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  • Ono Northey

Beginner's Guide to Investing

I'm not a financial advisor, and none of this is financial advice, but I get this question a lot, so this should get you started and pointed in the right direction.


I'm going to assume you've read a few investment books like "Money, Master the Game" and have a vague understanding of the future from books like "Bold" and "The Future is Faster than You Think", and are looking for more technical ideas or starting points.


As for my credentials, I don't have any. I've invested well, but I have no background in the subject. Most of my stock picking ability comes from watching Shark Tank and Youtube tutorials. But when the Covid-crash happened back in March, I listened to 42 hours of youtube stock-picking tutorials and asset analysis & breakdowns per day (how, you ask? Video speed controller has allowed me to train my ear to listen at 3x. 16 hours a day = 48 hours p/day!)


Shark Tank taught me what makes a good company. Youtube folks taught me what makes a good stock. I combine the two into thinking what will go up and down. And it worked.


SO! Let's get into the good stuff!


Asset Allocation

This is a fancy way of saying what percentages of your money go into what categories. An example category might be "income fund" (a way to get 11% annual interest paid out monthly in order to support and grow your portfolio) or "Disruptive Technology" but you can have any categories you want. One of mine is "Gold, Silver & Water". Think about what future you want to see, and what you want to fund/support to get there. Chances are there are others like you, running companies you'd enjoy researching & eventually investing in.


While categories are flexible, I would suggest only adjusting them when a thesis changes, rather than a "unique opportunity". Disciplined investors grow AND KEEP their money.


Reading Financial Statements

Not as hard nor as daunting as it sounds. Look up how Daniel Pronk does it, and work backwards. Yahoo finance and "(company name) investor relations" will get you 90% of the way there.


Whenever someone uses a word you don't understand, write it down. Keep reading and then go through a list of everything they said until you could explain it to someone else.


Index Funds & ETFs

These are fancy "bundles" of stocks. Like mutual funds, but for people who want to keep the money they're making. Let's say you want to invest in the concept of genomics, but don't have the ability to choose between Illumina and Invitae. ARKG is a fund of both (as well as others). There are index funds and ETFs for just about everything. Autonomous driving, all the S&P 500 stocks, various natural resources etc.


Selling Covered Calls

I'm not suggesting you do this - I am suggesting you know what it means. This is essentially a way to make money for not selling your stocks, or only selling your stocks at a price you like. There are funds like QYLD who do this for you and simply pay you 11% interest for the privilege, but knowing how and when to do it yourself can also be very beneficial.


If you've bought a stock at $25 and would sell it at $100 in a year, you can promise to sell it at that price and someone will pay you for making that promise. If the stock doesn't go up to $100 by the due date, you keep the money for making the promise, and you keep your stocks. (and you can make the same promise again, and get paid again!)


Selling Covered Puts

I'm not suggesting you do this - I am suggesting you know what it means. This is essentially a way to make money for not buying stocks, or only buying a stock at a price you like.


If you've researched a company and would buy some at $25 but would buy at least 100 if it dropped to $15, then you can sell a $10 put at a $25 strike price, basically promising to buy the stock at a price you want, and getting paid for making that promise.


If the stock doesn't go down to the price you promised to buy at, you keep the money for making that promise and don't have to buy the stocks. (and you can make that same promise again, and get paid again!)


Disruptive Technology

This is the "buzzword" of this generation, and it is useful to understand. "Bold" will get you started. Cathie Wood of ARK invest is a great person to listen and understand.


Questrade

One of the things that stopped me from investing was knowing which program to use. It sounds stupid, but just not knowing that little thing held me back a few years. So many scams etc, and we're dealing with a lot of money. There are lots of programs out there, but if you're Canadian, Questrade seems to be on the top of the pile. I've heard Fidelity is great for US.


Youtubes Worth Watching


Chicken Genius

His heart is in the right place and he's got the skills to match. Leans towards scalable, growth companies. Careful, his logic is infectious. Still do your own research.


Daniel Pronk

Great at breaking down his process and as a result, teaching you how to implement your own. Leans towards conservative investments. Careful, his pragmatism is enthralling. Still do your own research.


Financial Education

Good at finding diamonds in the rough. Careful, his enthusiasm is contagious. Do your own research.


Unrivaled Investing

Often a more pessimistic viewpoint on a company. Good for challenging your investment thesis.


Ray Dalio

His understanding of the economic machine is extremely compelling and his viewpoints on economic cycles are worth understanding.



Mindset

Just something people use to make things look more difficult than they are
Obligatory Stock Graph Chart

Tim Ferriss said something in one of his books that really stuck with me.


He said that he had a choice of going to school for a total of $120,000 tuition or giving himself permission to make $120,000 worth of mistakes and learn by doing.


In the early days, you'll make mistakes. One time, I bought the wrong friggin' stock lol! Not like "I picked a bad stock" I mean I actually thought I was buying one stock and accidentally bought another!


But deciding on an asset allocation, and maybe starting with index funds that represent that allocation is a relatively painless way to start. As your education improves, you'll begin to understand WHY a stock is going up or down, and, eventually, you'll figure out why a stock WILL go up or down, and what to do about it.


Every time a stock goes up or down, you should know why (or you are gambling). You should know why you picked a bad stock, or why you picked a winner. There is no luck in the long term. In the short term, there's hella luck, but over 5-10 years, only a quality company rises in value. Learn as you go. If you start slow, then each lesson you learn costs very little in comparison to a school's tuition.


The key is to start. Set up an automatic withdrawal from your savings account and set it aside for investment. Open up a trading account, and find something you can do for $20. Just start. After that, you'll realize it wasn't quite as hard as you thought.


Or, don't. And keep your money in a bank account that pays .01% on your money and wait until you're older. Procrastinate and then yell at yourself in a decade. Up to you :)


_____


(Still here?)


Are you asking "but wait, isn't there more?"


"Is that everything?"


"Is that all there is?"


"What about stop losses? What about taxes? How do I use my TFSA?"


Look, here's my thought: You can get bogged down with analysis paralysis, and learn everything there is to know, or, you can open up a trading account and lose $5 but learn more than you ever would reading "how to"s on the internet by some guy who writes Urban Fantasy books.


Tony Robbins has a great quote, which I'll paraphrase: "When you need to lose 200lbs, you don't need the best nutritionist, the highest quality equipment, the top-notch trainers... you need to get out the door and start moving. You'll figure out the rest as you go.


Is there more to learn? Heck yeah. There is loads. But I strongly believe in learning by doing. Just bite off small chunks, learn, grow, adjust your thesis, and keep going. As Steve Jang says: "I'd rather move at 1,000mph in the wrong direction with the faith in myself that I'd figure that out and pivot, than just stand still and do nothing."


(Okay, Steve might've borrowed that from Tom Bilyeu ;)

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