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Thread: Stocks: How do other people do it?

  1. #16
    Easy Glider in London UK GoodBoy's Avatar
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    Quote Originally Posted by kiwis-mom View Post
    .
    Tried to couch it with a smiley - sorry it if came across harsh - just do not think this is the place to learn about what you need to learn about - that is all I was trying to say -- good luck with your venture!
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  2. #17
    Senior Canuck kiwis-mom's Avatar
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    Thank you for the sorry. It got my back up but we're all good now. ✌
    I get where you are coming from but I learn best from asking questions--sometimes it's hard to find the answers to questions when those damn books won't talk back to you
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  3. #18
    tightwad and proud of it! brunt's Avatar
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    Quote Originally Posted by kiwis-mom View Post
    I am also interested to know the tax implications of buying, selling and holding stocks. Am I right in understanding that you only get taxed when you sell your stocks (either making a profit--results in Capital Gains or losing money--results in Capital loss).
    That is correct, but of course there is more to it.

    Assuming that your investment is not in an RRSP or TFSA, then...

    You are correct with capital gains, the gain is payable when you sell, and a loss can be written off of other gains (but you cannot deducted from other income, say your wages from work, just capital gains).

    Now, even this is more complex than it sounds. If you purchased a mutual fund or ETF, the fund itself buys and sells holdings during the year, and come the end of the year, you will have to pay taxes based on what they sold, even if you did not sell any of your holdings. This is only fair, since a sale did exist.

    Taxes on dividends are payable in the year the dividend is paid.

    Quote Originally Posted by kiwis-mom View Post
    As well what do you all think about borrowing money to invest?
    My opinion here, and I would like to stress that, my opinion is that this is a bad idea in general, and an exceptionally bad idea when you are just starting out.

    Yes, borrowing magnifies the gains if things go well, but they magnify the losses even more if things do not go well.

    In my opinion, borrowing to invest is best left to those with a very high level of knowledge in the markets, and with money that they can afford to lose.

    For every story that you hear about someone making out like a bandit with OPM (other people's money, a term used for borrowed money), there are half a dozen people who lost out that you don't hear about.

    Quote Originally Posted by kiwis-mom View Post
    Is it best to invest inside and RRSP or outside? I know that RRSPs allow you differ paying taxes until withdrawal upon reaching 65 (hopefully at a lower tax rate). So many questions......
    No clear answer here, but I can provide some info...

    The plus with RRSP is that you are able to compound your gains tax free, and just pay taxes on your withdrawals. This can be a big deal.

    Let's just say you make 10% dividends per year for 30 years straight (fat chance in this market, but let's just run with it). Let's also assume that you have a 30% marginal tax rate (15% for dividends and capital gains).

    If you keep it in an RRSP for 30 years, starting out with $1,000 and cashing out out $17,449 ($10,000*1.1^30) after your 30 years are done. If you are in a 30% tax bracket, you wind up with $12,215 of that ($17,449 * (1 - 0.3)).

    In a TFSA, you start out with $700 (you could afford more in the RRSP due to the deduction), and at the end of 30 years you have $12,215 ($700*1.1^30), the same as the RRSP. Despite the differences between the RRSP and TFSA, assuming that your marginal tax rate is the same at the time of contribution and withdrawal, the two plans are identical after taxes.

    Outside of an RRSP or TFSA, you start out with $700 (again, no deduction). At the end of 30 years, you have $8,091 (700 * 1.085^30).

    In this case, over the 30 years, the sheltered investment made 51% more.

    Now this is due to the compounding, which takes time. If we just did this for one year, the TFSA and RRSP would give $770 (1000 * 1.1*(1-0.3)), and outside would give $760 ($700 * 1.085). In this case, the sheltered investment makes 1.3% more.

    So yes, the sheltered accounts make more, but even at a 10% return, you have an edge of just over 1% each year. At a current rate of 3% or so, the advantage shrinks to 0.4% annually.

    Now if you have interest bearing investments, the registered vehicles give a larger advantage since the taxes outside of the registered accounts are higher.

    To further complicate matters, if you expect your tax rate to be lower in retirement than it is when you contribute, then the RRSP has a further advantage over the TFSA and outside. But then this depends on your income in retirement, and how much more greedy governments will be by the time you retire, so that is a bit difficult to figure out.
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  4. #19
    tightwad and proud of it! brunt's Avatar
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    Quote Originally Posted by kiwis-mom View Post
    As well what do you all think about borrowing money to invest?
    I know that I already answered this, but I stumbled across this link this morning.

    With options and futures, you can go broke and then some in minutes.
    Thanks now to leveraged ETFs you can produce some amazing results in a day.


    Pension Partners reports How to Lose 40% in a Day.
    Losing 40% or more in a day was always possible using futures and options, but before June 2006 it was nearly impossible to do so using an exchange-traded fund (ETF). What happened in June 2006? The first leveraged ETFs were introduced.
    Fast forward to yesterday and we witnessed the largest one-day decline in history for an ETF: -48.3%. The 3x long Brazil ETF (BRZU) now holds this ignominious distinction.
    Thanks to leveraged ETFs, the 1987 crash has become child’s play. For a number of these ETFs, a 20% decline has become a non-event. The 3x long Gold Miners ETF (NUGT), for instance, has had 15 days in which it has declined 20% or more since its inception in late 2010. Its counterpart, the 3x short Gold Miners (DUST) bests this with 16 days with declines of at least 20%.
    Before this week, the 3x short Financials ETF (FAZ) had held the record for largest one-day loss, at 45.1% (on March 23, 2009). The record stood for over 8 years. But records, as they say, are made to be broken.
    Who will be the first to lose 50% in a single day? The casino is open – place your bets.
    One person commented they did not understand the point of my post How High Will Bitcoin Go?
    It would have helped if I included the Twitter poll I meant to insert.

    Trade of the Century
    I was curious where people thought it was headed. So far, 67% think it will more than double from here. Not many readily buyable things go from well well under a penny to $1900.

    As late as June 2012, you could have gotten Bitcoin for $7. I didn’t.
    Blockchain Technology
    For the record, blockchain technology will become widespread. It is perfect for recording things. Mortgages, deeds, titles, etc, are a perfect fit for starters.
    Bitcoin itself is widely used as a capital flight mechanism out of China. Outside of that, it is a mostly a speculative plaything.
    Why not a triple-leveraged Bitcoin ETF? Perhaps Bitcoin could then eventually take out the above ETF records.
    Mike “Mish” Shedlock
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  5. #20
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    Quote Originally Posted by kiwis-mom View Post
    I am also interested to know the tax implications of buying, selling and holding stocks. Am I right in understanding that you only get taxed when you sell your stocks (either making a profit--results in Capital Gains or losing money--results in Capital loss).
    As well what do you all think about borrowing money to invest?
    Is it best to invest inside and RRSP or outside? I know that RRSPs allow you differ paying taxes until withdrawal upon reaching 65 (hopefully at a lower tax rate). So many questions......
    Yes, Only when you actually sell, capital loss or capital gain is realised. Paper profits or loss, don't count. Only 50 % of the Capital gains are taxed. You can even deduct the brokerage fees and transaction fees from the capital gains and show that as an expense.

    Borrowing to invest is very risky. You need a MARGIN account for that if you are going to borrow from the broker, not just a regular cash account. Of course you can borrow money from somewhere else and transfer it to your brokerage account and buy stocks. But if the stocks go down, not only you lose money on stocks, but you will be paying interest on the borrowed money too. So double whammy.

    Investing in stocks in TFSA is the best bet, if you want to avoid Capital gains. You pay NO capital gains tax inside the TFSA and NO income tax when you withdraw money from the TFSA. So if you buy $ 10,000 stocks in TFSA and they become $ 50,000 , when you withdraw that money there is NO capital gains tax or income tax on the $ 40,000 profit you made . But be careful about the contribution limits in TFSA.

    Holding your stocks in the TFSA also means all the capital gains will be tax-free.
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  6. #21
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    Some people even SHORT the stocks, i.e BET against the market. They make money when the stock goes down ! Your brokerage account lets you do that.

    So its not always buying a stock at $ 10 and then waiting for it to go to $ 10 + and then selling it to make money. That's called going LONG on the stock.

    In a BULL market the LONG's make money. In the BEAR market the SHORT's make money.

    Most companies and stock exchange publish how much of their Stock is SHORTED by investor's. If lot of their stocks are SHORTED, usually its not a good sign to buy that stock and go LONG on it, because its probably going down in future. Or at least that's what the so called experts think.
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  7. #22
    Senior Canuck matty's mom's Avatar
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    Some great advice above. I set a budget for myself on what I willing to "play" with/ loose. GoodBoy was on the right track when he mentioned the library. Both our library and local college have investing and taxation courses offered every term. (Free or little money). These can be excellent resources to network and learn from people who have more experience than you. Questions and discussions are usually welcome. Not sure where you are located, but it maybe worth looking into. As for me, my life became too complicated to follow my own investments, so I eventually went with a planner. And I LOVE her. Good luck!
    Last edited by matty's mom; Sat, May 20th, 2017 at 09:57 AM.
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    Senior Canuck kiwis-mom's Avatar
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    Wow, tons of great info. I'm​ finding this to be very interesting and educational. I appreciate all the time and info that you have all shared so far.
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  9. #24
    Senior Canuck kiwis-mom's Avatar
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    Brunt and tjthemanto--
    Thank you very much for the info and tips.

    As far as borrowing to invest, I would likely never do anything like that myself as it sounds too risky-being on the hook for loan (and it's repayment) with no guarantee of a return on the investment made with that loan. It was more that I wanted confirmation of the dangers of such a move. The topic came up in a conversation I recently had with a family member who is an investor (and who has being doing well recently for himself). But I find in conversations with those who do well with their money and investments, that when you ask how they do it they tell you only part of their secret but not the whole--like when you ask for the recipe for your friend's great dip, cookies, cake , etc...They give it to you but always leave out some key unknown ingredient, so that when you try the recipe it never turns out quite right.


    Except for all of you who have shared what you know on here with answering my inquiries! Fantastic is all I can say!
    Last edited by kiwis-mom; Sat, May 20th, 2017 at 11:45 PM.
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  10. #25
    tightwad and proud of it! brunt's Avatar
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    Quote Originally Posted by kiwis-mom View Post
    As far as borrowing to invest, I would likely never do anything like that myself as it sounds too risky-being on the hook for loan (and it's repayment) with no guarantee of a return on the investment made with that loan. It was more that I wanted confirmation of the dangers of such a move. The topic came up in a conversation I recently had with a family member who is an investor (and who has being doing well recently for himself). But I find in conversations with those who do well with their money and investments, that when you ask how they do it they tell you only part of their secret but not the whole--like when you ask for the recipe for your friend's great dip, cookies, cake , etc...They give it to you but always leave out some key unknown ingredient, so that when you try the recipe it never turns out quite right.
    One of the issues here is something called survivorship bias. Things like this can seem like a good idea because the people burned by it tend not to talk about it since they are hesitant to admit their mistakes. You only hear about it from people who have not been burned. These people may be skilled, or they may just be lucky.

    One of the traps here is the dreaded Margin Call. When you trade on margin, your broker loans you money. Your broker wants to make sure that you can pay back the loan, so he monitors the value of the investment you made with the borrowed money. If you the investment is down a sufficient amount, the broker gets antsy and wants you to put up more money to make up for your on paper losses. You have to either come up with the cash (one of the reasons that people who borrow to invest should only be richer people), or sell something to put up the money, potentially losing profits on the thing that you had to sell. Worst case, if you don't get back in time, your broker may sell some or all of your investment while it is down to make up for the shortfall. So even if the trade was a good one, one bad day where it temporarily falls a lot can guarantee a loss for you.

    There are rare instances where I would consider it, but not as a general strategy.
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  11. #26
    Senior Canuck kiwis-mom's Avatar
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    Brunt:. Thank you for the info. Borrowing to invest seems like playing with fire(I expected it to be) which is why I wondered what impartial people would think of what my uncle said about investing OPM. Might work for him, personally however, I find that kind of needless risk to be less than ideal. No guarantee on return of investment in using OPM could lead to a whole disaster that could have far reaching repercussions that I would not be comfortable with. I like my house and would like to keep it thank you very much!

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    Quote Originally Posted by kiwis-mom View Post
    Brunt:. Thank you for the info. Borrowing to invest seems like playing with fire(I expected it to be) which is why I wondered what impartial people would think of what my uncle said about investing OPM. Might work for him, personally however, I find that kind of needless risk to be less than ideal. No guarantee on return of investment in using OPM could lead to a whole disaster that could have far reaching repercussions that I would not be comfortable with. I like my house and would like to keep it thank you very much!
    Sometimes the stock market tanks big time in just 1 day. And you might not have liquid cash on hand to take advantage of that, as your money is invested in your house or some other stocks .

    On days like that it might make sense to buy stocks by borrowing money to take advantage of the plunge and lows.

    I have had days when the stocks were very low due to some war somewhere or something happened in China stock exchange or some other irrational fear based psychological stuff. But I didn't have the liquid cash on hand to buy, so I have though about borrowing to buy ( but I never actually did it ). Later on in a week or so, the stocks have rebounded nicely. But again the risk factor remains.

  13. #28
    tightwad and proud of it! brunt's Avatar
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    Quote Originally Posted by kiwis-mom View Post
    Brunt:. Thank you for the info. Borrowing to invest seems like playing with fire(I expected it to be) which is why I wondered what impartial people would think of what my uncle said about investing OPM. Might work for him, personally however, I find that kind of needless risk to be less than ideal. No guarantee on return of investment in using OPM could lead to a whole disaster that could have far reaching repercussions that I would not be comfortable with. I like my house and would like to keep it thank you very much!
    The main advantage of OPM is leverage, that is, your profit is a multiple of the gain of the stock. For instance, if you invest $1000 and borrow $1000, you have 2:1 leverage (for every $1 you personally put in, you have $2 worth of stocks thanks to your loan). This means that if the stock goes up 10%, your profit is 20% minus the interest costs. However, if the stock loses 10%, you loss is 20% plus the interest costs.

    However, if you are seeking leverage specifically, there are other ways to do it. Although they are often given a bad rap, options are a great way to get leverage that can limit your losses to the downside. However, they come with other issues, and one had better really understand options before running into them willy nilly.

    Options can be used to gain leverage, get extra profit on a stock that you own, or even provide insurance on your investments. Thus, they can be boring as insurance, or as exciting as using borrowed money - it all depends on how you structure your investment.

    But before I would put a dollar into options, I would make darned sure that I understand how they work backwards and forewards, as always. There is a lot to them, and they are not recommended for the feint of heart.

    Of course, ETFs and regular stocks are much easier to understand. Mutual funds are easy as well, but I find that ETFs offer much cheaper alternatives with none of the nasty surprises of early withdrawal fees and the like.
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  14. #29
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    Quote Originally Posted by kiwis-mom View Post
    Good Afternoon Everyone!


    I am trying to do some research into buying Stocks but don't know the first thing about how to go about doing it. There is so much information out there that it's a bit overwhelming and I'm not sure where to start. So I'm putting this out there to see what you Smart Canucks do.

    Any suggests for someone who starting out in buying stocks? Where is the best place for information and research?
    Do you use an online brokerage, if so which one?
    What are the tax implications?

    Any and all useful advice would be great...I need a starting off point.

    Thanks for reading!
    Most people just starting to invest often do so without really having a goal. Certainly one can Play the Market, try buying a stock and hold it to sell if and when it goes up. Then try again with another stock. That's usually how most begin and most end up losing money before they begin to gain more knowledge about investing.

    Rather than go through the various choices and many have been mentioned earlier, here's what we finally settled upon. We bought stocks with the objective of generating a growing income. Again there may be different methods of achieving that goal, but we followed the advice from the Connolly Report. He's been publishing his strategy for over 35 years and those who practice what he preaches have done extremely well. For us we have no company pension, invested unsuccessfully for many years but after switching or making our goal of investing for Income, we are now fully retired and financially secure. Our annual dividends exceed our annual expense and the income keeps growing each year.
    Is it the best method, maybe not. Can one make more money with other strategies, possibly. Would you not be better off just buying a group of ETF's, I doubt it, but investing is a personal thing. You've got to evaluate the various methods and decide which suits your personality, goals and risks.
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  15. #30
    Canadian Guru Lynn49's Avatar
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    Oh good grief!

    If you have money to waste, yes, by all means dabble in the stock market, buy what Warren Buffet buys.
    However if you"re thinking get-rich fast, our DD is Canadian Certified Financial Planner, who invests her clients in funds and stocks and tells me that by the time ' regular people' get a whiff of a good stock it's too late for them.
    It's taken her years and years, many courses to understand the international monitary systems, stocks, etc and I for one could never hope to understand it all!

    Find a CFP if you have the funds, or a Financial Advisor if you don't and keep the money you have to grow more.
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