Ridiculously Long Money Investing Guide for the Confused Beginner

Ridiculously Long Money Investing Guide for the Confused Beginner
Photo by Chris Leipelt / Unsplash

This document was created by me when I first started learning about investing a few years ago. It consists mainly of notes I took from sources like Canadian in a T-shirt and Investopedia. I copied and pasted the document from a Google Docs file, and I have not verified all the facts in it to ensure they are still accurate at the time of publication. While some of the information may be outdated, most of it should still be relevant and useful.


From this series of videos

What are securities?

  • stocks and bonds

What’s a stock?

  • a unit of ownership of a company
  • these units of ownership are bought and sold in stock markets
  • it does not have any inherent value. The value of a stock is just how much someone is willing to buy it for

What’s the difference between stocks, shares and equities?

  • no difference! SAME THING

What’s the Canadian stock market? American?

  • TSX - Canadian
  • NYSE - American

How can stocks earn you money?

  1. Capital gains
  2. Dividends

What are capital gains?

  • When you can sell your stock to a higher price than what you bought it for and reap the difference

If your stock gains or loses value, do you gain or lose money?

  • NO. You gain or lose money only when you decide to sell the stock.
  • Until that moment, your gains or losses are FICTIONAL.
  • what you WOULD get if you WERE to sell TODAY

What are dividends?

  • A % of the profits a company pays out to its investors
  • Paid every QUARTER or month

What’s a quarter?

  • 3 months

Do all companies pay dividends?

  • No. A lot DON’T.
  • Generally new companies and tech companies
  • Companies can STOP paying dividends

What are the 2 main types of stocks?

  1. Growth stocks
  2. Dividend Stocks

What are growth stocks and your goal if you buy?

  • companies that pay no or almost no dividends
  • rather ‘’invest in themselves’’ to boost the company
  • buy the stock at a low price and sell it later at a higher price

What are dividend stocks / strategy?

  • companies known to be paying significant dividends
  • the dividend is the same for each share and does NOT depend on the price of the share
  • buy a company with a long history of paying dividends AND increasing its dividends every year

What are blue-chips?

  • really large, rich companies with little room for growth
  • pay important dividends to attract investors
  • well established and make profits no matter what

Example of blue-chips?

  • Banks : TD, BMO
  • Energy, utility : Enbridge,
  • Telecommunication : Bell, Rogers
  • Consumer Goods : Coca-Cola, Procter and Gamble

How to know whether a company pays monthly or quarterly dividends

  1. go on yahoo finance
  2. find the stock
  3. click on Chart or Historical data (change for dividends only) and look at the frequency

What’s the dividend yield?

  • Annual dividend / share price
  • the percentage of money you get back on investment every year

Does the dividend yield changes over time?

  • Yes, because the share price fluctuates! But the dividend are constant!

Why not chase very high dividends? What’s considered high?

  • Anything above 7% is generally TOO MUCH for a company to maintain. They’ll either cut it down or stop entirely
  • between 3% to 6% is safer
  • not because above 7% that necessarily bad, ex : market crash!

How to know if a dividend stock is safe?

  • payout ratio : how much of a company’s income is paid out as dividends
  • Lower is better
  • generally below 80% is good
  • if it’s above 100%, means they are paying more dividends than their income!

What’s an ex-dividend date?

  • NOT the date you get paid for dividends
  • It’s an eligibility date : anyone owning shares BEFORE the date will get a dividend a FEW WEEKS LATER
  • Means if you get a share THE DAY or after, you won’t get dividends
  • If you sell your share AFTER the ex-dividend date, you’ll still get dividends!

What is the best thing to do with dividends?

  • Reinvest with a DRIP

What’s a dividend aristocrat? King?

  • a company that has increased their dividend every year for at least 25 years in a row
  • has done it
  • KING = 50 years in a row


What’s an ETF?

  • exchange traded fund
  • a collection of stocks and bonds packaged into one fund

Why buy ETFs?

  • It diversifies your portfolio
  • No commission fee on Questrade VS multiple commission fees if you buy stocks from each company

Why is important to diversify your portfolio?

  • If you invest only in a company, or companies in a certain sector, and that the company / sector gets hit, you can lose A LOT
  • with different companies in different sectors, even if one company takes a hit, it’ll be fine

Do you get dividends with ETFs?

  • Yes! You’ll receive the dividend of all companies that pay dividend in your fund
  • They won’t  all pay it at the same time, so you’ll receive small more consistent amount

Bad thing about ETFs?

  • You need to pay a fee to OWN the ETF
  • called MER (management expense ratio)
  • % of the total you own
  • need to pay even if the investment remains FLAT
  • ***The MER is built into the price of the fund, so you’ll never actually SEE IT**

Difference entre ETF and Mutual funds?

  • the MER is WAY HIGHER for mutual funds (10 to 50 times higher)
  • around 2-3%

How to calculate the actual yield of an ETF?

  • Yield - MER = Actual Yield

What’s an index?

  • it’s a collection of stocks in a given sector or region

What does it mean that the market dropped 10% last week?

  • means that the combined value of all the stocks in the S&P 500 index dropped by

10% (or TSX Composite index)

What’s the S&P index?

  • Standard and Poor’s
  • one of the oldest and most important indexes in the world
  • Represent the 500 largest US companies

What’s the TSX Composite index?

  • Represent 250 largest Canadian companies

Can you buy an index?

  • No, but you can buy an ETF that tracks an index (the ETF will contain the same companies and in the same proportions as the index)


What’s a REIT?

  • Real Estate Investment Trust
  • A large company that owns hundreds or thousands of real estate properties and rents them out for a profit
  • You gain income from the rent

Why is real estate a good investment?

  • Land is limited, so as population grows, demand and value increases
  • don’t need as much money to get started, no contract or meeting people
  • much more liquid than physical real estate
  • REIT are diversified, not like ONE physical property

What’s the strategy?

  • Passive income : HIGH YIELDS
  • Don’t expect great capital gain

What are the types of REITs?

  1. Mortgage REITs
  2. Equity REITs

What’s a mortgage REIT?

  • less common, don’t actually invest in properties
  • invest in mortgages and make money on the interest made on the loans

What’s an equity REIT?

  • ''normal'' REIT: own and operate real estate, get income through rent
  • residential REIT
  • own houses, condos, apartments
  • Commercial REIT
  • Retail REIT
  • shopping malls, plazas
  • Industrial REIT
  • factories
  • warehouses
  • Etc….

Who to diversify your REITs?

  • buy REIT ETFs!

In what type of account should you invest in REITs?

  • TFSA and RRSP
  • maximizes tax efficiency
  • RE

How to determine if a REIT is safe?

  • payout ratio isn’t enough : it doesn’t account for depreciation of properties
  • should look at FFO payout ratio (funds from operations)
  • dividends/ FFO ratio
  • should be around 80%, less is better


What are the two types of taxes you need to pay in Canada?

  1. Federal Tax
  2. Provincial Tax

What are the differences?

  • The federal tax is the same for ALL Canadians (with the same revenue)
  • The Provincial Tax changes depending on the province

What’s a progressive tax system?

  • As your income grows, the more taxes you pay on your new income
  • The taxes you pay depend on the TAX BRACKETS of income in which you are

How do it work?

  • Let’s say you have a taxable income of 60 000$
  • The first bracket is 0 to 47 000$, the second is 47 000$ to 95 000$
  • Each tax bracket has a MARGINAL TAX RATE.
  • for each dollar you have in the bracket, you’ll pay the marginal taxe rate
  • ex : I have MORE than 47 000$, so I have a full 47 000$ taxable with the first marginal tax rate, which is 15%
  • 47 000 X 15% = 7050$
  • I also enter in the second bracket, where the marginal tax rate is higher : 20,5%
  • For every dollar in this bracket, I’ll pay 20,5% so (60 000$ - 47 000$)*20,5% = 2665$
  • MY TOTAL FEDERAL TAX IS OF = 7050$ + 2665$ = 9715$

Tool to calculate it fast?


Why is it a bad idea to rely only on a full-time job to earn income considering tax rates?

  • The single most taxed income stream in Canada is your full-time job
  • You’re taxed far less on your investments (capital gains and dividends) and on business income
  • You can even avoid paying taxes entirely on a tax sheltered account (TFSA, RRSP)

How to reduce your taxable income from your full-time job?

  • Tax credits
  • Tax deductions

What are tax credits?

  • it reduces the tax owing by a FIXED amount
  • benefit everyone equally, regardless to their income

What are non-refundable VS refundable tax credits?

  • If you need to pay 1000$ in tax and that the tax credit is 1500$
  • non-refundable : You save up to 1500$, but if your tax is BELOW 1500$, you don’t get the cash back.
  • tax amount = 1000
  • tax credit = 1500
  • tax owing = 0              Government doesn’t pay you
  • refundable : you get the cash back, so in this case, 1500$ - 1000$ = 500$
  • tax amount = 1000
  • tax credit = 1500
  • tax owing = 0              Government pays you the difference, 500$

What are the tax credits available?

  • personal tax credit
  • tuition credits
  • donations
  • medical expenses
  • interest on student loans
  • GST / HST Credit
  • first time homebuyer

What are tax deductions?

  • it reduces taxable income depending on you marginal tax rate
  • offers more benefit if your income is higher


  • Income : $85 000
  • Marginal rate : 31,48%
  • Deduction : 5000$
  • you’ll pay NO TAXES on 5000$ of your income
  • saves $1 574

What are the tax deductions available?

  • RRSP contributions
  • Employer pension plan
  • Childcare expenses
  • disability expenses
  • legal expenses
  • moving expenses


What’s a TFSA? CELI?

  • Tax free saving account / compte épargne libre d'impôt
  • It’s tax sheltered : any income you make INSIDE your TFSA will NOT be taxed

Is it a savings account?

  • does not have to! don’t have to put money in it
  • you can put stocks, bonds, REITs, ETFs, mutual funds, cash, etc.

Why shouldn’t you use it as a savings account?

  • TFSA is perfect to grow wealth
  • A savings account serves to PROTECT your money, not to grow it
  • with an interest rate that matches inflation
  • you will barely pay any taxes on 2% interest rates BUT incomes on stocks and ETFs far surpass the ones on a savings account, hence you will save more taxes using stocks and ETFs on TFSA

What are the rules with TFSA?

  • You can open one only when you’re 18
  • There’s a contribution limit
  • does not depend on income
  • depends on AGE

How does the contribution limit work?

  • Each year, you gain ROOM to your contribution
  • right now it’s around 6000$ of room per year
  • it ADDS UP : if you don’t use your total contribution one year, it stays the same
  • So as you grow older, the more room you have in your TFSA, whether you put anything in it or not!
  • The contribution limit increase changes year by year!
  • It adds up each January 1rst

What happens when you withdraw money?

  • you can do it at anytime
  • no taxes or fees when you do it!
  • you’ll regain in limit contribution any dollar you withdrew the NEXT YEAR (January 1rst)

When to withdraw it?

  • try to do it at the end of year, in December, so you don’t have to wait much time until you regain your room

What happens if you over-contribute?

  • You’ll pay 1% of the excess amount every month

Can you create multiple TFSA accounts?

  • Yeah, as many as you want, as long as your TOTAL respects the limits

Does income from your TFSA takes contribution room?

  • NO! no limit of money in the account, only a max you PUT IN


  • Secure and established blue-chip stocks (dividend stocks) and ETFs
  • Put extra emphasis on REITs
  • REITs are taxed more heavily than regular dividend stocks
  • REITs don’t pay eligible dividends, but distributions (combination of the rent and capital gains earned from properties)


  • invest in risky stocks, like penny stocks
  • if you sell at a loss, you'll permanently lose room!
  • don’t invest in growth stocks
  • It doesn’t pay dividends
  • the point of it is to hold things for a long time. With a growth stock, you earn only when you sell it, so you won’t earn anything in YEARS
  • if you don’t earn anything, you won’t pay taxes ANYWAY during all this time, only when you sell it
  • Capital gains are already taxed lower than all other investments, so as well pay taxes on them instead of on dividends!
  • don’t have to always respect this rule, but generally good!
  • hold your US invesments in your RRSP instead

Why no to sell stocks that are down in your TFSA?

  • you’ll permanently lose TFSA room (price you sell the stocks - price you bought the stocks for)
  • the contrary is true! : let’s say you have put 20 000$ in your account and that with time, it grew to 100 000$
  • everything you withdraw will be added to the contribution limit next year. In this case, 100 000$ instead of 20 000$. Your contribution limit just grew of 80 000$ regardless of your age!

Can you put any investment on a TFSA?

  • NO. Is only tax-free for CANADIAN INVESTMENTS
  • if you hold US stocks, you’ll be charged a 15% tax


What’s a RRSP?

  • registered retirement savings plan
  • tax sheltered account
  • NOT A SAVINGS ACCOUNT, for investment!

Benefits of RRSP?

  1. it defers your taxes to the future : when you’ll be retiring
  • Then, you should have a smaller income, so you’ll pay less in taxes
  1. Tax sheltered : income of the account is not taxed
  2. Tax deductions : for each dollar you contribute for your RRSP, you get 1 non-taxable dollar!
  3. income : 50 000$
  4. put 10 000$ in your RRSP
  5. taxable income is NOT 50 000$, but 40 000$ now!

Who can open an account?

  • if you live in Canada and have earned a Canadian income in previous years, you’re good
  • No age minimum,  but you must be under the age of 71 to open or  CONTRIBUTE

What is the RRSP room based on?

  • your income in the previous year
  • each year, you add 18% of your previous year’s income as ROOM
  • There’s a CAP to it (it changes every year)
  • EX : Income in 2020 = $100 000
  • Room gained in 2021 = 18% * $100 000 = $18 000
  • As in TFSA, you accumulate the room whether you use it or not

What counts as income towards the room gain?

  1. Employment income
  2. Net business income
  3. Net rental income
  4. Disability income

What happens if you have pension adjustments

  • if your employer offers an RRSP or a pension plan matching  program, it will can as an RRSP contribution and reduce room
  • a pension plan matching program means that for 1$ you put into your RRSP, your employer will also give 1$ (your room will reduce of 2$!)

How to determine your RRSP room?

  • at the bottom of notice of assessment on CRA account after filing taxes

Difference between your deduction limit and available room?

  • deduction limit = available room + unused contributions of previous years
  • you get a tax deduction for putting money in RRSP, and you can accumulate that deduction over the years, instead of using it right away!
  • if you use always use it right away, then Unused contributions = 0

What will happen if you exceed your RRSP room?

  • you’ll be charge 1% every month on the excess
  • 12% annual fee!!

Is there a limit to the number of RRSP accounts you can hold?

  • Nope

How (where) to open an RRSP?

  1. With the employer
  2. With a bank
  3. With an online stock broker, like Questrade

What to invest in for RRSP

  • High yield non-Canadian Dividend Stocks and dividend ETFs (american)
  • Hold the ETFs in USD not CAD


  1. Use it as a savings account
  2. not because you can hold cash in it that you should do it

What’s the advantage to keep your RRSP tax deduction until you get a better income?

  • if you get into a higher tax bracket, you marginal tax rate is higher
  • even if you gain more money, it doesn’t mean you’ll be in a higher tax bracket
  • The same tax deduction will then same you more money
  • save 1000$ with a 20% tax or save 1000% with a 25% tax?

What happens when you withdraw money from your RRSP?

  • No actual ‘’Penalty’’
  • you only get taxed on the amount you withdraw
  • you'll immediately pay 10 to 30% on the amount you withdraw
0 to 5000$ = 10%
5000 to 15 000 = 20%
+15 000 = 30%
for Quebec, different!!
  • the amount is added to your taxable income for the year
  • if the 30% is higher than your actual tax rate, you can apply for a refund
  • if it’s lower, you’ll pay more taxes
  • You will lose as much room as you withdraw money, permanently

Then, of  what should you withdraw money?

  • in order of priority…
  1. savings account
  2. non-registered investments (like the margin account)
  3. TFSA
  4. RRSP

What’s a RRIF?

  • Registered retirement INCOME fund
  • required to convert RRSP to RRIF by age 71
  • it forces you to withdraw a minimum amount from your retirement fund every year and pay taxes on them
  • but you won’t have to pay upfront taxes


What are the sectors that dominate the Canadian market?

  • financials
  • energy
  • materials
  • industrials

Why invest in the USA

  • biggest market in the world
  • diversification
  • US has exposure to every industry, while Canada is limited to the 4 main sectors above
  • can invest in tech

How to?

  1. Convert CAD to USA
  2. you pay a one-time 2% conversion fee on Questrade
  3. to know how much money you’ll have to invest, scroll down to balance and check all in USA,  - 5$ (commission fee) then X 0,98
  4. OR you use Nortbert’s Gambit!
  5. only worthwhile for large sums of money (over 3000$)
  6. You pay for the stock (it will convert automatically)
  7. make sure you’re in the NYSE



  1. Panic and sell your stocks
  2. This ‘’loss’’ is NOT REAL. It’s imaginary UNLESS I SELL IT. Like a house. You don’t care about the value of your house day to day, only its value when you want to sell it! Nobody is forcing you to sell your house at a loss.
  3. don’t care about short-term, aim long-term
  4. It plummets because peolple panic, want to cash out asap and don’t care about the selling price anymore in exchange of the security of holding cash in their hands. BUT nothing has changed with the company itself
  5. Only sell the stocks of companies you don’t think will survive, like pernny stocks. NOT THE ESTABLISHED COMPANIES

What TO DO

  1. Boost your emergency fund
  • you do NOT want to have to sell your stocks out of desperation
  • do NOT burn your emergency fund to invest
  • if you might lose your job, don’t sell any stocks but don’t buy either
  • Be frugal and put your money in high interests bank accounts
  1. If you have cash, invest further into stocks and ETFs at a DISCOUNT
  • don’t invest in any cheap stock just because of the discount, only in QUALITY ans SECURE companies you know will survive the crash
  • Don’t spend you money all at once. Don’t try to figure out when the market will hit rock bottom, you can’t, so spread out your investment over a few weeks (it’s called dollar-cost averaging)


What are the different class types of shares?

  • Class A, B and C

What are the differences?

  • The voting rights and privileges differ depending on the type

Why isn't there a clear definition of what a class A, B or C share is?

  • The meaning what a class A, B or C share is DEPENDS ON EACH COMPANY (it’s clarified in the companies charter)
  • But, there are some norms that most companies follow
  • No all companies offer class A, B and C shares. They can offer whatever they want
  • EX : class A and B, A and C, just A, etc.

What do class A, B and C mean for general companies?

  • Class A : special share held by the companies’ high management. have boosted voting rights per share. Can’t be traded!
  • EX: instead of having 1 vote per share, they can have 5 or 10 votes!
  • the point of this is to give more control on the company to the founders and managers, to limit the power of investors to take important decisions for their own profit and not for the good of the company (like increasing dividends)
  • Class A shareholders benefit from prioritisation when dividends or exit is paid
  • they pay them first, and if there’s money left, pay for class B shares
  • Class B : common shares. 1 vote per share.
  • Class C : same as class B, but without any voting power. Generally sold at a discount compared to class C, because you can’t vote with it.

What do class A, B and C mean for tech companies?

  • a lot of tech companies follow the Google class system
  • Class A : common share. 1 vote / share
  • Class B : special shares for founders and high management. 10 votes/share
  • Class C : no voting power


The only way to become a good investor is to acknowledge that you’re a terrible investor!

Investing biases

  1. Loss aversion bias : when the market is down, we worry about losses and tend to sell
  2. Anchoring bias : when something happens in the past, we tend to think that the future will look like the past event (it’s hard to change your perception)
  3. Herding : follow other people’s decisions
  4. Regret aversion : we fear regretting decisions, which paralyses us from taking decisions ; we don’t want to regret selling low or buying high. Decisions are tough but must be taken


How much house can you afford?

  • Rule of thumb ; 3 times your pre- tax household salary
  • Doesn’t apply to everyone
  • More specific calculation : 30% rule
  • the limit of what you can afford to pay is 30% of the mortgage +  internet, heating, electricity, property taxes, insurance, condo fees  and anything you would pay because of the house, plus phone bill and any debts you have)

What are CMHC fees?

  • a mortgage insurance you need to pay in Canada if you buy a house while putting down less than 20% of its cost.
  • Costs up to 4% of the home’s price
  • depends on the ratio of (value of the house / loan) Higher it is, the more you’ll pay

Are you obligated to have mortgage insurance?

  • ONLY if you buy a house with less than 20% down payment
  • Otherwise, OPTIONAL

How to calculate what you’ll pay interests each year?

  • house cost - down payment = money you borrow
  • Money you borrow * interest rate = yearly

What is the property tax?

  • a tax you pay to your city for owning a property
  • property value * tax rate = property tax

What else than your income vs house cost should you consider?

  • your SAVINGS

a. You’ll need to do a down payment when buying a house

b. you’ll need to pay closing fees

  • Closing fees
  • inclue lawyer fees, title insurance, inspection costs and land transfer tax
  • Rainy day fund

Should you put everthing you’ve got towards the down payment?

  • No.
  • when you own, you take all the risks that come with the house
  • you WILL need to change the water heater, furnace, roof, VC, etc. WHEN you’ll encounter problems
  • might cost you in the 1000s or the 10000s
  • that’s on top of other ‘’normal’’ unexpected expenses life throws at you, like a wedding gift or a car reparation
  • good to have 3 months salary in a savings account

Questions to consider?

  • where will you work?
  • do you need the flexibility to move?
  • it’s a risk. what’s your risk tolerance?
  • have a constant and reliable income stream?
  • a house an illiquid equity

How are mortgage payments structured?

  • split between the principal (the money you borrowed) and the interests
  • the interests you pay each month aren’t calculated considering how much principal is left each month
  • your TOTAL interests for the interest rate and mortgage period are calculated
  • the first payments will pay interests in very high proportion and principal in very low
  • the trend switches with each payment (at the end, almost all your payment goes toward your principal)
  • once you have paid your total interests and principal, you’re done


What are the costs of NOT investing

  1. Price inflation
  2. Opportunity cost (time-value of money)
  3. it grows exponentially the longer you time frame because of compounding
  4. if you want to retire, for ex, the amount of cash you need to pay each month to reach your goal increases exponetially with your age

*home prices are excluded from Consumer Price Index calculations



How does it work?

  • it’s a strategy where you sell a security today and buy it back in the future hoping the price will go down
  • Instead of buying low THEN sell high, like in long term investing, you sell high and buy low

How the hell do you sell a stock that you don’t own?

  • you can borrow the stock from your broker, then sell it

How do you profit from shortselling?

  • If you can buy the same stock at a lower price, you can give them back to your brokerage but that means you can keep

What is the requirement to be able allowed to shortsell?

  • Put an initial margin of 50%
  • means that if you borrow 1000$, you need to put 500$ in the account

Why do you need an initial margin?

  • To act as an insurance that you will be able to pay back the stocks if they gain value
  • it’s a collateral, so it’s still YOUR MONEY

What if your margin becomes insufficient? Ex: contributed 5000$, but you’ve already lost 5000$ in value.

  • you a get margin call
  • the brokerage will ask you to replenish your margin


  • need to pay an interest rate on the value of the stock you borrow (2,5 to 20%)
  • If the stock pays dividends, you need to pay it back to your broker
  • Buy-in risk : a broker can prematurely end your position, at any time (because of surging demand or to return the stock to the portfolio they took it from.
  • Short-squeeze : when a heavily shorted stock sees its price surge because the  investors shorting need to repay them to the brokerage (happens that investors buy back the stock around the same time)
  • Infinite money loss potential


What’s a broker?

  • someone that buys and sells stocks (and other securities) for a client
  • they find buyers and sellers for clients’ orders
  • in exchange, you give them a commision fee

Can’t you buy securities without a broker?

  • you can buy a mutual fund from a fund company or a guaranteed investment certificate (GIC) from a bank
  • BUT stocks and ETFs can only be bought through exchanges
  • You don’t have access to this exchange, so you need a broker to bridge the gap

Why aren’t zaro-commission brokers actually free?

  1. bid ask spread
  2. foreign exchange
  3. Payment for order flow

*+ brokers also get monet from the premium paid version of their brokerage and their margin account, where they lend money to investors

What’s a bid-ask spread? Why do you lose money with it?

  • You don’t actually buy or sell a stock to its marketprice
  • with each transaction, you lose a tiny amount of money
  • ex : Bid price : 99,9$
  • Ask price : 100,1$
  • Market price : 100$
  • the bid is the price at which you can sell your share for, and the ask is what you must pay for the stock
  • what’s the spread here?
  • 100,1 - 99,9 = 0,02$

Why does the spread changes from stock to stock?

  • it depends on the liquidity and the capitalization of the company
  • less liquid / small cap companies have higher spreads
  • 0,5 and more %
  • Options have higher spreads!

How can you evade the spread fee?

  • put a limit order instead of a market order!

What will happen if you buy a security traded with a currency that varies from your account’s currency?

  • you’ll pay a fee on your exchange!
  • ex: Wealthsimple charges 1,5% on US dollar trades

What’s a ROR (rate of return)?

  • it’s the net gain or loss of money over a certain period of time. It’s expressed in % of the initial investment

What are the types or ROR?

  • There’s the Nominal Rate of Return and the Real Rate of Return
  • The Nominal Rate of Return expresses the money variation for an investment during a period (not the buying power variation, because it doesn’t consider the depreciation of money, aka inflation.) It also doesn’t consider taxation or investment fees.
  • also called Return on investment or Basic Growth Rate
  • The Real Rate of Return accounts for INFLATION and sometimes taxation / investment fees. It expresses the variation of buying power for an investment during a period.

What does ‘’time value of money’’ means? (valeur temporelle de l’argent)

  • It's the idea that, if everything else is constant, money received now has more value than money received later, because money can be invested to gain interests.
  • It's a question of opportunity cost. You can’t invest money you don’t have. By receiving money 1 year later, you lose the opportunity to fructifiate your money for 1 year, which would have resulted in more money.

How to calculate the time value of money?


What’s an economic moat? (douve économique)

  • a business' ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms.
  • represents a qualitative measurement of its ability to keep competitors at bay for an extended period of time. This translates into prolonged profits in the future. Economic moats are difficult to express quantitatively because they have no obvious dollar value
  • For example, if someone can easily copy you, then the advantage is not maintained in the long term. If you have a patent on a technology, then you can maintain it for a longer period of time.

What are the different types of economic moats?

  1. Cost advantage: This means having lower operating costs than competitors, which cannot be easily replicated. If the advantage is significant, it can drastically reduce the prices of products and force competitors out of the market. This can result in a company maintaining a significant market share.
  2. Size advantage: This advantage comes from the size of a company. When a company reaches a certain size, it can achieve economies of scale. Economies of scale refer to the decrease in the average cost of a product or service resulting from an increase in the quantities produced. This is because fixed costs (like a factory, salaries, etc.) are spread out over larger variable costs (proportional to the number of products).
  3. High switching costs: Switching costs refer to the penalty a consumer must pay when they change suppliers, brands, or products. This can be a monetary cost, but also a psychological, time, or effort cost. Companies try to create high switching costs to deter customers from switching. For example, to close a bank account, there may be a long wait time on the phone, paperwork, and account closure fees.

Low switching costs :  generally occur when a company's products or services are easily replicated at comparable prices, such as with clothing stores. In contrast, high switching costs occur when a company creates unique, high-quality products with few substitutes that take time to learn, such as with complex software programs.

4.  "Intangibles" : refer to all the intangible assets a company may have, such as patents, brand recognition, government licenses, and so on. For the same product, a company with better brand recognition may be able to charge a higher price, resulting in a competitive advantage.

5. A "soft moat" is a type of competitive advantage that is difficult to quantify or measure. It can result from exceptional management or company culture that remains consistent over time.

Investing in a company with moats is generally considered a good strategy when the company starts to reap the benefits of a wide and sustainable economic moat. This can be seen through a consistently high return on invested capital (ROIC) and earnings growth over an extended period. It's important to note, however, that a company's moat can erode over time due to changes in the market, technology, or other factors, so ongoing analysis is necessary to ensure the moat remains intact.


What’s Berkshire Hathaway?

  • A massive American holding company
  • it’s overall return on its stock from 1965 to 2020 is of  2 810 526%
  • The CEO and controlling shareholder of the company is Warren Buffet
  • he has 30,71% of the voting rights
  • Capitalisation at over 600 billion dollars

What’s a holding company?

  • a company created to buy and possess shares of other companies to seize their control

What’s the Rule of 72?

  • quick formula to calculate the time needed to double your money at a certain rate of return
  • it actually applies to anything that grows at a compounded rate, like population
  • it’s 72 / rate of return


What is the rate at which banks charge one another for a loan in the overnight market?

  • the policy rate, set by the bank of Canada

How does a higher policy rate affects loans for companies and consumers?

  • banks can borrow money from big banks, to then borrow it to consumers or companies
  • If the policy rate is 2%, it means a bank can borrow money from a big bank with a 2% interest rate. To gain money, this bank will then borrow this money at an increased interest rate, like 3%.
  • If the policy rate is higher, then the banks will augment their interest rate, which will augment the cost of loans for companies and consumers. Companies have higher costs, meaning they can’t hire as many people, means consumers have less money, translates into lower spending

Why would central banks higher the policy rates?

  • slow down economic activity when it’s moving too rapidly
  • When economic activity is high, we see an augmentation in consumer demands for goods and services (because more people are employed and have more money to spend)
  • If demand grows too quickly, businesses will begin to increase their prices higher and higher ,leading to inflation
  • By augmenting policy rates, you make it more expensive to borrow money, to decrease demand and protect the economy from inflation

How does higher policy rates affect you as a consumer?

  • mortgages become more expensive - if it’s a fixed rate loan, it will stay the same, but with a variable loan, it will increase

How does it affect you as an investor? Why?

  • à the interest rise, the stock market tends to have weaker performance
  • Because it makes it more expensive for companies to operate, which lowers the profitability and the value of the stock
  • Bonds prices (older ones) might fall, because new bonds will have higher interest rates. Why buy a 4% bond if you can buy 6%?
  • But means that the new bonds you buy will have higher interest rates
  • Higher interest in savings accounts
  • You will experience volatility with stocks in the short term, but it will adjust in the long term

How can the money supply be increased?

  1. Printing money
  2. Devaluing the currency
  3. by loaning new money into existence as reserve account credits through the banking system by purchasing government bonds from banks on the secondary market.

If a currency loses value, 1 unit can buy fewer goods and services

What are the different mecanisms by which an increased money supply drvies inflation?

  1. Demand-pull inflation
  2. cost-push inflation
  3. built-in inflation