Stock Trading – Entry 8

How have your stocks been doing?

Running stats on my trades: there is only a change with FE Battery Metals, which went up 2.6%. Had I invested in Decisive Dividend, that went up 3% and is nearing $8. For Leveljump Healthcare, I am not expecting much for now since their recent big moves won’t even be in operation until early in the new year. As for Braille Energy Systems, that is very much a wait-and-see stock as I am expecting one or two sudden jumps over the next year or two based on my online research (but again, no guarantees).

What is your intent and motivation behind your articles on stock trading?

The Internet is flooded with fancy advisors and e-books plus bookstore shelves are loaded with books on investing. What I needed – and what I am imparting – I could not find. I was looking for two basic answers. First, what are the first few investment steps I should take with no seed money to start? Second, a potentially never-ending series of ‘what next?’

I also need the answers to all those questions to make sense to me. Like they say, if you can’t explain it to a five-year-old, you don’t understand it. Plus, many people see stock trading as being surrounded in mystique and I sought to dispel that for myself. When it dawned on me that I had simplified adult language for all that, I knew I could turn around and share that. Let’s face it, I am not the only one with very little seed money who needs to invest to build wealth.

The big bonus is, I get to combine all that with real life examples – which I share. In short, I am showing how easy it can be to invest in stocks confidently with very little seed money.

Why did you only buy three stocks to diversify?

Uh, first up, you could only do so much with $360 – and I walk you through that in article 3 of this series. Plus, I am married, which means I am partnered with my wife, who had invested in other sectors.

If you are building a personal life online, STOP! Go out and interact with real people. You will feel more excitement about life and the chances of ending up with a decent partner are undoubtedly higher – plus they can boost your combined portfolio’s diversification. 😉

What was it like funding accounts with such small amounts?

Setting up the two accounts at those two banks with $25 initial deposits was interesting. One was setup online, so there was nothing to it. The other one, well, they rolled their eyes and expressed pain at having to suggest something so low as $25. But I opened those accounts for me, not them. Did they get low commissions or something? Maybe. But I did not open those accounts for them.

If your son or daughter works at a bank and you want to give them a leg up regardless of performance, that’s your choice. That was not my circumstance, so that was not inside my decision frame and my expectations matched that frame. Like ballroom dancing, be happy with your frame.

Getting the market-linked guaranteed income certificate (MLGIC) was alright actually because there was a minimum amount, meaning the bank had already done its calculations. Plus, they were happy to have a new customer (that MLGIC is currently my only product with them, although they were in a close second place for refinancing our mortgage a couple years ago).

Why are you writing about incomplete stock analyses?

When I bought those first three stocks, everything I had written about up to that point had been applied. When you create a decision framework for your involvement or not in a stock trade, that in and of itself is incomplete because you are choosing not to factor absolutely everything into account. When you have a decision framework, certain things won’t matter. Take the MLGIC for example. Did I need to know the bank’s strategy behind it in order to have a chance at making money? No. Did I need to know how the bank was setup and being managed? No. It’s an insured GIC. I get paid no matter what, so the analysis there was time, access, percentage, and whether or not the bank had motivation for better performance. Two years, no access, a percentage range I was happy with, and yes they were.

I didn’t need to know anything else to be certain I would easily make the kind of money I wanted to in that investment.

That’s the decision framework I strive to create and apply, given what it enables.

There are a lot of things to consider, but taking everything into account at the beginning as an investor with so little seed money won’t work because many strategies will NEVER apply to such investors. By narrating my journey, I hope to show the kinds of things people, in my opinion (IMO), should be considering when in a similar context and some strategies I will be putting off until my investments improve for me to level up.

Isn’t stock trading inherently risky?

If you are stock trading, you have to take a risk because the possibility of a non-guaranteed, non-insured investment decreasing in value is always possible. But I work that risk in to my view so that I focus on setting up trades that are very likely to go up in value easily and in a way that works for me. There is always a chance it could go wrong, but it’s kept within my own definition of low that will vary with each trade. Plus diagnostics become easier, so I am guaranteed to become a better investor over time with this approach.

Why have you not considered segregated funds as a stable investment choice?

For those who might not know, segregated funds are kind of like mutual funds, but they are, from what I gather, operated by insurance companies. Insurance companies don’t just take your premiums, hold them, and hope they only have to pay their staff salaries, office buildings, office equipment, stationary, cell phones…. Oh, yeah, they need to make some money, so that’s what those are. Personally, I would classify them as somewhat stable.

In fact, my wife’s previous employer used segregated funds for their employees’ pension fund. My guess is, that employer cheaped out by recovering some of the cost of the employee insurance benefits they had to pay for that were offered by the same insurance company as the segregated fund. The insurance company gets a customer and an investor while the employer likely got a discount on the insurance premiums it had to pay.

I don’t invest in segregated funds because of what I wrote in my first article about sell-out lines. Segregated funds would have been a ‘no’ at that point because, in my opinion, insurance companies don’t wow their customers and their product is money – which could otherwise go to capital gains.

Instead, I looked at GICs, ETFs, and MLGICs. I went with the ones I considered to be within my decision framework and offered a higher return. Plus, the ones I chose serve as a two-year comparison between:

• guaranteed returns;
• ETF performance; and
• the pay-off of my extra effort evaluating an increased risk threshold when stock trading.

You can do your own analysis of segregated funds (and write about it) if you want.

With which organizations are you affiliated?

I studied economics at Carleton University*, business and finance at the Sprott School of Business (also part of Carleton University*), and big data analytics at Carleton University’s* College of Humanities. While I have attended online penny trading workshops, to-date I have signed up for none (ditto for related software). I have had the pleasure of interviewing managers of a few medium and small companies in a variety of industries over the past twenty-five years for my own professional development and am an avid reader (both online and in print, both articles and books). In fact, I have written a book on philosophy, which touches on economics and a model for predicting human behavior. Finally, I have never worked at/for investment firms or banks, nor have I ever been a professional financial advisor in any capacity (not even these articles since they are not financial advice, only my narrative). Like a few billion people, I have worked entirely outside of the financial services industry in my professional life to-date.

Actually, this got me to thinking if applied finance even exists as a subject of study.

Apparently, it does. After scratching the surface of a few such programs, I see the courses are theoretical (having taken some myself in my university days). I must admit, the (complex) math and charts based on those economic theories haven't helped me to navigate influences on the market to find investment opportunities for simple investors. We'll see if the future sees me use any of those, but for now...in food speak, I consider my articles (to-date at least) to have only a little garnish, not loaded with so many garnishes you can't see the leg of lamb underneath!

* It should be noted that Carleton University (including its Sprott School of Business and College of Humanities) and the University of New South Wales are not in any way affiliated with these articles, nor am I a professor, instructor, or employee at either university.

What about other aspects of trading do you plan to cover in future articles?

I have already touched on and promised to write more about international trade agreements, IPOs, and the blockchain. When I have five figures to invest, I will consider an IPO. As for international stocks, when I have four figures, I will look at capital gains taxes in my home country, legal limits for the % of foreign stocks that can be in my portfolio (if any), geopolitics, and tax/trade treaties.

That said, I am thinking of one of my next few articles to be about arbitrage – which can be used to trade blockchains against each other as well as real currencies against each other.

How are you making money off of us readers?

If you have $25 of seed money to start investing, I want you to be able to invest that, so I didn’t want to charge new or potential investors $25 for a book or login-required website or something like that. Bringing an investor back to square one ($0) as a first move is a bad strategy all around IMO. I wanted a platform to share knowledge and my examples as it all builds without costing the reader. I earn less than 0.4 cents gross (before banking fees) for every unique read. It costs a reader one click to pay me less than half a cent. Some links are referrals that might pay me a few dollars, but I will only ever do that if I use the tool, have found it useful, the tool will actually help (new) investors, and does not increase the cost of the tool (if any) for the investor/reader.

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