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Beginners Guide To Investing in the Stock Market

How To Start Investing Your Money

1- Open a brokerage account

A brokerage account is essential an account that allows you to buy stocks from any publicly traded companies. You could usually fill out an application online through your bank. The best type of account for students is a TFSA (tax free savings account). This account allows all your capital gains to be tax free.

What is your contribution room?

The government, essentially, allows you to contribute a certain amount of money into your TFSA each year starting from the year you turn 18. The contribution room gets carried over year after year if you don’t use all of it. For Canadians, you can check how much money you can contribute through your CRA account.

What is a CRA account? This is your Canadian Revenue Agency account. If you applied for CERB, you needed to do it through this account. It pretty much tells you how much money you owe the government (if you owe any) and tells you the days you will be getting money back from the government.

2- Buy Stocks

A lot of people think that leaving the money in the account to sit there (as a savings account) will automatically grow it, but this is not the case. You need to use this account to purchase your stocks in order to grow your money.

3- How to Buy Stocks

There’s a very popular saying, buy low sell high, but what does this mean?

So, when you go on your app that tracks stocks (Yahoo Finance is the best app for this) you will notice there’s a graph that shows you the growth of the stock. If the graph is red this means that the stock declined from yesterday to today and if its green, then it’s the opposite.

Let’s say, you’re planning on buying shares in Apple because you believe in the company and believe that it will continue to grow in the future. You’re going to want to buy it on a day that it’s low (meaning in the reds) because the chances of that stock increasing the future is high.

Recently Apple hit 182 per share (this was the all-time high of the year), if you would have purchased it on this day, right now you would be losing money, but if you would have bought the dip, you’d be making money since the following week it dropped to about 159 a share.

4- How to Place Orders

Placing orders can be done in advance. So, let’s say you want to buy Apple, but you want to wait until it reaches 170 a share. What you would do is set a limit buy at 170 a share, enter the amount of stocks you wish to buy and set a date limit. This allows you to get the share at no more than 170 a share when it does reach that price.

5- Other ways you can earn money through stocks

A very common way people go by buying stocks is through the number of dividends they can earn.

What are dividends?

Dividends in simple terms, is a company compensating you for holding their stock. This comes in the form of money, or additional shares.

For example, a company can pay you $1 per share every 3 months just for holding their stocks. So, if you own 100 shares, you are getting $100 every 3 months on top of the gains you already have from the stock.

6- Be Patient

It’s very common for you to be losing money when you start investing. Just because you’re losing money, doesn’t mean that you should sell. It means the opposite. Stocks fluctuate all the time especially if you’re stock is very volatile (this means that the day’s graph is always going up and down).

7- Don’t Put All Your Eggs in One Basket

You don’t want to start investing all your money in one company. The best way to limit risk is to diversify your portfolio. For example, investing in tech, health, financial, and real estate stocks.

Thank you so much for reading this week’s post! Don’t forget to follow @theweekly__ on instagram. And feel free to message me about which posts you’d like to see next!

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