By Hilary Hagerman
The global stock crash might be forcing most economies into the red, but that doesn’t mean you can’t make money from it.
Investing might just be the answer.
“If you want to invest your money well into the markets, it gives you financial independence for sure,” says Adeola Labinjo, 19, a second-year Information and Technology Management (ITM) student. “If you’re going to save and invest your money, you’re going to be able to do lots of things with it.”
Labinjo should know. He’s been investing in the stock market since the age of 13, and is the founder and president of Capital Markets Group, a new student group where students will gain hands-on investment experience by actually investing in real stocks.
Although investing may seem daunting, it’s really not as tough as it sounds. With tips from Labinjo and Kyle Bloemink, 19, a second-year Business Management-Finance student and the Vice President of Communications for Capital Markets Group, here’s a step-by-step guide to investing that will have even the least financially-savvy person ruling the stock markets.
Step 1: Pick up the newspaper
“The first step is to pick up the newspaper and start immediately reading through the financial section of the paper,” says Labinjo. “That will give you a good basis and some knowledge about what’s happening in the markets.” Labinjo explains that it’s crucial to have an understanding of what’s going on in the markets, especially now when stocks are “going crazy” due to a trickle-down effect from the stock market crash in the U.S.
Step 2: Do your homework
Yep, sorry, this step involves more reading. Before jumping into investing, Labinjo and Bloemink suggest going to the library and reading background books on trading.
“Before I started investing, I just read beginner’s books on trading and investing, such as Trading for Dummies, just to build my knowledge and comfort level,” says Bloemink.
Step 3: Go with what you like
After reading up on stocks and how the market works, start looking into companies that interest you.
“Invest small amounts in a favoured company to build familiarity with the company,” says Bloemink.
If you’re not interested in a company or sector, says Labinjo, you probably won’t be interested in their stocks.
“For example, if you like clothes and your favourite brand is Lululemon, Lululemon is on the stock exchange,” he says.
After checking out companies you like, start looking at the financial details of the companies, like how they generate revenue. You should be able to find this information either on company websites, or on company databases using MSN Finance, Google Finance, or Yahoo Finance, says Bloemink. Those books you read in Step 2 should help you with understanding what’s important to consider.
Step 4: Talk to the experts and learn from the past
Before you actually start investing, you should consult with a few experts.
“Talk to your bank,” says Bloemink. “They will have advice on where your money is best suited.”
Labinjo says you should then start using a brokerage service, such as TD Waterhouse, where you can buy and trade stocks.
“If you’re just a beginner, TD Waterhouse is probably the best because they can give you advice on what to do.” And of course, you can always check out Capital Markets Group.
Step 5: Keep it conservative
Labinjo says that new investors should look at some of the least risky options, Blue Chip stocks, which are stocks from strong companies, such as Microsoft and IBM, that have predicted earnings and revenues.
Mutual funds are another good option for first-time investors, says Labinjo, because they involve a collection of different stocks in one mutual fund, which could include different sectors, like technology, healthcare, and resources (like gold).
“Since it’s a portfolio of stocks, it minimizes risks, because you get a diverse portfolio of investments, and you’re not exposed to one sector” says Labinjo. “You don’t want to be limited to one sector, like the financial sector, because it’s like putting all your eggs in one basket, which is bad. For example, if you put all your money in the U.S. financial sector, you’d be pretty much bankrupt now.”
And of course, as a new investor, you should always be careful with the amount of money you’re investing, and be conscious of what you’re doing.
“Never invest money that you aren’t willing to lose,” says Bloemink.