Financial Literacy Is A Lifelong Process!

Jan 6th, 2009 – Comment

Simon from Keswick, ON writes about advice for the newbie: Hi Lou, I really enjoy your spot on AM640.  I wish they would give you your own show.  I like the down to earth advice that the layman can understand. The catchphrase of the year seems to be “in these tough economic times”, so here is […]


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Simon from Keswick, ON writes about advice for the newbie:

Hi Lou,

I really enjoy your spot on AM640.  I wish they would give you your own show.  I like the down to earth advice that the layman can understand.

Financial LiteracyThe catchphrase of the year seems to be “in these tough economic times”, so here is my question.  In these tough economic times, many companies’ stocks have tumbled in value, making it a great time to get into the market.  This is clear to anyone.  However, as someone who is new to stocks and never invested in them directly before (I hold mutual funds in an RRSP), there are a couple of hurdles remaining.

I would like to invest $1000 not as a long term retirement type investment, but something that will yield a nice healthy return after the recession, say 3-5 years out.  I would like to parlay that into a larger investment perhaps in real estate.  Through whom should I invest?  I would assume my amount would be too small for a broker to handle so what about services like etrade?  Are there any you would recommend to get started with?

How should I pick a company or companies to invest into?  It may be easy for someone as experienced as yourself to pluck 3 companies to throw a grand at but to the newcomer, I don’t know where to start looking.  Its like a needle in a haystack.  What do you suggest?

Finally, what would you recommend for the newbie to become more informed, aside from your segment?  Any recommended reading or listening?

Thank you for your valued advice.

Regards,

Simon


Hi Simon,

Congratulations on having the desire to improve your knowledge of the financial system and the good sense to ask for help.

The first thing to begin the process is to look my links to the Canadian Securities Institute, which is the education arm of the capital markets in Canada, and the Canadian Society of Technical Analysts, which is the professional association for technical analysis.

Both of these resources will serve you well as you go forward working and building wealth. The CSI offers a great introductory course in technical analysis which will give you insight into how to read a stock chart and reduce the risks and improve the profits on your investments.

Once you have an understanding of what the charts are telling you its time to look for investment ideas. For a new investor I always recommend taking a Peter Lynch approach. Lynch was the manager of the Magellan Fund at Fidelity for many years and he always said start with what you know.

If you are in media, look at media companies, if you are in healthcare, look at healthcare companies. Taking this approach at the begining gives you some advantage in that you are in the business and have some sense of the companies that you interact with.

You asked about Etrade – they are a good shop and would be a place to open an account to manage your transactions. There are others but why make it complicated. Open an account and when you are ready let er rip!

As far as turning $1,000 into a larger play in real estate in a 5 year time frame I think you will find that as you progress in your pursuit of investment knowledge that those would be aggressive expectations.

Managing expectations and emotions is the other part of investing that you will, like most of us, struggle with for far longer than you would imagine.

Finally I would suggest that if your schedule allows that you take in the Financial Forum January 15-17, 2009 in Toronto. Its a trade show for investors and you’ll be exposed to lots of new ideas that will help you on your journey.

Here is the link.

http://www.financialforum.ca/

Happy Capitalism!

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