Money and Happiness |  water and tears

Money and Happiness | water and tears

in the newsletter money and happiness, emailed Tuesday, our journalist Nicolas Bérubé offers insights on getting rich, investor psychology, financial decision-making. His texts are repeated here on Sundays.

Posted at 8:00 am

Nicholas Berube

Nicholas Berube

Olivier Primeau, l’homme d’affaires Québécois co-propriétaire du Beachclub de Pointe-Calumet, a fait parler de lui récemment pour an investment of 3 million qu’il vient de faire dans une petite entreprise que detient des captage d’eau surterraine in Quebec.

The company does not capture water, but says it is positioned to take advantage of any potential interest in Quebec’s water.

The publicly traded company, Dominion Water Reserves (DWR), is a penny stock (penny stocks in English). Companies whose shares are traded in pennies are the financial equivalent of sitting on the back benches in the back of the school bus, out of sight of the driver. Businesses there are less regulated, untested and risky.

I don’t know if Mr. Primeau will become the Jeff Bezos of Quebec water, or if his adventure will come to nothing, or something in between.

What I do know is that this hype drove DWR’s stock price from $0.10 to $0.20, a 100% increase in a matter of days. This means that many people have decided to embark on the adventure of the water.

Penny stocks can make those interested in them feel like pioneers. Like taking a bucket, a shovel and going to distant lands in search of gold.

And that is exactly what they are.

The problem with speculating in penny stocks is that the risks of catastrophic loss far outweigh the chances of profit.

If you think financial markets are volatile this year, you haven’t taken a look at the penny stock market.

The CSE index, which represents the majority of penny stocks in Canada, has lost more than 50% of its value since the beginning of the year, compared to 14% on the Toronto Stock Exchange.

Putting on my positive-guy glasses, I tell myself that people who buy DWR stock know they’re speculating. They can do this because they have finished paying off their mortgage, they have made 100% contributions to their children’s RESPs, their TFSA and RRSP are full, their vehicle is paid off, and they have enough money to quit work tomorrow morning if want and have fun speculating on penny stocks to clear your mind between two Thai massages and hot yoga sessions.

But something tells me it isn’t.

The lure of a quick win is powerful in the financial markets. Historically, tears have outnumbered cries of joy in this universe.

For 99% of us, the strategy to implement to get rich is to invest your money in a diversified portfolio made up of index traded funds (ETFs), that is, that contain the shares of thousands of companies. Why ? Because if one of these companies had problems and went bankrupt, it would not affect the value of the average. It would also prevent us from getting stuck with all our marbles in a sector that is troubled or experiencing long-term decline.

It is possible to start investing with a single dollar on online brokerage platforms including Wealthsimple Invest, RBC Investi-Clic, Idema Investments, Questrade Self-Managed Investments and many others. In just a few clicks, these platforms can build a portfolio that also includes bonds, which are financial assets that are less volatile than stocks, and help keep a cool head during a stock market correction like the one we are currently experiencing.

Once established, a balanced portfolio needs only one thing: to be left to work in peace.

Ten thousand dollars invested in a balanced portfolio when my son was born is worth $21,000 today. Invested when I was born, they are worth $483,000. Invested when my father was born, they are worth $7,600,000. When my grandfather was born: 85 million.

Being successful in investing does not mean having a brilliant performance in the short term. Being successful in investing means standing tall, head above water, long enough to see our assets working harder than we ever could.

#Money #Happiness #water #tears

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