Hi Everyone! Happy Sunday I hope you have had an enjoyable and productive weekend. I am super excited to be able to share this post with you all. This is our first post in the “Let’s Talk!” Blog Series.
The Q & A for this post was with an old friend and colleague (let’s call her M.G), who was able to quit her full-time job to focus on her stock investments.
An entrepreneur who now has the freedom to work from home, manages her own finances and was able to turn her side gig into a full time (ad)venture. Hope you enjoy it as much as I do, as I am sure her tips and advice will be helpful to those who are interested in making a similar change.
Q & A
ALIA: Hi! Thank you for taking the time to do this interview. I know you have been investing in the stock market for some time now, so I will get right to it. When did you buy your very first stock?
M.G: I bought my first individual stock in 2018 after a friend introduced the growth potential of marijuana stocks. I had spent the first two quarters of 2018 building my stock positions in marijuana and was able to sell at a profit just days before legalization in October of 2018.
ALIA: What made you want to start investing in stocks?
M.G: I was lucky enough to have a teacher in high school give us an idea of what it meant to be financially literate. His first piece of advice was to open an RRSP.
From that point it meant building savings, purchasing mutual funds and GICs and so it seemed like the natural progression to venture into self-directed investing and picking stocks.
ALIA: Did you do any research prior, or did you follow the advice of any one before/while investing?
M.G When I started making my own money, I always had a portion of my income redirected to a savings account or a mutual fund managed through the bank.
I discovered Wealthsimple in 2017 and was interested in the idea of investing with a robo-advisor which cut down on the fees I had been paying through mutual funds.
That kind of sparked my interest in investing and the different products being offered on the market. Wealthsimple provided an easy, transparent breakdown of where and how my money was being invested that I haven’t seen from the products the major banks were offering.
From there, reading and learning more about personal finance became a goal of mine. I was making a decent living, but I wanted to continue to find ways I could make the money I worked hard for, work for me.
I read up on the investing principles of Warren Buffett and Charlie Munger to Ray Dalio and from there tried to get a sense of what I wanted my investment style to be. I then learned the basic jargon, kept up with daily financial news and the buy-sell process of stocks as a start before I really began to substantially invest into self-directed stocks.
ALIA: When did you decide to quit your job and start working for yourself?
M.G It’s definitely a process to get to the point where your investments can cover your expenses and your lifestyle.
At the time in 2018, I had been working 2 full time jobs and was looking to build my stock portfolio. I had used the income from one job to cover my bills and expenses while using the income from the second job to contribute to my investment plan.
I think like many people, juggling 2 full time jobs became a difficult thing to maintain and I started to think of the possibility of looking at my stock portfolio as an income stream to substitute for one job.
At that point I started to learn more about trading and how I could use that skill as a supplement to my investment plan.
Every part of this process required extensive learning, and reading trading and investment books was a big part of that.
I had quit one full time job in August of 2018 and began using that additional time to read and learn to develop a skill in trading.
By October 2018, marijuana was just on the cusp of legalization and my stock positions in Canopy and Aurora had reached all time highs at the time. I took that opportunity to sell all my marijuana shares at the high and was able to gain a viable profit.
At that point, I used the money I had made to venture into swing trading.
(**It’s important to note that trading and investing are different concepts, I use trading as an income stream to supplement my long term investments).
I would test out trading strategies on the back end, and when I felt that they were working, would execute them in the market. I had reached a point that by the first quarter of 2019, I had been making the same income as the job I had left months ago.
In April of 2019, I decided to scale back with my 1 full time job and went part time. I was averaging healthy returns on my trades and I felt that I needed to dedicate more time to developing my skillset in trading and investing. I was able to fully integrate into a reality of trading during the week, while still working part time on the weekends.
This transition was not an easy one, and with my full attention on the markets during the week, it taught me the value of mental toughness in this line of work. Trading is all about strategy and it’s important to plan your work to work your plan. Anything outside of that realm leads to poor decision making when you allow the swings in the stock market to toy with your emotions.
I still work part time to this day and will probably maintain that until I have hit certain benchmarks in my overall investment strategy.
ALIA: How much money did you put aside for savings before making that life decision?
M.G: To be able to day-trade US securities, you have to maintain a minimum of $25,000 in your trading account. Canada has more flexible rules, but I used that as a goal to meet to float my trades.
In any case, I also have a discrepancy fund to cover any losses or for use of any opportunities to take advantage of.
In addition, I also made sure that I could continue to consistently contribute to my various investment portfolios including TFSAs and RRSPs and other long term investments.
ALIA: Did you have any reservations before quitting your job? Was there anything holding you back, and if so how did you overcome the fear?
M.G It definitely took time for me to come to the decision of leaving my jobs. In my case, I still have a part time job but have more autonomy over my time.
I cannot stress the importance of getting your ducks in a row before making a decision that could affect your family and your lifestyle. I went into this process with the notion that losses were to be had and sacrifices needed to be made.
Ultimately, the decision to maintain a part time job worked into this transition. The extra income from my part time job is enough to cover daily bills and expenses while the work that I do for myself is reinvested to build my long term investment strategy.
ALIA: Do you do any online courses to help you guide your investments?
M.G I’m an advocate for taking any online courses to help develop your skillsets. I am on a constant look out for interesting courses in finance, trading and investments.
In addition to that, I also make it a goal to read as much as I can on those subjects but also love reading books on entrepreneurship and self-help. Anyone involved in trading will tell you that the mental and emotional mindset is just as important a skill to the strategy.
ALIA: Do you have an investment strategy that you use?
M.G: My short term investment strategy tends to change as things progress and is based on financial news and more currently the impact of COVID-19 on the market.
My long term investment strategy is a little more simplified which is aiming to max out my RRSP contributions every year where it is dispersed into a combination of ETFs.
Another portion is contributed to dividend paying stocks and to growth stocks.
ALIA: If someone told you they wanted to start investing in the stock market, but they have NO idea where to start, what would you tell them?
M.G I’ve had friends ask me this question and I always redirect them to a robo-advisor like Wealthsimple or Wealthbar. They simplify the process of investing to make it easier to understand for someone that is starting out in investing. They factor in your personal risk tolerance and also take into account certain industries you may be interested in. In addition, they are relatively low cost compared to mutual fund portfolios offered through your major banks.
If you are interested in choosing your own stocks, I recommend understanding the basics first. Learn how to read a balance sheet, understand the terminology used and the differences between different stocks.
You need to have a better understanding of your financial plan and how choosing your own stocks fits into that plan.
ALIA: When COVID hit, how did it impact your investments? And what is the plan to recover any losses?
M.G The range of portfolios I carry fell on average of 20% across the board. It’s a terrible feeling knowing that you’ve lost a portion of your wealth, but the market continues to do what it does despite outside influences.
Seeing the ebbs and flows of the market is part of your responsibility as an investor. If history is any indication, a stock market rout much like what has occurred over the last few months is an opportunity to invest if you happen to have cash on hand.
The beginning of 2020 marked consistent highs for the NASDAQ and S&P 500, but I was also anticipating a potential recession within the next 12-18 months. COVID-19 has sped up and exceeded that expectation to an economic shut down no one saw coming.
Dollar cost averaging has been a priority during this time. I have consistently been adding to my long term positions every time there have been moderate pull backs. I expect to see this happen over the course of the next 2 years. This is where cash on hand in a discrepancy fund works, so buying opportunities can be taken advantage of.
ALIA: If you could give 3 pieces of advice/motivation to someone who is thinking about making a BIG change in life, like quitting their job and working for themselves, what would it be:
M.G: a) Strike up a realistic plan. You won’t be able to properly execute if you don’t have a plan in place. It is so important to get your ducks in row when anticipating any major life changes. Accept that it will be difficult and that it may take some time for you to get to that point.
b) There will be bad days. People generally like to romanticize the idea of working for yourself and being your own boss. It’s very much a work in progress, one in which I am still going through myself. If you are looking to transition from a 9-5 job to working out on your own, accept the weight and responsibility of the decisions you will have to make.
c) Never stop learning. Reading has been a great source of inspiration for me to stay motivated and disciplined even when I don’t feel like it. Read a book, take a course, listen to podcasts, seek mentorship from like-minded individuals. Find resources to lean on to help you get to your goal.