Think about your day for a moment and all the products you rely on. Your morning latte from Starbucks. Your cell phone. Your computer. Your car. Your cosmetics. Even your yoga pants and your credit card. All these products have public companies behind them — companies that earn profits thanks to your purchases. Have you ever thought that maybe you should get a piece of that profit? The brilliant thing about the stock market is that it's accessible. So many people shy away for fear that they don't have enough money to invest (or know what to invest in). But guess what, with the proliferation of online brokerages, you can dip your toes in and test the waters. Here's how to begin investing in the companies and products you love…
Where do you start?
For many women, investing in the stock market is more comfortable with a financial advisor - someone to help you set investment goals, give you recommendations and ensure you have a balanced portfolio. However, if you are a do-it-yourself type and you know what you want to invest in, then direct investing websites (aka "online brokerages") are a simple, low-cost way to go. In Canada, some of your choices are RBC Direct Investing, BMO InvestorLine , TD Waterhouse and Scotia iTRADE. [More: Invest like a girl: Warren Buffett does!]
How much does it cost?
For basic cash and RRSP accounts, there is typically no minimum balance — transfer however much or as little as you wish to get started. As for fees, the more you trade, the lower the cost per trade. Most sites offer a flat fee of under $10 per trade if you make a minimum amount of trades — say 30-100 trades over three months. If you make only a handful of trades, the fee per trade may be closer to around $20. This is still lower than the full-service commission fees of investment advisors (though of course, without the personal advice).
How do you open an account?
You will need your social insurance number and a scan or photocopy of valid photo ID (such as your driver's license or passport). You will need to complete an authorization form for transferring funds to your account along with a personalized cheque. The account application will ask for a few details about your net worth and investment experience. Finally, you will have to complete a form for collecting tax information. All of this information is required due to regulations imposed on financial institutions to know and understand their clients. [More: Fees: Your investment portfolio's silent killer]
What type of account can you have?
You can choose a regular trading account or a registered account, which allows you to buy and sell shares with your RRSP, TFSA or RESP funds. (One bright idea: Rather than buying your kid her own iPad, buy her some Apple shares for her university fund…she'll appreciate it later.) A "margin account" gives you a kind of line of credit for trading, but this is not advised for beginners. Much like internet banking, your online account will give you access to your trading account balances, status of your orders, monthly statements, trade confirmations and tax documents.
How do you get money to and from your account?
Once you activate your trading account with a direct investor site, you simply transfer the money you want to use to buy shares from your everyday chequing or savings account through internet or telephone banking. If you're using a direct investor site affiliated with a bank, you can make a deposit in person at a bank branch. [More: The stock market wears Prada: How an IPO works]
Can you only trade stocks?
No! With a direct investing account you can buy and sell not just equities, but also mutual funds, government bonds, gold and silver, money market funds and more sophisticated securities, such as options. A good direct investing site will offer you access to free tools and research to help you become a more informed investor. Seminars, webinars, tutorials, online demos, newsletters and online research publications can help you evolve from a beginner to a more experienced and knowledgeable investor.
How do I place an order?
There are many different ways to order your stocks. Say you want to buy 25 shares of Lululemon stock (TSX:LLL.TO - News) at the best available price — this is a "market order". Or, you want to buy 25 shares of Starbucks (NSQ:SBUX - News), but only when and if the price is at $45/per share — this is a "limit order". Once you sign up, your direct investing site will provide you with a glossary of the different ways you can buy and sell orders.
What stocks should I choose?
Look around! What do you love? What do you buy? What companies and products do you believe have a solid future? Are you a Starbucks (NSQ:SBUX - News) addict or a Tim Hortons (TSX:THI.TO - News) loyalist? Could you never live without your Apple (NSQ:AAPL - News) gadgets or your Nokia (NYSE:NOK - News) phone? Do you use your MasterCard (NYSE:MA - News) for everything you buy or your Visa (NYSE:V)? Do you find yourself at Loblaws (TSX:L) or Safeway (NYSE:SWY - News) on the work-drive home? Do you stock up on Estée Lauder (NYSE:EL - News) cosmetics by the pound? These are all publically owned companies in which you can invest. And don't forget your bank — Canadian banks offer some of the best investments for dividends and long-term appreciation. [More: Safe haven investing: Is any investment a sure thing anymore?]
A word about IPOs
Buying shares on the first day a stock trades is typically for experts and big investors. Investment banks that manage the process of launching shares through an Initial Public Offering (IPO) usually pre-sell large blocks of stock to other banks and institutions, so it's usually only once the shares start trading that you will have a chance to buy them. However, some direct investing sites give you the chance to request access to IPOs or new issues by placing an "Expression of Interest". For a popular stock like Facebook, for example, the competition for shares will be fierce (and likely not available in Canada until later). More to the point, will it be worth buying even if the share price is high? Only time and Mark Zuckerberg will tell…
From customer to owner
When it comes to DIY investing, the best advice is to trust your instincts, get informed and go with what you know. If you don't understand the technology or the business model of a company, why invest in a mystery? Warren Buffett doesn't. For your first investments, choose companies you understand and admire. Follow them in the news, on Twitter and friend them on Facebook. Get to know more about the companies where you spend your money — if you like what you find, why just be a customer? Consider becoming an owner. Think of it as a whole new shopping category...one that might actually make you richer.
GoldenGirlFinance.ca is a free personal finance and education site for women.
Nothing contained herein is intended to provide personalized financial, legal or tax advice. Nothing should be construed as an offer to sell, or a solicitation of an offer to buy a security, a recommendation for any product or service by Golden Girl Finance or any associated third party, or a suggestion regarding the purchase, holding or sale of securities. Before implementing any financial strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances.
Sign up for your free financial scoop - from Golden Girl Finance - today!
There are no comments yet