The Moose of Wallstreet Vol 4

Buying Stock part 2: Reading a stock portfolio, executing a trade and stop limits

Pablo Portes
Sep 2, 2018 · 9 min read

Now that we have a basic idea of what stock is and how to judge its price it’s time for us to make our first transaction! In this issue I will show a step by step guide on how to read a stock portfolio from your trading dashboard and how to execute a trade on the RBC Direct Investing platform. If you use a different broker your layout may slightly differ, but most platforms show you the same basic information meaning you can still follow my advice. All the transactions we are going to do today are going to be done in a practice account.

Basic user interface:

RBC Direct Investing dashboard

The first thing you want to do is look at your main portfolio menu; I have highlighted the sections you will be using the most. In the top bar, you can view your portfolio menu, you can go in the Place an Order section (where you will execute transactions), you can also launch the Research Center to learn more and get more advanced information. The Search Bar is to quickly access a certain stock you already know or look for new ones. In Account Management, you can open new accounts (practice or real) to separate your funds, you can also hide some accounts if you do not want to see them if you invest for the very long term in your preferences.

In Take Action, you can transfer cash to and from your investment accounts, you can set up Pre-Authorized Contributions if you want to transfer a fix amount of money at regular intervals. This is also where you can purchase foreign currency if you want to speculate or do your transactions in US$ to avoid conversion fees every time. My Portfolio Holdings is where you can get an overall view of how your money is doing. The Check My Orders section is to look at past or current orders that have not been filled yet. The Trading Dashboard launches a separate window to make it easier to execute multiple trades in a row, however it is still being improved so you cannot use paper accounts in the dashboard and the traditional order method is fine for our basic needs.

Your Portfolio:

Portfolio overview

Once you open My Portfolio Holdings, the first section will be an overview of the overall health of your portfolio. I’ve highlighted the most useful sections for beginners in green and those you shouldn’t worry about just yet in red.

The important stuff:

Unrealized Gain/Loss is where you can see how the stocks you are holding are performing, please be aware that if it says 10% you haven’t made 10% yet. It reflects only the value of stock you are holding so as long as you haven’t sold any gains or losses are not counted yet for tax purposes. Book Cost is where you see how much you paid for all of the stock you are holding, and the Combined Total is the current total value of your account including cash. In the bottom section you can see the detail of what you are holding and in which currency it is held.

What you should leave for later:

The trailing 12 Mo Return is the performance of your portfolio over the last 12 months, since this account was opened less than a year ago it will stay blank for a little longer. Don’t worry about it just yet, besides it is a good habit to keep track of your performance yourself in a separate spreadsheet like Excel. The Combined Margin is how much of the money you invested is borrowed, if you are beginning I strongly recommend you DO NOT invest money that isn’t yours or you may find yourself in financial troubles. Finally, the Short section is for those who want to bet against a stock, but since it is for more advanced investors I will write about it another day.

If you keep scrolling down, you will end up on detailed info about the stocks you are holding.

Portfolio Detail

In this section you can look at the individual performance of every stock you are holding and quickly access the order section for that specific stock if you want to buy more or sell all/some of it. You have the name and Ticker in blue, the quantity/number of shares you are holding and if you press on the + you can see what your average cost for each share is and whether or not the company has announced dividend for the year (a payment to shareholders proportional to the amount of shares you hold). Last Price is what the stock is currently trading at, Change is the daily change in price for each stock and the Unrealized Gains/Losses is the difference between the current price and what you paid.

Making an order:

So now that we know the portfolio is doing ok and that there are available funds we want to buy more stock (you could also hold a certain amount of cash to buy dips or if you think a downturn is incoming). Since the stocks in this portfolio are already mostly tech and financial services companies I want to diversify to a different industry. This time to make it simpler I am not going to explain the research in detail. Let’s say I wanted to invest in the consumer market, beverages more precisely, and that I was interested in investing in the newly merged Keurig Dr Pepper group ($KDP). I would type KDP in the search bar, look at the stock and go into the BUY section. I do not want to invest more than 5500 CAD$/4208 US$ and we know the current price of one KDP share is 22.81 US$ so I open the share calculator.

This tells me I can purchase 184 shares at the current price, including commission without going over my budget. So we fill in the required information.

Transaction Screen

First you select which account you want to buy the shares with and you select either Buy or Sell. We input the desired number of shares that we previously calculated and the ticker of the company you wish to buy (here KDP on the US market). Double check the quote that will appear at the top to make sure you are buying exactly what you want (some companies trade on multiple markets or have different types of shares).

Then you have four options concerning the price:

- Market Price: you will purchase the shares at whatever the current market price is as fast as possible (be careful you may pay a difference compared to the current share price due to fluctuations).

- Limit Price: you chose the maximum amount you are willing to pay for each share (recommended method for Buys) and that’s the method we are going to use now.

- Stop Price: you determine an amount under which you will purchase the desired number of shares at market price automatically. For example, here I could have set a stop price of 22.70 and if KDP went under 22.70, as soon as it passed that amount the system would try to buy 164 shares at market price even if I wasn’t in front of the computer.

- Stop Limit Price: you input both a Stop Price and a Limit Price, this is a very useful way to make sure you don’t overpay for a share if you buy at very busy times like opening or closing hour or lunch time because at these times the price of shares is more volatile due to more people doing transactions.

You can then select a timeframe for your transactions, this is more useful for Stop Losses which we will cover another day or for very low volume stocks where there aren’t enough transactions in a day to ensure your order is executed right away. On the RBC platform you also have the option to pay your commission fees (9.50 $ per transaction) with your credit card reward points but this isn’t very important. The final step is to double check your transaction and confirm you are willing to pay the currency conversion fee since we are buying an American stock with CAD$.

Since this is a paper account, our transaction got executed right away but in a real account there may be delays between when you submit your order and when it is executed. This is because you are buying stock from a real person, if no one or not enough people are willing to sell, the listed price will rise depending on offer and demand. Sometimes your order may not even be executed at all if the price of the stock moves too fast or you made mistakes in your stop limit price. Don’t worry, you won’t pay commission unless the order is executed.

Now we can finally see our 184 shares of KDP in our portfolio!

Additional info:

  • The stock market has opening hours, these can vary from exchange to exchange but generally you can only buy stock between 9:30 am and 4:00 pm from Monday to Friday, and markets are closed during public holidays. Keep in mind this is LOCAL TIME if you want to buy stock on Asian or European exchanges.
  • As an individual investor you are subject to laws concerning day trading if you buy on American exchanges like NYSE. You need at least 25 000$ of cash or margin in order to be allowed to day trade (buying and selling a stock during the same business day). This law only applies to stock and not options or futures or foreign currency.
  • You cannot claim a capital loss for tax deduction if you repurchased the same stock that caused the loss in a 30-day period following the date of your sale. This is to stop people from making superficial losses to avoid taxes.
  • On some brokers, your 12 mo trailing return consider the cash you put in the account as gains which may inflate the value.
  • Your cash balance can go in the negative even if you don’t have margin as long as you are holding at least the same amount in another currency on the same account. You will not be able to spend that other currency since it will be deducted from your buying power. This can be good if the conversion rate is currently not advantageous.
  • If you are trading on margin and your broker identify you as being at risk of not being able to pay due to price fluctuations, they are allowed to force you to sell your stock even at a loss in order to pay back your margin, this is called a Margin Call.

That’s it for this week, stay tuned for the next issue where I will talk more in detail about ETFs and inverse ETFs. Thank you for reading, you can also follow me on twitter @PabloPortesMTL if you don’t want to miss one of these! There you can also ask questions if some things weren’t clear enough or if you want more details about one particular aspect of what we talked about.

Disclaimer: These articles are about investing in Canada, they reflect the opinions of the author, invest at your own risk.

Moose of Wallstreet Vol 3

Moose of Wallstreet Vol 5

Pablo Portes

Written by

Studying Master’s Degree in Business Analytics Strategy at Sherbrooke University in Canada. Passionate about Data, Business Analytics, Finance and Marketing.

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