How To Invest
In addition, Pat thinks then beginner investors should cultivate two important qualities: a healthy sense of skepticism and patience.
Investors should approach all investments with a healthy sense of skepticism. This can help keep you out of fraudulent stocks that masquerade as high-quality stocks. It will also keep you out of legally operated, but poorly managed, companies that promise more than they can possibly deliver.
If you are a new investor, you should also realize that losing patience can cause you to sell your best choices right before a big rise. All too often, investors buy a promising stock just as it enters a period of price stagnation. Even the best-performing stocks run into these unpredictable phases from time to time. They move mainly sideways in a wide range for months or years before their next big rise begins. (Stock brokers often refer to these stocks as “dead money.”)
If you lack patience, you run a big risk of selling your best choices in the midst of one of these phases, prior to the next big move upward. If you lose patience and sell, you are particularly likely to do so in the low end of the trading range, when stock prices have weakened and confidence in the stock has waned.
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Technical analysis (or reading stock market charts) can be a useful tool for picking stocks. However, some investors choose to make investment decisions based solely on charts. That’s when technical analysis can lead you to make poor (and sometimes disastrous) choices. Technical analysis is the process of analyzing a stock’s price movements in an attempt to determine its future price. It focuses on how a stock has behaved in the past, and the clues that could offer about future price movements.
It’s crucial to keep stock market charts in perspective
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These days, we see lots of ads for books, seminars and software that purport to show you how you can consistently make returns of 50% to 100% (or more) yearly in forex investments. Some even go so far as to say you can do it in a few minutes a day. Forex investments involve dealing in foreign currency futures and options. Futures and options on foreign-exchange investments (or anything else) offer a great deal of leverage. If you could get that leverage to consistently work for you, you could make the kinds of returns on your initial stake that promoters of forex investments claim. However, leverage works two ways: It magnifies your profits when the market moves in your favour, but it magnifies your losses just as effectively when the market moves against you. That’s because the amount you owe on your investment loan stays the same, so every dollar you lose comes out of your equity....
TSI Network gives me a wide variety of ways to communicate with Canadian investors. It also gives you exclusive access to the very latest advice on investing in the stock market and a wide range of other financial matters. Through my free Daily Updates, I keep you up to date on the issues that are most important to you — the individual investor. Soon, we’ll be allowing TSI Network visitors to “comment” on each update. We hope this will create an ongoing discussion that will let the site’s visitors share their own views on the day’s update, and read other visitors’ opinions. We also publish our “Financial Question of the Week,” which is a weekly poll we use to see what the site’s visitors think of current financial matters. As well, we invite readers to submit their own poll questions. To submit your question, simply email it to pat@tsinetwork.ca under the subject line “Suggested Question of the Week.”...
Even though today’s house prices are high, mortgage interest costs are near historic lows. And owning your own home has a number of advantages. For example, owning your house is a great tax shelter. That’s because gains on your principal residence are exempt from capital-gains taxes. However, this tax benefit only applies to your principal residence. You must still pay tax on gains on the sale of a recreational property, such as a cottage or a ski chalet. But these properties generally appreciate at a much slower rate than, say, a home in a major urban centre.
Many investors underestimate the risk and cost of owning rental property
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The p/e ratio (the ratio of a stock’s price to its per-share earnings) is one of many handy investing tools. Typically, you calculate p/e’s using a stock’s current price and its earnings for the previous 12 months. The general rule is that the lower a stock’s p/e, the better. And a p/e of less than, say, 10, represents excellent value. A low p/e implies more profit for every dollar you invest. There’s no doubt that p/e ratios are an important part of many investors’ decision making. These financial ratios are published regularly on the Internet and in newspapers, and are widely followed....
Discover how to structure your investment portfolio in a way that could save you thousands of dollars
Click here to immediately download our new free report, Capital Gains Canada: 7 Secrets for Managing your Canadian Capital Gains Tax Liabilities.As you consider how to manage your tax bill for the current income-tax season, you really shouldn’t be without our new free report, Capital Gains Canada: 7 Secrets for Managing your Canadian Capital Gains Tax Liabilities....
When clients join our Successful Investor Wealth Management service, they often ask us whether they should hold bonds or focus more heavily on stocks. This is a particularly important question for investors who rely on their portfolios for income. It’s important to note that there is no single “best portfolio” for every investor. Higher potential for loss comes with higher potential for returns, so the question of whether to hold stocks or bonds depends partly on your temperament and financial goals. Bonds provide steady income and a guarantee to repay the principal at maturity, so lowering your common stock exposure in favour of bonds can have some positive effects. First, you may reduce your portfolio’s overall volatility. Second, you are likely to cut your overall risk of loss....
Small cap stocks are companies with a “market cap” (the value of shares they have outstanding) below $2 billion, or some other arbitrary figure. (In a recent Wall Street Stock Forecaster, we updated our buy/sell/hold advice on a U.S. small cap stock that’s up nearly 63% since March 2009. See below for further details.) Small cap stocks have the potential for strong gains, but they are generally more volatile than large-cap stocks. Temporary setbacks, such as a poor quarterly earnings report or the loss of a contract, can quickly cut their share prices. That’s why we view even the best small-caps as aggressive, and advise investors not to overindulge in small caps....
Many Canadian firms have tried to expand into the U.S. over the years. Some, like Tim Hortons (symbol THI on Toronto), have had difficulty in the United States. Other companies’ expansion efforts have failed miserably. Canadian Tire (symbol CTC.A on Toronto) provides a memorable example of a failed U.S. expansion. In 1982, the retailer bought a chain of Whites automotive-retail stores in Texas. By 1985, Canadian Tire had lost $300 million on this purchase. That’s when the company decided to sell the division and retreat to Canada. Its stock price has since gone up more than 600%.
This real estate investment trust’s U.S. expansion adds risk — and potential rewards
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Here are four common mistakes to avoid when investing in the stock market. All can seriously hinder your portfolio’s long-term results. 1. Focusing too heavily on cutting costs: Cutting the costs of investing has an immediate, obvious benefit: it leaves you with more money. But some cost-cutting investment techniques can wind up costing you money in the long run. For example, some investors routinely refuse to pay the market price for stocks when they buy. They always put a bid in below the offer price, in hopes of buying at a slightly better price. However, some of your good investments are going to go up as soon as you buy, and keep going up. Other investments will go down. If you always put in a bid below the current market price when you buy, you’ll filter out all your good investments. You’ll save a few cents from time to time. But you’ll always buy all your bad investment choices, and none of your good investments....