Stock Investing For Canadians For Dummies

by Dagys, Andrew; Mladjenovic, Paul

• ISBN13: 9781119521945
• ISBN10: 1119521947
• Edition: 5th
• Format: Paperback
• Copyright: 2018-11-19
• Publisher: For Dummies

Summary

Start investing in stocks today

Canada is experiencing a large housing bubble, and if you’re a Baby Boomer looking to downsize, it’s more important than ever to find a way to invest your extra money, especially in a low interest environment. Plus, some very significant tax rules exist (e.g. registered savings plans for retirement and investing, income splitting, and estate planning) that affect investors, and few Canadian publications address these new realities in the stock investing context. Canadian stock investors also have unique opportunities to invest in a recovering domestic commodity sector and a strong dividend-rich and growing financial sector.

Stock Investing For Canadians For Dummies, 5^th edition arms you with trusted information on stock investing in both bear and bull markets; unique investment segments like the legal medical marijuana sector; stock investing for different types of goals, styles, and stages of life; and examples straight from the real world of stock investing as they have occurred in the past few years. With up-to-date references and resources, this fundamentally powerful yet easy-to-read book is the most reliable Canadian resource on stock market investment you can get your hands on!

• Contains 25% new and significantly revised material
• Covers the latest stock market trends including using roboadvisors, and a chapter on investing in proven digital currencies
• Provides expert tips and advice on how to navigate domestic and foreign markets including accessing surging Asian stock markets
• Helps you maximize your returns

There’s no time like the present to start investing in the stock market—and this comprehensive reference gives you all the information you need to make sure your investments grow.

Author Biography

Andrew Dagys is a professional accountant and the bestselling author of over a dozen books on investing, financial planning, and technology.

Paul Mladjenovic is a well-known certified financial planner and investing consultant with over 20 years of experience.

Table of Contents

Introduction 1

About This Book 2

Foolish Assumptions 3

Icons Used in This Book 3

Beyond the Book 4

Where to Go from Here 4

Part 1: The Essentials of Stock Investing 5

Chapter 1: Surveying the World of Stock Investing 7

Understanding the Basics 8

Preparing to Buy Stocks 9

Knowing How to Pick Winners 10

Recognizing stock value 10

Understanding how market capitalization affects stock value 11

Sharpening your investment skills 12

Chapter 2: Taking Stock of Your Financial Situation and Goals 15

Establishing a Starting Point by Preparing a Balance Sheet 16

Step 1: Have an emergency fund 17

Step 2: List your assets in decreasing order of liquidity 18

Step 3: List your liabilities 20

Step 4: Calculate your net worth 22

Step 5: Analyze your balance sheet 22

Funding Your Stock Program 24

Step 1: Tally up your income 26

Step 2: Add up your outgo 26

Step 3: Create a cash flow statement 27

Step 4: Analyze your cash flow 28

Another option: Finding investment money in tax savings 28

Setting Your Sights on Financial Goals 29

The Shape of Equities: Stocks, ETFs, and Mutual Funds 30

Mutual fund equities 31

Exchange-traded fund (ETF) equities 31

Canadians in Their 20s and 30s: Setting the Foundations 32

Determining the right allocation to stocks and other equities 33

Start off by investing in big picture themes 34

Your Tax-Free Savings Account (TFSA) as a tax-free stock investing account 35

Invest in your company registered pension or retirement savings plan 36

Canadians in Their 40s 36

Exploring common investment portfolio allocations to stocks 37

Taxes, company pensions, and Registered Retirement Savings Plans (RRSPs) 38

50+ Canadian Stock Investors 38

Revisiting your allocation to stocks 39

Taxes, registered pensions, and Registered Retirement Income Funds (RRIFs) 40

Chapter 3: Common Approaches to Stock Investing 41

Matching Stocks and Strategies with Your Goals 42

Investing for the Future 43

Focusing on the short term 43

Considering intermediate-term goals 45

Preparing for the long term 45

Investing for a Purpose 46

Making money quickly: Growth investing 46

Making money steadily: Income investing 47

Investing for Your Personal Style 49

Conservative investing 49

Aggressive investing 50

Chapter 4: Recognizing Risk and Volatility 51

Exploring Different Kinds of Risk 52

Financial risk 52

Interest rate risk 54

Market risk 57

Inflation risk 58

Liquidity risk 58

Foreign exchange risk 58

Tax risk 59

Political and governmental risks 59

Personal risks 60

Emotional risk 61

Getting the Scoop on Volatility 63

Minimizing Your Risk 64

Gaining knowledge 64

Staying out until you get a little practice 64

Putting your financial house in order 66

Diversifying your investments 66

Weighing Risk against Return 67

Chapter 5: Investing in Canadian Exchange-Traded Funds 69

Comparing Exchange-Traded Funds and Mutual Funds 70

The differences 70

The similarities 71

Choosing an Exchange-Traded Fund 72

Main types of ETFs 72

Bearish ETFs 76

Taking Note of Indexes 77

Part 2: Before You Jump In 81

Chapter 6: Gathering Information 83

Looking to Stock Exchanges for Answers 84

Grasping the Basics of Accounting and Economics 86

Accounting for taste and a whole lot more 86

Understanding how economics affects stocks 87

Staying on Top of Financial News 91

Figuring out what a company’s up to 92

Discovering what’s new with an industry 92

Knowing what’s happening with the economy 92

Seeing what politicians and government

bureaucrats are doing 93

Checking for trends in society, culture, and entertainment 93

Reading and Understanding Stock Tables 94

52-week high 95

52-week low 95

Name and symbol 96

Dividend 96

Volume 96

Yield 98

P/E 98

Day last 99

Net change 99

Using News about Dividends 99

Looking at important dates 99

Understanding why certain dates matter 101

Evaluating or Ignoring Investment Tips 101

Chapter 7: Going for Brokers 103

Defining the Broker’s Role 103

Distinguishing between Full-Service and Discount Brokers 105

At your disposal: Full-service brokers 105

Just the basics: Discount brokers 107

Choosing a Broker 109

Discovering Various Types of Brokerage Accounts 109

Cash accounts 110

Margin accounts 111

Option accounts 111

Judging Brokers’ Recommendations 112

Understanding basic recommendations 112

Asking a few important questions 113

Robo-advisors and Fintech 115

High tech meets equity investing 115

Terminating bad investment decisions with artificial intelligence 116

Advantages of an inhuman touch 116

What can go wrong with a short circuit? 117

Canadian Robo-advisors 119

Not just for Millennials 119

Asset allocation: What is the robo-advisor investing my money in? 120

What to watch for 121

Fees 122

Final thoughts 122

Chapter 8: Investing for Long-Term Growth 125

Becoming a Value-Oriented Growth Investor 126

Handy Growth Stock Tips 127

Look for leaders in megatrends 128

Compare company growth to industry growth 129

Consider a company with a strong niche 129

Check out a company’s fundamentals 130

Evaluate a company’s management 131

Notice who’s buying and/or recommending a company’s stock 133

Make sure a company continues to do well 135

Heed investing lessons from history 135

Exploring Small Caps and Speculative Stocks 136

Knowing when to avoid IPOs 136

Making sure a small cap stock is making money 137

Analyzing small cap stocks before investing 138

Chapter 9: Investing for Income 139

Understanding Income Stocks Basics 140

Getting a grip on dividends 140

Recognizing who’s well-suited for income 141

Advantages of income stocks 141

Disadvantages of income stocks 142

Analyzing Income Stocks 144

Pinpointing your needs first 144

Checking out yield 145

Looking at a stock’s payout ratio 147

Studying a company’s bond rating 148

Diversifying your stocks 149

Exploring Some Typical Income Stocks 149

Utilities 149

Real estate investment trusts (REITs) 150

Royalty trusts 152

Chapter 10: Understanding Technical Analysis 153

Comparing Technical Analysis and Fundamental Analysis 154

Under the hood of technical analysis 154

The good and bad of technical analysis 156

Combining the best of both worlds 157

Using the technician’s tools 158

Staying on Top of Trends 159

Distinguishing different trends 159

Looking at a trend’s length 160

Using trendlines 161

Watching for resistance and support 161

Getting the Scoop on Technical Charts 163

Checking out types of charts 163

Picking out chart patterns 164

Surveying Technical Indicators 167

The Relative Strength Index 168

Moving averages 168

Moving average convergence/divergence 170

Crossovers and divergence 170

Oscillators 171

Bollinger bands 171

Part 3: Picking Winners 173

Chapter 11: Using Accounting Basics to Choose Winning Stocks 175

Recognizing Value When You See It 176

Understanding different types of value 176

Putting the pieces together 178

Accounting for Value 180

Breaking down the balance sheet 180

Looking at the income statement 184

Tooling around with ratios 189

Chapter 12: Decoding Company Documents 195

Reading Annual Reports 196

Analyzing the annual report’s anatomy 197

Going through the proxy materials 200

Dig Deeper: Getting a Second Opinion 201

SEDAR, SEDI, and the SEC 201

Value Line 204

Standard & Poor’s 204

Moody’s Investment Service 205

Brokerage reports 205

Doing Your Own Research 207

Chapter 13: Sectors, Small Caps, and the Marijuana Space 209

Telling the Difference between a Sector and an Industry 210

Interrogating the Sectors and Industries 211

Which category is the industry fall in? 211

Is the sector growing? 212

Are the sector’s products or services in demand? 214

What does the industry’s growth rely on? 214

Is the industry dependent on another industry? 215

Who are the leading companies in the industry? 215

Is the industry a target of government action? 216

Outlining Traditional and Key Canadian Sectors and Industries 216

Resources and commodities 217

Moving in: Real estate 219

Banking on it: Financials 220

Exploring Small Caps and Speculative Stocks in Any Sector 221

The attractive potential of small cap stocks 221

Knowing when to avoid IPOs 222

Making sure a small cap stock is making money 223

Analyzing small cap stocks before you invest 223

Marijuana Stock Investing in Canada 224

Rules of the game 224

A plant by any other name 225

Why invest in marijuana stocks? 226

Legal and regulatory risk factors 228

Evaluating micro cap marijuana stocks 229

Chapter 14: Investing in Asian Stock Markets 231

Why Invest in Asia? 232

The numbers tell a story 232

Yes, but 233

Investing in Chinese Stocks Directly 233

Open a brokerage account and buy Hong Kong dollars or yuan 234

Access the Hong Kong Stock Exchange and other exchanges 236

Look up and buy stock using local stock tickers 240

Investing in American Depository Receipts (ADRs) of Chinese Companies 241

Other Ways to Invest in China 243

Investing in Chinese companies on U.S non-ADR exchanges 243

North American multinationals in China 243

Investing in ETFs 244

Investing in country or regional funds 244

Chapter 15: The Big Economic and Political Picture 245

Tying Together Politics and Stocks 246

The effects of politics on stock investing 247

Ascertaining the political climate 248

Nonsystemic and systemic effects 249

Understanding price controls 250

Central banks 251

Poking into Political Resources 251

Government reports to watch out for 252

Websites to surf 254

Part 4: Investment Strategies and Tactics 255

Chapter 16: Discovering Screening Tools 257

Understanding Screening Tool Basics 258

Choosing the category 258

Distinguishing min vs max 258

Setting value ranges 259

Searching regardless of your entry 259

Touring a Stock Screening Tool 259

Sector and industry categories 260

Region 261

Sales and profitability 262

Valuation ratios 263

Analyst estimates 266

Checking Out an ETF Screening Tool 266

Asset class 267

Geographic area 268

Inverse and leveraged ETFs 268

Other considerations 268

Chapter 17: Understanding Brokerage Orders and Trading Techniques 269

Checking Out Brokerage Orders 270

On the clock: Time-related orders 270

At your command: Condition-related orders 272

The joys of technology: Advanced orders 277

Buying on Margin 278

Examining marginal outcomes 279

Maintaining your balance 280

Striving for success on margin 280

Going Short and Coming Out Ahead 281

Setting up a short sale 282

Oops! Going short when prices grow taller 283

Feeling the squeeze 283

Chapter 18: Using Trade Triggers and Advanced Conditional Orders 285

Trying Trade Triggers 286

Surveying different types of trade triggers 286

Entering trade triggers 288

Considering Advanced Conditional Orders 289

Checking out different types of advanced conditional orders 289

Placing advanced conditional orders 291

Chapter 19: Bitcoin and Alternative Digital Currencies 293

The Look and Feel of a Freshly Minted Cryptocurrency 294

What is digital or “crypto” currency? 294

Is cryptocurrency really currency? 295

And the verdict is 295

The Blockchain: Recording Your Cryptocurrency on a Public Ledger 296

Encryption: The Key to Anonymity and Security on the Blockchain 298

Your public key 299

Your private key 299

Mining for Bitcoin Gold 300

Bitcoin: The 500-Pound Digital Currency Gorilla 301

New Kids on The Blockchain: Altcoins 302

Coins or altcoins 303

Tokens 303

Buying and Selling Cryptocurrencies on Digital Currency Exchanges 304

Broker exchanges 305

Trading exchanges 305

Decentralized trading exchanges 306

Peer-to-peer exchanges 307

Canadian cryptocurrency exchanges 307

Selecting the right exchange for you 309

Setting up your first digital exchange accounts 310

Regulatory Oversight and Fraud: Caveat, Emptor! 311

Picking Winners: First Determine Value 313

Evaluating the factors that move digital currency prices 314

What moves Bitcoin’s value, the crypto leader? 314

What moves all individual cryptocurrencies? 315

What will enhance digital currency adoption and move crypto markets? 320

Final thoughts on value and picking the right digital currency 322

Holding Your Crypto Assets in a Wallet 322

Software wallets: Desktop, online, and mobile 323

Hardware and paper wallets 323

Multicurrency wallets 324

Will that be hot or cold? 325

Brain wallet 326

Final Thoughts 326

Chapter 20: Skullduggery: Looking at Insider Activity 329

Tracking U.S Insider Trading 330

Checking Out Canadian Insider Trading 331

Looking at Insider Transactions 332

Breaking down insider buying 333

Picking up tips from insider selling 334

Considering Corporate Stock Buybacks 335

Understanding why a company buys back shares 336

Exploring the downside of buybacks 337

Stock Splits: Nothing to Go Bananas Over 338

Ordinary stock splits 339

Reverse stock splits 339

Chapter 21: ’Cause I’m the Tax Man 341

Interest Income 342

Dividend Income 343

Grossed out 344

Stock dividends and splits 344

Capital Gains and Losses 345

Superficial losses 345

Foreign Exchange Gains and Losses 346

Deferred-Income Tax Shelters and Plans 346

Registered Retirement Savings Plans (RRSPs) 346

Tax-Free Savings Accounts (TFSAs) 350

Registered Retirement Income Funds (RRIFs) 350

There’s a catch 351

Invest Inside or Outside Your RRSP? 351

Things to Remember: Recap 352

Things to consider 352

Ways to look at the RRSP debate 353

Mutual Funds 353

Oil, Gas, and Mineral Stock Investments 354

Part 5: The Part of Tens 355

Chapter 22: Ten Indicators of a Great Stock 357

The Company Has Rising Profits 357

The Company Has Rising Sales 358

The Company Has Low Liabilities 359

The Stock Is at a Bargain Price 360

Dividends Are Growing 360

The Market Is Growing 361

The Company Is in a Field with a High Barrier to Entry 362

The Company Has a Low Political Profile 362

The Stock Is Optionable 363

The Stock Is Benefiting from Favorable Megatrends 364

Chapter 23: Ten Ways to Profit in a Bear Market 365

Find Good Stocks to Buy 365

Hunt for Dividends 366

Unearth Gems with Bond Ratings 366

Rotate Your Sectors 367

Go Short on Bad Stocks 368

Carefully Use Margin 368

Buy a Call Option 369

Write a Covered Call Option 369

Write a Put Option to Generate Income 370

Be Patient 370

Chapter 24: Ten Investments and Strategies 371

Gold 371

Nonstock ETFs 372

Inverse ETFs 372

Covered Call Options 373

Put Options 373

Tangibles 374

Cash 374

Motif Investing 375

Bearish Exchange-Traded Funds 375

Dividend Yield Exchange-Traded Funds 376

Part 6: Appendixes 377

Appendix A: Resources For Stock Investors 379

Appendix B: Financial Ratios 391

Index 401