April 25, 2020

Investing is a very exciting sport. People get excited all the time when they analyze the upsides. At the end of the day, no one will invest in the market blatantly knowing that they are going to lose money, right? Before you look at the upsides, you first need to look at risks. Before you invest in the market, you need to make sure you get a few things set up so you can keep as much of the money as possible.

If you are living in Canada, these are some of the helpful tips:

What are the investing accounts you should have to minimize tax?

What broker should you choose? Should you find the broker with the lowest fees?

What are the tools you should have? What tools will help you stay organized and make the best decisions?

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Transcript with 90% accuracy:

How to invest a 100K in stocks for a beginner in Canada. What accounts should you have a broker should you use and what tools should you have before you start investing? And these are the three key big considerations for beginners in Canada.

Now welcome back to my channel. My name is Eric and I developed this channel for the purpose of educating you on how to invest in the market. So if you are a complete beginner, you have no strategy, you have never invested before in your life, then this video is for you. Now with $100,000, you do have quite a good amount to invest in the market. But you've got to be careful because you also have quite a pits of money to lose. So in this video, I'm going to cover the three absolutely essential questions you need to ask her as a beginner before you even start doing any research whatsoever. So the first question is really what kind of investing accounts he should have. Now when you're looking at investing accounts, I'm not just talking about should you have a Robin hood app or a Wellstone poll or whatever.

I'm talking about tax. I'm talking about how you can save on taxes. Now in Canada there are mainly three types of accounts. There are retirement savings accounts, there's a tax free savings account, and there's also a regular investing account. Now for retirement savings accounts, you contribute money, you get your taxes back and then many years later when you take out money from that account, then you get taxed during that time. So it was a tax delayed account. Now for TFSA is slightly different. You put in your after tax money, so then you get taxed already. And then afterwards you let it run for however many years when you take it out, you don't need to pay tax anymore. And the final one is a regular investing account where every time you make money you get tax. And when you lose money you can use that to the doctor gain as well.

So depending on where you are in life, if you have a relatively lower income so you're not at the max tax bracket, then you would want to start with your TSA. And that is really because you can contribute money to it after tax. So when you take it out you don't need to pay tax on it. Now if you have a high income and you're at probably the highest bracket in Canada, like 40 almost 50% then you want to first max out your RSP. Now if you max out your RSP, this means the money you put in there is really for longterm use. You're not planning it, you're not planning to take it out and the next two, three, five, 10 and you're really looking to take it out once your income is lower probably when you retire. So that's probably the account I would max out first and for my portfolio right now as well over a hundred K and I max out both of these accounts, both RRSP and TFSA.

Now in terms of your regular investing account, I would usually treat that as the very last option. And that is really because every time you make a game and or you receive a dividend, you get taxed on it. So you don't want to be paying a taxes so much because it's kind of like a transaction cost to your investing activity. So the second question is really which broker you should choose. Now when it comes to broker, a lot of people just go for the lowest fee. You know, what is the lowest fee broker? How can I get it a to a $6 per transaction instead of a $9 per transaction? You know, that's what most people care about. Now when you think about it, if you are a longterm investor, if you are not planning to day trade, then the transaction costs a couple of dollars really is not going to make too much of a difference in the grand scheme of things.

So instead of focusing on the lowest fee broker, what you should focus on is actually the most trustworthy broker. So, for example, one of my students in New Zealand he invested in with a broker that has very low fees, but after two years it went bankrupt. So then he lost his money and he has a hard time getting it back. So when you think about it, well this is an important lesson because you don't want your money to be lost because the broker went bankrupt and this is a very rare scenario, but it does happen. So that is one of the most important consideration when choosing your broker. Now for myself, I use TD Canada. I'm not endorsing it or anything, but I just find that the most convenient to use. And in terms of the portal, it's also quite friendly. I know people that use RBC, CIBC as well.

I think those are fine as long as your broker or your bank can satisfy your needs, then I think you're in good shape. The third question is really what kind of tools you should have. Now this is a really complicated question because it really depends on your investing strategy. Now, if you are just a pure chart reader, you know a chartist, then you only really need the charts. And I would have thought of tools I use. I think this is probably the most important one because it allows you to see the price. You know, you can apply indicators on it, you can look at patterns. So for myself, I actually don't use the charts that is provided by my broker. I have quite a few brokerage accounts and I don't use any of their charts because I can't customize it the way I want it to.

So in terms of charts, I use a website called view.com. You've probably heard of it. It's completely free. There is a paid version if you want to use it. But essentially I would just use the free version because the chart is fantastic. And there's also a community there that talks about stocks and talk about ideas, where to enter and where it takes it. A second tool you probably need is a source of news. Now this is really up to your preference on how you want to absorb news. Some people have subscription to financial times, some people like to follow Forbes so on and so forth. Now for myself, I mainly used a news in Google news. It's an app I have on my phone and essentially everyday I just go check it for five minutes or so to see if there's anything that is interesting that is happening now as we are in the middle of the Corona virus crash.

Right now most of the news is pretty negative and same old, same old, nothing too interesting. Now you also need another tool to get financial data. Now financial data is probably the most useful and least understood source of information because it requires you to look at financial statements, which it's like a two, 300 page document. But you do need some sort of analysis on it so you can get comfortable with the company so we can understand the company's doing well or not. So make sure you have that as well. And the final one is really a tracker. You know, tracking your investments. Now sometimes your broker will do it for you. For example, TD Canada will track my return for me. But you also need a tracker to track a list of companies you're interested in that you're not investing immediately.

You know, sometimes for example, I have Shopify on my list and eCommerce company that I am not invested in it yet, but in the future I might consider buying it. So you do need a tracker to track it and hopefully that combines with the charge. So it was easy for you to pull up the charts and then look at the news as well. So that's actually something trading for you can do. So if you don't have a chart software, you don't have a tracker and you don't have a source of news stand and you can start with tradingview.com. Yeah, so that is pretty much it. Those are the three big considerations you need to work out before you even start researching before you even need to find your first stock. So once you get that settled down, then you are ready to start doing some research. So I'll see you in the next video. So thank you for watching and I hope you enjoyed the video. Please help support me by like subscribe and you can watch the next recommended video here as well. So I'll see you in the next one.

About the author 

Eric Seto

Investor, CPA (Canada) based in Hong Kong and Vancouver

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