Retirement Savings — you should have some — and you should invest it. Part 2.
Post-writing pause for thought: I’ve written this and I believe what I have written, but I am neither an expert nor a professional. This is a charming anecdote, not financial advice.
This is part two of a two-parter. Here is the link to part one: Retirement Savings — you should have some — and you should invest it. Part 1. | by April Goodwin-Smith | Apr, 2023 | Medium
So, as I mentioned, the little bag of peanuts I saved during my working life wouldn’t be enough to keep Trudeau the Younger in socks, but it’s mine, and it can damn well do better than some of the investment vehicles promoted especially for TFSAs.
Enter: the Stock Market.
I haven’t got the budget, but I’d appreciate it if you would do do do do the Twilight Zone theme here.
Confess: most non-stock-owning people have terrible stories about somebody they know being eaten alive by dabbling in the piranha pool that is the stock market. And, if you are gullible in other situations, that gullibility will cost you in the stock market because the wicked will scam anyone anytime anywhere. And as often as possible.
But stocks are where every single government and company pension is generated. If the stock market fails, then there will be no retirement income at all. Also, if it fails, it is because everything has failed and money won’t be safe, or useful, anywhere. If that happens, then we are all as seriously hooped as we already are with climate change (no, I don’t think we are going to get our act together in time, no matter how many catfood tins I recycle).
So, in spite of double doom, I still want my sad little bag of peanuts to generate some income in my TFSA so that I can pay for car insurance and dwelling insurance and other oh-look-I-need-a-hot-water-tank surprises.
Sometimes stock market losses are from lack of knowledge. So, before I bought my first stock, I spent some time learning, and I insist that you do the same. I used many online resources, which helped to learn jargon and common assumptions. These websites change so quickly that once you know what you want to know more about, I recommend you search engine afresh. For me, I soon realized that I am not suited to day trading, or any other form of stock owning that involves obsessing over stocks and prices all day everyday. No. I am too emotionally driven and would be making flawed decisions based on the fact that I hadn’t modified my stock holdings in the last ten minutes. No.
I decided that I wanted to buy stocks and hold them. Keep them through ups and downs. Just think if you’d been gifted with a single Coca Cola stock back in the day. Well. So that’s my ideal: identify stocks that have holding power. I say that like it is easy. You know that it is not. But, the more a person knows, the better chances they have of making good choices. My track record is so-so, but I am pretty happy with a couple that I have picked.
I decided that I wanted dividends. That’s kind of obvious since I had already decided to buy and hold. If I am not getting dividends, I can’t generate any income since I am unwilling to sell my stocks. So, dividends it is. This decision allowed me to get a couple of books. Such as, yes, Dividend Stocks for Dummies. https://www.dummies.com/book/business-careers-money/personal-finance/investing/investment-vehicles/dividends/dividend-stocks-for-dummies-282156/
So, since I needed to start somewhere, I chose a company from a news report because they were donating mega piles of money to a Canadian college. I started following that stock. I used the charts and lists and formulas in the Dummies book to try to evaluate whether or not it was a good choice. Honestly? I have no idea. I downloaded the company’s most recent financial statements (you can get Canadian publically traded ones free online https://www.sedar.com) and I crunched numbers — but they crunched back.
It was a good exercise, though, because while I was in search of a particularly crucial number, I learned that financial statements have oodles and boodles of ways to report a number — all legal and all true, and all as transparent as brick. Good to know. You need to wade around in that slew of paper/pixels because information you want is located in there. How many board members own stock and how much. Do the board members all have the same last name. Do you recognize the names of board members from juicy news reports. Who have they signed contracts with. And similar non-number intel.
Another good source of information is the Toronto Stock Exchange (https://www.tsx.com) itself. You can see the history of the stock prices, and they list news stories about the company. You can match up price changes to the news reports. You can then compare how the financial statement deals with the news report.
I’m an English major, okay? This reading-between-the-lines is meat and drink, and quite possibly ricotta cheese on a crostini. Mmm. Where was I?
Ultimately I thought my news report company was a good company, but I didn’t buy their stock because they don’t do dividends.
The next book was the Dummies book Investing for Canadians: https://www.dummies.com/book/business-careers-money/personal-finance/investing/general-investing/investing-for-canadians-for-dummies-4th-edition-282305/
Since my taxation body is Canada, I better know the rules about investing in Canada, yes/no?
This confirmed my decision to only buy Canadian stocks on the Canadian Stock Market. I do not want to learn about how to pay income taxes in other countries. Of course, I do not want to pay income taxes to other countries at all, but I really don’t want to learn the rules, and turn out to be wrong, and get myself in deep do do do do with another country’s taxation body. It is important for Canadians to remember that TFSA rules only apply in Canada. Also true for RRSPs. Other countries want their Capital Gains taxes come hot summers or high water, and I do not want to learn how to pay them. Canadian income tax rules are arcane enough.
Once you’ve got a good start on your financial education, spend six months to a year following stocks and learning about new stocks, and watching the stock prices yo-yo up and down for no reason you can see. Pay attention to patterns and news stories that spook the stock market. Prices go up and down because of how people feel. If they are afraid, they sell their stocks, and the prices drop. If they are optimistic, they buy more stocks and the prices rise. Prices rise because if Mr RichestSOBintheWorld buys a stock, then people you would think would be pretty level-headed scamper off to buy some too, and then there isn’t enough to go around at the old price.
So, when you have your little list of stocks you want to buy, the next thing is getting an online do-it-yourself broker. There are tons of lists online to help you choose. I picked the one below because it is not itself a broker (which doesn’t mean that it doesn’t have other interests — you have to learn about your list givers, too — but still): https://www.moneysense.ca/save/investing/best-online-brokers-in-canada/
TANGENT — I am so grateful for online DIY brokers. If I’d tried to do this in my twenties, I would have had to find a broker to do things for me, and he would probably have been an avuncular well-meaning man my father’s age, who would have tried to talk me out of my decisions (don’t worry your pretty little head, argh), and who might have even made trades without my knowledge (never mind permission) for my own good. Now I get to eat my own mistakes — but I am also not eating someone else’s. Anyhoo.
The online broker will help you set up a TFSA account.
Now. Take your little bag of peanuts and kiss them goodbye. You have to be willing to be wrong and lose it all. I don’t think you will lose it all — but you might — but you will lose some of it, and you won’t like it. I still don’t like it. Just because you have more experience doesn’t mean the chance for a mistake goes away.
Another thing I didn’t realize about the stock market is that it is so big that it is possible to set fairly restrictive parameters — Canadian only, pays dividends — and still have piles of choices. If you don’t like my choices, there are so many other options that will allow you to narrow your focus so that you can build your expertise. Some people really enjoy buying “penny stocks” and then hitting the kill switch when they reach a particular price per share. You do you. But do the do with knowledge.
Also, don’t worry if it feels too late. Although I started saving earlier, I only started buying stocks eight years ago, and while not very much (not even the GST on TtheY’s yearly sock budget), what I am earning on my peanuts is still worth it.
