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Welcome to our Padlet about the Stock Market! 🍁

In modern day, the stock market has become so relevant in our lives; that at some point you too have heard a little bit of information about it. ✨

✨ The learning objectives that are anticipated:

Learning about what the Stock Market generally is.

The origin of Stocks

The TSX

Bull & Bear Markets

What investing is, and how does it benefit the Stock Market

The difference between the Canadian Stock Market and the U.S. Stock Market.

Mutual Funds vs ETFs

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KEY TERMINOLOGY ⬇

Stock Market: "Referenced as a marketplace in which you can buy and sell public shares held in companies."

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Stock Exchange: "A transaction within the Stock Market when it comes to exchanging, and buying and selling shares."

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Volatility: "It measures the unpredictable nature of the market and security experience periods of price movements."

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Dividends: "Are a form of payment in which a company makes to share profits with its very own stockholders."

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Trading Volume: "The number of shares traded over a specific period of time, usually a day."

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Website One: How to Invest in Stocks: A Beginner's Guide

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Website One: How to Invest in Stocks: A Beginner's Guide

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With the use of the following five steps, you can determine what tactics most people use when investing in stocks, and how it can make your money grow. The first step is analyzing your risk tolerance levels. For this process of growth, success is mostly decided by chance. The second step is to set long terms goals that would require a great sum of money. The third step is to determine your investment style such as stocks, bonds, exchange-trade funds etc. The fourth step is to choose an investment account for example, a retirement plan. The last step, is to diversify the stocks that you choose to invest. 💲

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This website was chosen because it not only gives some insight on investing for beginners following along with the steps, but it also gives insight for other things such as the costs when it comes to investing in stocks, mutual fund loads, and an explanation of different types of brokers. This was very helpful in terms of understanding the strategies used to invest effectively. 💲

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Investing in stocks is a way to make your money grow over time. By regularly putting money aside to invest, you can see its value multiply over the long term. That's why it's important to begin as soon as you have the money to do so-the longer your time horizon, the better. This article takes you through how much you need, what stocks to choose, and the other basics of investing in stocks you need to get started, all in 10 steps. Whether you have thousands set aside or can invest a more modest $25 a week, you have enough to begin.

Step 1: Set Clear Investment Goals

Begin by reflecting on what you want to achieve financially. You might have short-term goals like saving for a home or a vacation or have long-term objectives like securing a comfortable retirement or funding a child's education. Your objectives will depend on your life stage and ambitions. Younger investors tend to focus more on growth and long-term wealth accumulation, while those closer to retirement typically prefer income generation and capital preservation.

The more precise you can be about your goals, the easier it will be to sort out the best means to get you there. Here are some tips:

Be precise about your objectives: Instead of general goals like "save for retirement" or "I don't want to have to worry about money one day," set specific objectives like "accumulate $500,000 in my retirement fund by age 60."

Set your investment horizon: Determine how long you have to achieve each goal you set. You will have longer and shorter timelines for different purposes. In general, the longer you can give yourself, the less risk you'll need to take on, and the more viable your objectives will be.

Evaluate your finances: Be realistic about how much you can allocate toward your investment goals. This includes looking at your savings, regular income, and any other financial resources you can put to work as you begin. We'll come back to this.

Rank your goals: Most of us have several goals at once, like saving a down payment for a house, paying for a wedding next year, or preparing for retirement. Prioritize these and balance them according to their importance and urgency.

Review and adapt to changes in your life: The phrase financial planning is best taken as a verb, not a noun since goals aren't set in stone, and planning your finances is an ongoing project. You might fall in love or out of it, have many children or none of them, or realize your life's work is best done in a different place in the country. Life changes, and so will your financial objectives. Regularly review and adjust your goals accordingly.

The first step in any venture is the biggest, but it's also when you set your aspirations and imagine yourself in a future that your investments in stocks, a touch of luck, and a prudent investment strategy you'll begin to learn here make possible.

Step 2: Determine How Much You Can Afford To Invest

Determining how much you can afford to put in stocks involves carefully and honestly assessing your financial situation. Don't worry if your funds are less than you would wish. Just like you shouldn't berate yourself for not being ready for a race on your first day of training, so too, you're just at the beginning of your investment journey. This is a marathon, not a sprint and you've got a long way to go. Here are some tips for giving yourself an honest appraisal of how much you can use:

1. Look at your sources of income: Start with your income. In particular, you'll want to see if your employer offers ways for you to invest while gaining tax benefits or with matching funds that will amplify your own contributions.

2. Have an emergency fund: You should have a solid financial foundation before investing, though solid does not mean perfect. Settle on how much you need for emergencies, typically covering major expenses (a few months of mortgage or rental payments, plus your other bills).

3. Snuff out any high-interest debts: Financial advisors also generally suggest making sure you've paid down your debts, especially credit cards and anything else with high interest rates. Any returns you expect from trading stocks are unlikely to make back the cost of the high interest rates accruing each month on your credit card statements. If you still owe on your student loans, look at how much interest you pay. Balance that against the returns you expect by investing in stocks, and choose whether it's better to pay your loans down or invest.

4. Set a budget: Based on your financial assessment thus far, decide how much money you can comfortably put into stocks. This shouldn't dip into any funds you need for expenses now or down the road. Your budget should determine if you are starting with a large lump sum or investing smaller amounts at set times each month or year.

Investing in stocks carries risk, and it's important to only invest money you can afford to lose. Never put yourself in a financially vulnerable position for the sake of investing. This is what separates investing from some of the worst forms of gambling.

Step 3: Appraise Your Tolerance for Risk

Understanding your risk tolerance is a cornerstone of investing. Gauge your level of comfort with the inherent uncertainties of the stock market. Your risk tolerance will differ depending on your life stage, financial goals, and your financial cushion for potential losses.

Determining your risk tolerance is crucial for crafting an investment strategy that matches your financial goals while keeping your peace of mind. It helps you decide which stocks are suitable for your portfolio and what to do when the market goes up or down. Don't be goaded into being more adventurous than you need to be, or more cautious than called for. Do you prefer stability, or are you willing to accept higher risks and price swings if that means there's the potential for more returns? This self-assessment is key to setting a foundation for your investment journey.

Stocks can be organized by the risk they involve. For instance, large-capitalization (large-cap) stocks are generally more stable since they are well-established, major companies well-known in the market. Small-cap stocks usually offer more growth potential but come with increased risk. Similarly, growth stocks are sought for rapid gains, with higher risks, while value stocks focus on long-term, steady growth, usually with lower risks.

Step 4: Determine Your Investing Style

Everyone has a different relationship with money. We've seen how this affects your risk tolerance. But investors also have investing styles that best suits them. Some prefer an active role, meticulously pouring over the last cell on the spreadsheets for their portfolios, while others opt for a hands-off, set-it-and-forget-it approach, trusting their investments will grow over time if they just leave them alone. Some just might not have the time to be active traders following the ticker crawls and latest reports on investing platforms. It's important to recognize that your style might evolve, but you'll need to start somewhere, even if your choice isn't set in stone.

Here are general directions for understanding your investing style:

DYI investing: If you have a good grasp of how stocks work and are confident to head out with minimal guidance into the market, managing your stock trades is one option. You can set up an account with well-known and trusted online brokers to access a wide range of investment options, including stocks, bonds, exchange-traded funds (ETFs), index funds, and mutual funds. This approach gives you full control over your investments, even if certain choices might be stock funds and the like managed by professionals with a fiduciary responsibility to look after your funds.

Working with a financial advisor or broker: For those who prefer the more personal approach and want more, an experienced broker or financial advisor can be invaluable. They offer advice tailored to your life experiences and goals, help you decide among the more promising stock choices for you, monitor your portfolio, and collaborate with you when adjustments need to be made.

Step 5. Choose an Investment Account

You've figured out your goals, the risk you can tolerate, and how active an investor you want to be. Now it's time to choose the type of account you'll be investing through. Each has its own set of features, benefits, and drawbacks.

Here are the most common:

Retirement accounts

Your employee retirement plan: If your employer offers a retirement plan, this is a convenient way to invest in stocks, including potentially those of the company itself. The plans are known by the sections where they're described in the U.S. tax code. The most popular are 401(k)'s (tax-deferred, private employer-sponsored retirement savings), but you could also have a 403(b) (used mostly by nonprofit organizations, public schools, and some churches), a 457 (mostly for state and local public employees), or a similar plan. You contribute to your account automatically each pay period, and many employers offer matching contributions, boosting your investment. Your contributions are tax-deductible, and the account balance grows tax-deferred.

Individual retirement account (IRA): You can start investing in stocks by opening an IRA in addition to your workplace retirement plan (if you have one). IRAs provide some tax benefits, and you can choose between a traditional IRA (tax-deductible contributions) or a Roth IRA (tax-free withdrawals in retirement).

Taxable brokerage accounts

If you prefer more flexibility or have maxed out your IRA contributions, a regular taxable brokerage account gives you access to various investment options, including individual stocks, stock mutual funds, ETFs, and stock options. While they don't have the tax advantages of retirement accounts, they are more flexible and don't have contribution limits. You can also pick different taxable brokerage accounts as you seek a match for your investment style.

Individual brokerage accounts: These are standard accounts opened by one person. The account holder has full control over the investments and is solely responsible for any tax implications. The most basic type is a cash account, through which you buy securities using only the money available in your account. You can also have a margin account at a brokerage for more experienced investors who borrow money from the brokerage against their account's value to buy additional stock.

Joint brokerage accounts: These are shared by two or more individuals, typically spouses or partners, and can be cash or margin accounts. These accounts can be structured as joint tenants with rights of survivorship: if someone on the account dies, ownership passes to the survivor(s).

Managed accounts:These are professionally managed, and a portfolio manager makes the decisions on your behalf, personalized to your needs, goals, and investment style.

Accounts for specialized goals

There might be tax advantages to using different kinds of accounts if you're investing in stocks for specific goals, e.g., for your own or your child's education or health expenses. If so, it's to your advantage to consider these alternatives, which have special tax incentives:

Dividend reinvestment plan accounts: Some brokers offer accounts that automatically take your stock dividends and use them to purchase new shares, usually without charging commissions for the additional shares.

Education Savings Accounts: These offer tax advantages when the funds are used for qualified educational expenses.

Health savings account: Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free.

Trust and custody accounts: A trustee manages trust accounts for the benefit of a third party according to the terms of a trust agreement. In the case of custody accounts, minors can own stocks and other assets, but a custodian manages the account until the minor is an adult.

Step 6: Learn the Costs of Investing

Commissions and fees

Besides reputation and fit with your investment strategy and goals, broker fees are the most important consideration when you're choosing a brokerage firm, which comes in the next step. Let's prepare. Traditionally, brokerages have charged fees through trade commissions, account maintenance fees, and fees for additional services like research or financial advice. However, the landscape of brokerage fees has evolved significantly in recent years. Here's what you'll want to look for as you do your research:

Trading commissions: A broker might charge a commission every time you trade a stock, whether you buy or sell. Trading fees range from $2 per trade to $10. Some brokers charge no trade commissions at all, but they make up for it with other fees. Depending on how often you plan to trade, these fees can add up, affect your portfolio's return, and deplete the money you have available to invest.

Let's see this in action: Suppose you buy one share of stock in five companies with $1,000. Assuming a transaction fee of $10, you will incur $50 in trading costs which is equivalent to 5% of your $1,000. Should you sell these stocks, the round trip (buying and then selling) would cost you a total of $100, or 10% of your initial deposit amount of $1,000.

Maintenance fees: Some brokerages charge monthly or annual fees to keep your account active. These might be waived, though, if your account balance is above a certain threshold.

Service fees: You might pay additional fees if you haven't used your account in a while. Brokers also may charge for services like broker-assisted trades, access to their premium research, and trading on margin (by borrowing). Most of these fees and the services linked to them are optional.

Subscription-based models: As Generation Zers and Millennials take up a larger share of the investment space, financial advisors, planners, and brokers are taking on clients used to month-to-month or yearly fees for apps and app-based services. Instead of paying per transaction or for specific services, you pay a flat monthly or annual fee. Your subscription may include commission-free trades, access to research tools, and other premium support.

Some platforms offer tiered subscription levels, supplying more features or lower margin rates at higher subscription rates. As you would with Hulu or your favorite online magazine, you'll want to keep an eye on how much you're taking advantage of what you're paying for. If not, you might draw down to a lower tier or seek another broker altogether.

Account minimums

A major change in recent years has resulted from the immense competition among brokerages. Many online brokers have eliminated account minimums, making it easier for a wider range of investors to get started.

This means that if you have just a few dollars to invest, you can still open a brokerage account and begin trading stocks. While some brokerages still require you to deposit substantial amounts before you can become a client, this shift away from very low or no minimum requirements has made investing far more accessible to nontraditional investors and beginners. However, you'll want to assess any minimum a brokerage requires, which is still your money, with transaction fees and maintenance costs that may lead you to decide that keeping a minimum in your account is less costly in the long run.

Step 7: Pick Your Broker

Brokers are either full-service or discount.

Full-service brokers

These offer a full range of traditional brokerage services, including financial advice for college planning, retirement planning, estate planning, and for other life events. This customized advising justifies the higher fees that they typically charge, normally a percentage of the value of your transactions, a percentage of your assets under management, and sometimes, a yearly membership fee. Minimum account sizes can start at $25,000.

Discount brokers

These offer you tools to select your investments and place your orders. Some also offer a set-it-and-forget-it robo-advisory service. Most have educational materials on their sites and mobile apps. Some brokers have no (or very low) minimum deposit restrictions. However, they may have other requirements and fees. Be sure to check on both as you look for a brokerage that's best for your financial situation.

Below, we get you started by comparing the best online brokers:

We recommend the best products through an independent review process, and advertisers do not influence our picks. We may receive compensation if you visit partners we recommend. Read our advertiser disclosure for more info.

Robo-Advisors

For an automated solution, robo-advisors or automated investment platforms are cost-effective and pretty effortless when investing. If you select this option, you won't be alone in doing so. According to Charles Schwab, 58% of Americans say they will use some sort of robo-advisor by 2025.

An app or platform takes the information you provide about your financial goals, risk tolerance, income and savings, and so on, and its robo-advisor creates and helps manage your investment portfolio using its specialized algorithms. Aimed at retail investors, robo-advisors are low-cost, usually have little or no minimum balance requirements, and are programmed for strategies suited for new and intermediate investors. That said, they tend to offer fewer trading options and lack the personal approach to financial planning best suited for long-term investing.

If this interests you, we get you started below by comparing the best robo-advisors.

Step 8: How To Fund Your Stock Account

Now that you've chosen the type of account to open, you'll have to fund it. Here's what to do:

1. Choose a brokerage: First, select a brokerage firm, perhaps one of the major online firms, that aligns with your investment goals and preferences or is simply most convenient for you. Consider factors like fees, available investment options, and the platform's user-friendliness.

2. Pick your account type: Decide whether you're opening a cash account, which requires you to pay for investments in full, or a margin account, which allows for borrowing to purchase securities.

3. Open your account: Once you've chosen a brokerage and account type, you'll need to open your account. This involves providing your personal information: Social Security number, address, employment details, and the particulars of your financial situation. This shouldn't take you more than 15 minutes.

4. Link your bank accounts: The most common way to fund your stock account is by linking it to your bank account. This is usually done online through the brokerage's platform, where you'll enter your bank account number and routing number. Many brokerages allow you to link your account via small test transactions for verification.

5. Transfer or deposit your first funds: Once your bank account is linked, you can transfer funds to your brokerage account, typically through an electronic funds transfer, which can take a few days to process. Other options may include wire transfers for faster funding if you're raring to go, though these usually cost more. Some brokerages still accept physical checks. If you prefer this method, you can mail a check to the brokerage or bring it to a physical location.

6. Set up periodic transfers: If you plan to make stock buys a habit, consider setting up automatic transfers from your bank to your brokerage account.

7. Start investing: Once you've verified the funds are in your account (don't worry: the brokerage won't let you trade otherwise), it's time to start choosing among the stocks that best fit your investment goals.

If you plan to trade frequently, check out our list of brokers for cost-conscious traders.

Step 9: Pick Your Stocks

Choosing the right stocks can be daunting even for experienced investors. Beginners should look for stocks that have stability, a strong track record, and the potential for steady growth. Don't start out of the gate with a risky stock, thinking you'll hit it big right away. Investing for the long term is mostly slow and steady, not fast and rash. Here are some stocks that are solid bets to begin:

Blue chips: These are shares of large, well-established, and financially sound companies with a history of reliable performance. Examples include companies listed in the Dow Jones Industrial Average or the S&P 500. They are typically industry leaders and offer stability during market fluctuations.

Dividend stocks: Companies that regularly pay dividends can be a good choice for beginners. Dividends give you a regular income, which can be reinvested to buy even more stock. See How to Buy Dividend Stocks to get started.

Growth stocks: The greater the chances for outsized growth in a stock, the riskier investing in it will be. Beginners interested in growth stocks should look for industries with long-term potential, such as technology or healthcare.

Defensive stocks: These are in industries that tend to perform well even during economic downturns, such as utilities, healthcare, and consumer goods. They will give you a buffer against market volatility as you start.

ETFs: Traded like stocks, these track many indexes or sectors and are a low-cost way to gain exposure to a broad range of assets. You can trade shares in them throughout the day at market prices. These funds often track a specific market index, like the S&P 500, and offer instant diversification, reducing the risk associated with individual stocks. As you gain experience, you can look at funds for sectors that pique your interest, themes that meet your investment goals, or indexes that track environmental, social, and governance stocks to match your quest for returns with your values.

It's prudent to begin with a conservative approach, focusing on stocks or funds that offer stability and a good track record. This will give you confidence and returns to work with as you advance in your investing knowledge.

Step 10. Keep Learning About Investing In Stocks

Investing in stocks is an ongoing learning experience-even the most successful investors are learning new tips and strategies each passing day. As the stock market continually evolves, staying up to date and going back to Step 1 and reviewing your goals, available funds for trading, investment style, and so on, will be key. Here are some final tips for now:

1. Read widely and regularly: Consistently visit reputable financial news sites. Keep informed about the global economy, industry trends, and the companies you are invested in. Avoid sites and books promising easy returns or tricks, not tips, likely to redound to their benefit when you buy their courses or apps. Books on investment strategies, stock market fundamentals, and diversification techniques can be essential.

2. Use stock simulators: These platforms enable you to practice trading stocks risk-free using virtual money. They are excellent tools for applying investment theories and testing strategies without risk. Investopedia's simulator is entirely free to use.

3. Learn about diversification: Having taken your beginning steps here, you'll next want to spread your investments across diverse asset classes to reduce risk and improve the potential for returns. When you're ready, we'll help you learn how to diversify your portfolio beyond stocks.

Just as financial planning is a verb, learning about stock investing is continuous. The more informed you are, the better you'll be able to make wise investment decisions and adapt to market changes.

What Is the Difference Between a Full-Service and a Discount Broker?

Full-service brokers provide a broad array of financial services, including financial advice for retirement, healthcare, education, and more. They can also offer a host of investment products and educational resources. They have traditionally catered to high-net-worth individuals and usually require significant investments. Discount brokers have much lower thresholds for access, but tend to offer a more streamlined set of service, allow you to place individual trades, and offer educational tools.

What Are the Risks of Investing?

Investing is a commitment of resources now toward a future financial goal. There are many levels of risk, with certain asset classes and investment products inherently much riskier than others. It is always possible that the value of your investment will not increase over time. For this reason, a key consideration for investors is how to manage their risk to achieve their financial goals, whether short- or long-term.

How Do Commissions and Fees Work?

Most brokers charge customers a commission for every trade. Due to commission costs, investors generally find it prudent to limit the total number of trades they make to avoid spending extra money on fees. Certain other types of investments, such as exchange-traded funds, carry fees to cover fund management costs.

The Bottom Line

Beginners can start investing in stocks with a relatively small amount of money. You'll have to do your homework to determine your investment goals, risk tolerance, and the costs of investing in stocks and mutual funds. You'll also need to research brokers and their fees to find the one that best fits your investment style and goals. Once you do, you'll be well-positioned to take advantage of the potential stocks have to reward you financially in the coming years.

Options trading entails significant risk and is not appropriate for all investors. Certain complex options and strategies carry additional risk. Before trading options, please read the Characteristics and Risks of Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request.

There is an Options Regulatory Fee that applies to both option buy and sell transactions. The fee is subject to change. See Fidelity.com/commissions for details.

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How to Invest in Stocks: A Beginner's Guide

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From how much you need to open an account to the investments to choose, this guide will get you started.

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Video One: How does the Stock Market work?

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Video One: How does the Stock Market work?

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The Stock Market dates back to the 1600s and the worldwide trade of gold, porcelain, spices, and silks. A portion of this trade was run by the Dutch East India Corporation who traded their goods with the use of ships. However, to keep this process going they needed the assistance of private citizens to invest in their corporation. It was a fair trade because those citizens would receive a share of the corporation's profits. Essentially, this method is used with today's Stock Market.

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This video was chosen to give a basic understanding of the Stock Market for those who are only beginning to discover the system. This video breaks down the process of how the Stock Market operates into just a few steps. It explains that a company starts with a simple thought which is then introduced to regular investors. If the investors have faith in the company's product, then they will invest and sponsor the company's initial public offering. It also explains how the stock market operates in terms of when the value of the stocks decline. It shows how detrimental losses can be which leads some investors to sell their stocks so that they can still obtain some value before the company hits rock bottom. This explanation showed the effects of supply and demand.

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How does the stock market work? - Oliver Elfenbaum

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This is a chart tracking the price of the S&P/TSX Composite Index as well as its trading volume since 2000. As you can see, major dips in its price occurred after both the 2008 financial crisis and the beginning of the Covid-19 pandemic. The green and red of the trading volumes indicate if the Index lost or gained capital overall that year.

This chart was chosen due to it representing a large portion of the Canadian stock market.

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The history of the TSX began in 1852, when several Toronto businessmen met to form an "Association of Brokers". They would achieve this in 1861 when a resolution was passed to create the Toronto Stock Exchange. It started very small, with only 2 or 3 transactions daily from a list of 18 securities, but by the turn of the century it reached 1 million transactions per year and 100 companies listed. The TSX continued to grow throughout the 20th century, with accomplishments such as:

Not having any members default on their obligations to clients during the Great Depression

Merging with their primary competitor, the Standard Stock and Mining Exchange, in 1934

Reaching 1 billion shares traded in 1955

Launching the world's first Computer Assisted Trading System (CATS) in 1977

Closing their trading floor for an electronic model in the late 90's, at the time the largest stock exchange in North America do so.

Becoming the sole Canadian exchange for the trading of senior equities right before the turn of the century

The TSX became a for-profit company in 2000, and acquired the Canadian Venture Exchange in 2001. They also joined with the Montreal Exchange in 2007. Throughout the 21st century the company has grown and continued to acquire various smaller financial companies, as well as being acquired themselves by what was formerly Maple Group in 2012.

This source was chosen because it is a history of the TSX coming right from those who run the index in the modern day. It also provides various photos of the bank's old locations and memorabilia, which provide a snapshot of many different eras of banking.

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Video Two: How to Invest in Stocks For Beginners (Will update)

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Video Two: How to Invest in Stocks For Beginners (Will update)

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This video captures the true meaning of investing in stocks and the reason why many people do it today. It touches on the fact that when we invest in companies we can partially own that company. It also describes the value and how it may increase and decrease depending on the company. It also touches on how one might buy and sell stocks, explaining the setup process to buy stocks, and the action taken to sell the stocks.

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This video was chosen because it guides you through the healthiest choices to make when you are thinking about investing. It describes the different approaches to investing such as: 'buy and hold', 'dividend investor', 'speculator' and 'trader'. All these approaches are further explored in the video, which makes it more easier for one to pick and choose which exact approach fits them.

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Bull and bear markets are frequently referenced, but they are not exact terms. Generally, a bear market is when an asset/index drops 20% or more and continues until the price begins to recover, and a bull market is any period of time between bear markets. Bear markets have occurred 10 times over the last 70 year in U.S equity markets according to this definition. Each Bear market differs in characteristics from one another, with the U.S equities market experiencing lengths over the past 70 years ranging from just 3 months to a year and a half, and value dips from 20.7% to 57%. While Bear markets can be intimidating, it's important to remember that markets have always recovered from them, and the lower prices they bring often lead to returns once the market switches.

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This website was chosen due to it being from a Canadian bank and having a good working definition of the markets, as well as some insight into trends related to them. One piece of information from it that stands out is the graph of bear and bull markets in the U.S going back to 1958, giving a good wider picture of the markets.

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Website Four: Canada Vs US Stock Markets: How do they differ?

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Website Four: Canada Vs US Stock Markets: How do they differ?

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The Canadian Stock Market and the U.S. Stock Market are very different in terms of size, profit, and the companies that are present. When it comes to investing in the Stock Market, it is best for Canadian investors to invest into Stocks from the U.S. This is because the U.S generally has larger Stock Market sectors. The sectors that are significantly larger in the U.S than in Canada are as follows: capital goods, energy, financial, technology, transportation, and many more. However, despite the U.S. leading with many sectors, there is a notable sector that Canada does lead with, and it is basic materials being 1.6 times larger.

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This website was chosen for the sake of diving deep into the specifics with data and percentages, along with comparing the Canadian Stock Market with the U.S. Stock Market. In this website, it briefly notes about how Canada's strength when it comes to the Stock Market lies with its basic materials/resources and as well as the Canadian banks. This website is also notable for being quite up-to-date with the data that has been collected and displayed, as of May 21st, 2023.

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Aside from the obvious currency difference, do you really understand the strength of each stock markets? From a population perspective, the USA is nearly 10 times bigger than Canada, you would expect the stock markets to be somewhat bigger by the same ratio. It's nearly true with a couple of exceptions. Anecdotally, the entire population of Canada is just under the population of California alone. That alone should give you a sense of the economics at work.

Canadian investors should understand the need to invest in the US.

US investors should pay attention to the exceptions. In most cases, the companies of interest are probably trading on a US exchange already.

Currency is often the challenge but there are ways to overcome that challenge and get access to the money in an effective manner.

You need a bank account for each currency

You need to be able to transfer money around in the currency you need

You can do the Norbert Gambit with DLR

Stock Market Sector Comparison

By the numbers, each sector compares this way. Using the average PE per sector is a good resource by the way as it can easily tell you if an investment is within the range of the market, well below or well above.

Basic Materials: Canada is 1.6 times bigger

Capital Goods: US is 6.5 times bigger

Conglomerates: US is 2.4 times bigger

Consumer Cyclical: US is 16 times bigger

Consumer Non-Cyclical: US is 8 times bigger

Energy: US is 1.54 times bigger

Financial: US is 5.66 times bigger

Healthcare: US is 10 times bigger

Services: US is 8 times bigger

Technology: US is 11 times bigger

Transportation: US is 8 times bigger

Utilities: US is 5.4 times bigger

Strength of Canadian Market

As you can see, there are more companies trading on a stock exchange in the basic material and the number of energy companies in Canada is also an exception to the other ratios. When building a portfolio that is diversified, it's important to understand the sectors and their strength along with the international diversification. Canadians should definitely have US holdings and your RRSP account is the best account to hold those investments.

The Canadian banks are definitely worth mentioning as a strength as none of them had major trouble from the sub-prime mortgage. The banks went on to recover and make a new high. I own all the top banks as you can see in my stock holdings.

Strength of US Market

I will have to say that Americans don't really have to invest in Canada to have a good diversification of sectors but it's worth understanding the companies that do a lot of business in the US. Most recently, I reviewed the big Canadian oil producers for example. The railway companies also do a lot of delivery in the US and they are really big companies worth paying attention to.

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Canadian vs US Stock Markets: How do they differ?

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The difference between the Canadian and US stock markets is BIG. The sector representation differs and by a large number. Know the difference to build wealth.

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Stock can be categorized by 5 different factors:

1. Their sector and industry.

2. Their size. There are 4 categories of this, ranging from micro-cap/penny stocks all the way up to large cap stocks.

3. Their relation to the business cycle. This is split into cyclical and non-cyclical stocks. The price of cyclical stocks tend to rise and fall in turn with the state of the economy, while non-cyclical stocks are relatively insulated from it. Cyclical stocks include companies related to non-essentials and luxuries, such as travel, fashion, and tourism. Non-cyclical stocks include companies that serve basic needs, such as food, medicine, and utilities.

4. Their relation to investment strategy. This category include:

Growth Stocks: Stocks from companies that are growing at a fast rate compared to their industry. Usually bought at a fair or high valuation compared to their actual value, and rarely offer dividends.

Value Stocks: Stocks from companies that are financially stable but currently undervalued for various reasons.

Income Stocks: Stocks that pay regular and valuable dividends. Are also stable and profitable enough to continue paying dividends for the foreseeable future.

5. Where they are located. This is usually presented in the context of if stocks are national or international, with national stocks being easier to invest in.

This source was chosen as an overview of how stocks can be divided into categories. One piece of information that was valuable was the list of what industries are cyclical and non-cyclical, as this could aid investors in deciding to invest in certain industries based on the current economy and their willingness for risk.

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What are the Different Types of Stocks in the Stock Market?

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1. What did you learn about this topic that surprised you the most?

What I learned about the Stock Market that greatly surprised me was the fact that Canada's part to play in the Stock Market is only by the basic material and natural resources it possesses, along with the Canadian banks.

2. Provide a real-life example of how this topic is relevant or interesting for you.

One potential example for me is how I may use this information to direct my investing once I have the money. I plan to start working next year, and I would like to invest a bit in order to combat inflation but not in something very high risk. Knowing what I know now, I would most likely choose to invest in a mutual fund because of their management expertise, or in non-cyclical stocks in trusted companies, as they are likely to hold their value even in economic downturns.

3. If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?

I think the thing I would pass on is that the stock market is inherently risky. Companies can collapse, recessions can occur, and you can potentially lose most or all of the money you put in. As such, you shouldn't invest more than you are willing to lose.

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First, some definitions.

Mutual Funds are groups of stocks and bonds controlled by fund managers. Their prices are set once per day and you pay fees to the company that manages the fund to essentially invest for you.

Exchange Traded Funds, or ETFs, are also groups of stocks, but they include stocks and bonds of a certain industry, commodity, or index, like the S&P 500. As such, their performance reflects that of what they are tied to. If the S&P 500 goes down, so will ETFs tied to it. Their prices fluctuate throughout the day and they can be purchased on exchanges, allowing them to be traded like stocks.

Each has its advantages and disadvantages. Mutual funds allow you to invest fairly passively (many retirement funds use them) and take advantage of the expertise of fund managers. ETFs put more of the responsibility on you, but offer lower fees, more flexibility (which can help with taxes), and greater control.

This source was chosen as a short and good overview of Mutual Funds and ETFs in comparison to each other. One piece of information from it that I found useful is the comparison between the market of the two investments, with Mutual funds having $13 trillion USD invested in them, and ETFs having only $2 trillion.

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Mutual Funds vs. ETFs - Which Is Right for You?