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In 1602, the first modern stock exchange was established. 

We’re still reaping the consequences more than four centuries later: gambling addictions, material inequality, finance bros and the r/wallstreetbets subreddit.

With terms like ‘investing’ and ‘trading’ being overused by news outlets, misused by peers and underused by academic institutions, it’s easy to feel overwhelmed. It also doesn’t help that women and people of colour are incredibly underrepresented in the finance industry, with 64% of corporate executive (C-suite) positions held by white men. To make matters worse, only one out of ten C-suite positions are held by a person of colour. It’s clear that if you’re both a woman and a person of colour, you’ve won the lottery for missed opportunities. (This is ironic considering that, on average, women are proven to be better investors than men.) If we are to build a stronger future for women in finance, we must begin here and now. In this two-part series, we’ll be exploring important information necessary to becoming financially independent. We will then foray into the future of the global economy, discussing the prevalence of cryptocurrencies and NFTs. But, most importantly, we’re working together to reduce the number of Patagonia-wearing, Wolf of Wall Street-loving C-suite executives. 

The following list explains basic terminology related to investing:

Bear Market – A market environment where stocks experience 1 or more years of negative or below-average returns.

Bull Market – A market environment where stocks experience 1 or more years of positive or above-average returns.

Diversification – The concept of purchasing multiple stocks or funds in different industries. For example, if you buy a variety of clothing instead of just buying jeans, you’re diversifying your closet.

Dividend – Share of a company’s profit (as cash or as a percentage) that some companies give out as a reward for holding their stock. 

Fund – A grouping of stocks from multiple companies. The most common funds are the Index Fund/Exchange Traded Fund (ETF) and the Mutual Fund/Actively Managed fund. 

Index Fund/ETF – A predetermined grouping of stocks (Oil/Gas Companies, Auto Manufacturers, Tech Companies, etc.). 

Market Capitalization – The combined value of all of a company’s shares. If a company has 100 shares, each trading at $10, the market cap would be $1,000 ($100 x 10).

Mutual Fund/Actively Managed Fund – A constantly changing grouping of stocks (the stocks are chosen by a person known as the ‘fund manager’). These are more expensive than Index Funds/ETFs since you pay for someone else to manage your investments.

Portfolio – The investments you’re currently holding. 

Return – The amount of profit you make from an investment. If you invest $1000 into a stock and sell it for $1500, you make a $500 or 50% positive return. If you invested $1000 into a stock but sold it for $500, you would have made a negative return of $500 or -50%.

Compounded Interest – The concept that your money will earn you money, which will earn you even more money. If you gain 10% per year and start with $100, at the end of year 1, you will have $110. This is a $10 gain (10%). The following year you also gain 10%, so you will end up with $121. This represents an $11 gain (still 10%). This concept is used by long-term investors to exponentially increase the amount of money they have.

Risk Tolerance – The amount of money you’re willing to lose in order to gain money. 

Share – A single unit of ownership in a company. 

Stock – A percentage of ownership in a company. If my company sells 100 shares of stock, then each one is worth 1%.

Stock Exchange – A platform where companies list their stock for the public to purchase. The largest Canadian stock exchange is the Toronto Stock Exchange (TSX), while the largest global stock exchange is the New York Stock Exchange (NYSE).

Trading – The process of buying and selling shares.

Next Steps

To begin investing, you can use a personal investment service or a mutual fund investment service. 

Personal Investment Services

Personal investment services give you complete control over what you invest in; since you’re the one choosing which stock or ETF to buy, you must conduct thorough research before making an investment decision. It’s also vital that you consult with your parents, a financial advisor or another trusted individual to ensure that you do not lose all your money in one play. 

Recognized personal investment services include Wealthsimple and Questrade, both of which can be downloaded on your phone. Questrade is particularly helpful for beginners, as it provides the option to open a practice trading account before opening a real trading account. (The practice trading account allows you to practice investing with virtual cash rather than actual money). You can open a Tax Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP) and a personal trading account using these platforms. 

One of the most well-known investing methods for beginners is the Couch Potato Method. Under this method, you invest a small amount of money each week/month/year and put it into a series of diversified ETFs. Since ETFs contain different stocks in different industries, you won’t lose all your money if one company performs poorly. Throughout the entire existence of the modern stock market, the average growth rate has been 8-10% per year. 

Mutual Fund Investment Services

Another option for investing is to hire a mutual fund investment service. You begin by working with an investment advisor to determine your risk tolerance. This investment advisor is also your portfolio manager, and they will be responsible for handling your portfolio for you. While there’s a management fee involved, this option is the best fit for those who do not have the time (or desire) to conduct a lot of background research into which stock or ETF to buy. One of the most well-known mutual fund investment services is Investors Group (IG) Wealth Management. However, hiring a portfolio manager does not guarantee above-average returns: over a 20-year period, more than 85% of mutual funds did worse than the average return of the market, and over a 3-year period, more than 65% of funds did worse. 

TL;DR: Investing a dollar a day keeps the finance bros away

While the path to financial literacy isn’t easy, it isn’t as intimidating as it’s made out to be. As long as you never invest what you can’t afford to lose, the stock market can be a fun way to make money without having to leave the comfort of your bedroom. Whether you’re investing on your own or with the help of an investment advisor, in today’s economic climate, it’s necessary to recognize the benefits of investing. As the cost of living continues to increase, becoming comfortable with financial terminology is one of the best ways to invest in yourself and your future.

Shayla Bird

McMaster '24

Shayla Bird is a second-year Integrated Business and Humanities student at McMaster University. She enjoys playing the violin, making Spotify playlists and trying out new cafés.
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