold is considered a hedge if you anticipate a drop in the market. After trading gold and silver for years, I can tell you that the market going down isn’t a guarantee that gold stock prices will go up. Commodities aren’t always the easiest trade. So much depends on the supply and demand in their own markets where people actually buy the raw or processed materials.

I’m not saying to not invest in gold or silver stocks. I just think it’s better to start diversifying when you have more money and own enough of the standard securities to give your portfolio a solid foundation.


Another thing I’d like to mention is to never lose sight of your goals. It’s a big mantra of mine. I tell that to myself all the time, particularly when times are challenging.

I’m in the Florida Keys right now on a short vacation. It’s hard to beat lying in the sun, reading, napping, drinking, and just totally recharging. I want my retirement to have plenty of days such as this. As sad as I am to leave this  wonderful place, I’m more motivated than ever to make this goal a reality.

The Transparent RRSP: Post #2

Actions Taken This Week of January 9th

  • Deposited $150 into the RRSP account which increases my principal to $1150

After buying 50 shares of ZPR at $10.86 per share, I have $456.50 left in the RRSP (I paid 0.50 cents in commission). With another $150, I give myself a better chance to buy enough shares of something else when the opportunity arrives. Having more money gives me the ability to diversify my portfolio.


For most of my working life, I mainly saved any extra money that my expected budget permitted. While this allowed me to contribute more than I normally would from time to time, it still fostered sporadic saving rather than regular savings that could’ve compounded nicely in my investments. There is power in consistency. 

When you’re consistent, you’re better able to determine where you’ll be headed in the future. If you can figure out your rate of return from year to year and factor in your regular contributions, you can see the actual potential of your financial growth. This where a goal is more likely to become a reality, rather than just exist in the back of your mind as a half-baked wish.

The first fundamental concept of investing refers to the compounding effect of your invested money + its previously earned interest = more interest on top of your growing money. I, too, wrote about it in my book because it’s the most basic concept of growth. Interest on growing money is going to be more than interest on a static amount money.

It gets complicated when you try to calculate the rate of return on your portfolio of investments. Ultimately, you want your portfolio at the end of the year to be worth more than it was at the beginning of the year and not just because you’ve been putting money into it. 

So if you put $3000 in three stocks. The best-case scenario would be for them to be worth more year after year so that should you have to sell them at any point, you will make money. You buy stocks to make more money on the sale of them. Never forget this.

Another reason to buy stocks is to make dividend income. For some people, this is their primary reason to buy stocks. It’s a very good reason because if you buy enough dividend-paying shares, you can live off that money. Or it can be reinvested in a DRIP to buy more shares or you can use the cash to buy other stocks.

HOWEVER, you must keep in mind that dividends aren’t a company’s obligation and not all companies pay one. If a company does, it can increase, reduce, or stop its dividend payments to investors if it makes financial sense for them. So, if a company is in trouble and over the years you bought many dividend-paying shares, you’re not only out of income, you face a big capital loss once you sell your shares.

A lot of people can’t get over the varying outcomes that stock investing offers. I mean, you might not make a profit and you might not get your dividends! The reason why I feel it’s important to regularly pump money into your investment account is so that you have capital to buy more than the three stocks in my example. You need to diversify. 

Not all stocks go up and down at the same time. Just because a stock price is less than the price you got it at doesn’t mean it’s in trouble – it’s normal for this to happen and sometimes it’s even healthy. It could take a while before it shines and becomes the star of your portfolio.The nice thing about a well-diversified portfolio is that as performances may be cyclical, over time they should all be going up in value. Having different stocks can smooth out the negative effects of underperformance, capital loss, or a stop on dividend payments.

Having said that, if you diversify too much and have too many stocks from all the sectors, it could start to look like the market. It’s a lot of trouble (and commissions) to diversify only to look like the market (or worse) when you could’ve just bought shares of an index ETF. Don’t over-diversify or else you can dilute the overall performance of your portfolio.

My takeaway point is that you invest your savings regularly so that you can afford to diversify.

I believe investing regularly, reinvesting your gains, plus diversifying your holdings lead to a growth effect that transcends the old compound interest model. With lower interest rates and the negative impact of inflation on your money and investments, you must start thinking about stocks and their ability to do more for you than anything else.

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!

Stock Picking 5: Selling

Before I discuss selling stocks, let’s do a recap of the Stock Picking posts up until now.

Part 1: Looking for Stocks

Here, I introduce my stock searching process for Canadian and US stocks. I feel more confident in stocks that have higher trading volume. I look for major Canadian stocks under $20 that trade over 10,000 shares a day. For US stocks, they must be over $5 and average at least 500,000 shares a day.

Part 2: Determine Your Investment Goals

I talk about the different reasons you might want to buy stocks. There are different stocks for different investment objectives better suited by shorter or longer-term time horizons. Whether the time horizon is short, medium, or long, I like to get in early before a stock’s price really starts to take off. To determine this, I look at a stock’s price history chart. For shorter-term trades, I seek additional information by looking at the charts of a stock’s corresponding sector and the market.

Part 3: Factoring in the Sectors and the Stock Market

I generally look for stocks in a sector that has been quiet for a while and is just starting to warm up. I’m not as concerned if a sector has been lagging the market, as long as it’s not going down the tubes, especially if the market isn’t. If I’m interested in several stocks in a sector that is starting to heat up, then I’ll pick the stocks that meet my criteria in volume, price, and charts.

No Stock Picking Here. Just Buy the Market Through ETFs

Stock picking is not for everyone as it’s hard to outperform the market. It’s a matter of strategy, research, and some luck. You can simplify the whole process if you ‘buy the market’ by buying the market index ETF. What’s great is that you can also get extra money from an ETF’s distributions or dividends. You can buy ETFs for the Canadian, US, or international markets, or even sector ETFs. You can have a whole portfolio of just ETFs to meet a variety of investment objectives!

Part 4: Investment Income

Here, I discuss my interest in stocks that pay dividends and how I invest in the blue chippy stocks for my retirement fund. What a great source of income as you can also enjoy a profit if you sell your shares later on at a higher price! For these income-generating stocks, I’m less concerned about their sectors.


Part 5: Selling Your Shares

Objective: To determine when to sell some or all of your stock.

Why Sell Your Shares?

Here are a few reasons to:

  • Bank profits
  • Rebalance your portfolio because you’re aging and you need to reduce your riskier assets
  • You need the money to spend or to invest in other things
  • Tax-loss selling (a capital loss can be subtracted from other capital gains, thus further reducing taxation on profits)
  • Play defense because there’s been an interest rate hike or a recession, so you want to lower your exposure and risk
  • Your stock stops paying a dividend
  • Your stock’s company or sector is in trouble and this is affecting the share price
  • Your stock is an underperforming dud
Banking Profits for Retirement

My retirement fund will consist mostly of investment income-producing assets. I’m optimistic to a fault. This means I sit back thinking that most of the dividend-paying stocks for my retirement fund will be worth a lot more in share price too. When I’m a spry elderly lady, livin’ large, and planning my next world adventure, I’ll sell some of those shares and use the massive profits to pay for my trip. If the markets reach exaggerated highs, I might sell some shares to buy a decent annuity.

Banking Profits for My Swing Trades

For my swing trades, I try to give a stock time as it moves within the profit zone, which is anywhere significantly higher than what I paid in share price. I look at the price charts to try to determine how far they’ll go before they experience a major selloff.

It’s a lot more realistic to expect a cheaper stock to double, triple, or increase multiple times in value. Once my investment has more than doubled in value, I usually sell half to 2/3rds of the shares and keep the rest of my shares in for the longer term. This way, I get back my principal investment and I can reinvest it along with the profits in another stock. If the remaining shares don’t keep going up in share price, I’ll sell them for a smaller profit — or break even at worst.

I’ve mentioned before that I like my Canadian stocks cheaper because my Canadian trading account is less funded. I also like them cheaper because I can buy more shares. I find that in general, Canadian stocks don’t move as quickly in price. I can still make money, even with smaller price moves, since I have a lot of shares. For my US swing trades, I use fewer shares than I do for Canadian stocks because they’re more expensive.

US stocks are good for swing trades mainly because they usually can move a lot more in price in a shorter amount of time than Canadian stocks. In other words, they get a lot of price action. I look for stocks that move on average at least $1 in share price in a day. The downside is, when stocks move faster, you have to act faster. If you’re not paying attention, it might get right into the profit zone and then sell off more quickly than it took to get there.

For more expensive stocks, it will take much longer for your total investment to double in its full value. This can take years. Sometimes you’ll have a jackpot situation where there’s a buyout; however, you can’t just wait and hope for these rare events to happen. So what swing traders do is decide how much of their investment they’re willing to risk losing (not all) and see if they stand to gain at least twice, three times or more that amount.

What…?

A lot of traders talk about ‘stops’ to minimize losses. A stop is basically your uncle point where you decide it’s better to take a calculated loss at a certain price than to lose more than that. Once a stop is determined, a trader will calculate how much he or she expects to gain and whether it’s realistic given the stock’s chart, its sector, the market, etc.


I’ll break down here how stops and setting targets work

lulu

  • Let’s say you bought 100 shares of a stock trading at $59.00 per share. Your investment is $5900. But there’s no way you want to lose an entire $5900 if things go south. And how long will it take for the stock to double in price to $118 a share? 
  • You might determine through analysis of its price history and other data that you will not accept a loss lower than $54 per share. You don’t want to lose more than $5 per share, which is $500. So of your $5900 investment, you’re only risking $500 of it. 
  • For this trade to be worth it, you want to at least get double the money you’re risking. Some traders want more, some are okay with less, it’s a personal thing for each person.
  • Take the $5 risk and to get double the reward would mean a $10 price increase at $69.00 ($1000 profit). Triple reward is a $15 increase at $74.00 ($1500 profit). All because you were willing to risk $500 of your investment.

This is a trade I actually took this week. It had a good earnings report (are see-through yoga pants back in style?) and it jumped close to the triple reward zone. It was good enough for me, so I sold 80% of my shares at $71.90.

For my remaining 20%, I’ll hang on to see if it’ll keep going up. Each time it surpasses another risk-reward multiple ($74, $79, $84, $89), I’ll move the stop up on that. If it breaches any of those multiples, I’ll sell the rest.


I use a very loose form of the stop method as I found it to be a pain to bother with stops. I found that with most of these trades if I’d waited a bit longer, I wouldn’t have taken a loss–instead, I would’ve ended up with a huge gain. I found that once I started to set more loosey goosey expectations as to what I’m willing to lose and what I expect to gain, my trading account started to flourish. Yes, I am a loosey goosey swing trader.

I find that if the stock is of a good company in a strong sector, even if you had to endure the discomfort of underperformance, the only thing you really lose is time. Because once the stock really starts to rock, it was totally worth the wait.

This is why sectors are important. If the sector is strong and your stock is strong or stronger than the sector, then you reduce the chance of sitting painfully through negative numbers. If, however, your stock is much weaker than its sector and is going down while the sector is going up, then there could be something else going on with the company that you might have to look into.

Having said all this, I’m not saying to ignore your threshold for losses. You must figure out what works best for you and trade responsibly out of respect for your money. For me, a good swing trade is more than just price action. It’s a combination of factors such as the company, its sector, and the market. Since I consider multiple reasons, I’m okay with waiting out the unforeseen downturns and I don’t totally wig out if the price gets a little out of whack.

Thanks to a diverse portfolio, I only ever have a small fraction of underperformers while the others do well. Sometimes these turn a corner and become the top performers in my portfolio.


Swing Trading is NOT for Everybody

Why do I swing trade? I don’t live much of a structured life (although I sometimes crave one) nor do I have dependents. I have a higher risk tolerance so I can endure the dry spells and downturns and patiently wait for the profits. I’m quite happy to aggressively grow my account in the mid-term while my more solid stocks grow for the long-term. It’s exciting, interesting, engaging, and I can go on about the fun I get out of being tapped into the markets.

Making money like this isn’t for everybody. I’m only sharing my strategies so that curious readers will have a better idea of what I do with my own money. All of what I write is only for information sharing purposes.

While there is a risk component to any kind of investing, there are many ways to reduce that risk with good diversification. To do this effectively, it’s good to be knowledgeable, even of the investment basics. Most working people, in my opinion, are better off saving regularly for their goals and investing their extra savings with a part of it in conservative stocks and ETFs that pay a dividend. No doubt, a lot of money can be made this way!

L2T Updates

updates


November

Financial Literacy

Lots of stuff going on especially with Financial Literacy Month coming up this November. In my world, almost every day is Financial Literacy Day

I’m always trying to learn more about investing and anything related. Right now I’m reading a book called Money, by Felix Martin. Next, I plan to read a book on options trading. I’m sure for most of us, the idea of reading such books doesn’t trigger the same excitement as reading a best-selling thriller like Girl on the Train (which I read too), but it’s great stuff for investor nerds like me.

Speaking of thrilling reads, to encourage financial literacy among new investors, I’ll be offering a massive discount of $5 off my eBook, which is currently available for $6.99. So for the low price of $1.99, you can become financially literate in the short time it takes to read this easy book on your phone or tablet. What’s so thrilling about the book is how knowledgeable you become as you read it!

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Columnista

I’ve got another column coming out in Investor’s Digest of Canada‘s November 25th issue, which you can find at most Chapters Indigo stores. Earlier this month, I was on the cover, front and centre, for another column I’d written. 

id-4

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Stock Picking Cont’d

I will also continue to blog my strategies on Stock Picking which I hope to complete over the course of November.


December

YouTube School of Investing & More

I’ll be posting a video on my process of selecting and analyzing stocks before the end of the year.

I’ll also be posting on various investment strategies based on investments I’d written about in my book to consider for the new year.


2017

Transparent Investing

I’m going to be doing a STOCK INVESTING CHALLENGE. I’m opening a separate RRSP account and I’m going to put $1000 in it. I’ll be selecting Canadian stocks for the portfolio and posting every week the results, my picks, my strategies, my analyses on performance, and the markets. I’m going to be totally transparent to all my readers about the results.

My goal is to make that portfolio grow through stock performance and compounding its growth through regular deposits. It’ll be fun and a great learning experience for us all. I wonder if this is how David Blaine feels when he thinks of his next on-TV challenge…

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Summer Kick-off at the Toronto Public Library in North York

This is an early announcement, but I’m too excited about it to keep it bottled up for almost eight months…

Mark your calendars: On June 20th, I’ll be hosting an event called, Investment Basics Made Easy, at the TORONTO PUBLIC LIBRARY! It’s going to be engaging, extremely informative, and loads of fun. If you’re brand-spanking new to investing, you’ll leave financially savvy and ready to make your money grow!

You really gotta love libraries and their commitment to being incredible resources to the public. The Toronto Public Library offers the Small Business Program in which they regularly schedule experts there to teach you about things related to business, marketing, and investing. I am so grateful for this wonderful invitation to share and engage with people interested in learning how to invest. 


 

That’s it for now, folks!