When Robin Speziale entered Grade 10, his teacher dropped a business newspaper on a desk in front of his class and asked each student to circle a stock to spend the semester tracking.
While most classmates lost interest when the term ended, Speziale was enamoured. By 30, the Toronto man had built a stock portfolio worth $300,000 and written a book on “market masters.”
That’s not the norm, especially for millennials, who are often more concerned with covering rent than investing. All the numbers, unfamiliar terms and those jagged graphs can make navigating the market intimidating — and many professionals agree that buying individual stocks isn’t the best move for those new to investing.
Even billionaire Warren Buffett discourages average investors from buying an individual stock because they can be costly and high-maintenance to manage. He suggests index funds, whose value is based on the health of an index like the S&P 500 or the Dow Jones industrial average, because they are less expensive and aren’t tied to the success of a single company.
But if you’ve been dabbling in the market for awhile and are keen on bucking the Oracle of Omaha’s advice, Speziale shared a few basics on how anyone can learn to buy their first stock.
Before you even think about shelling out any money, Speziale stresses research is key.
He digs deep into business news stories and a company’s quarterly financial reports that he finds on the company’s investor relations website, through press releases or on SEDAR, an online platform offering access to securities documents.
“There will be a nice summary of the revenue that quarter and year-over-year and you’ll see the earnings per share and everything else,” Speziale says. “You’ll see the key highlights and everything like cash on hand. You have to make sure the balance sheet is strong.”
Once you’re confident in your research, it’s time to turn to a broker or an investment platform.
“Every bank in Canada has their own, what they call, online brokerage,” Speziale says. “You don’t need to call a broker, if you don’t want to. You can do it yourself online.”
Many people also use online investment managers, which help people buy exchange-traded funds.
Signing up for any investment platform or service will involve presenting some identification, but the process isn’t long or arduous. Once the account has been set up, you can transfer money to it and buy.
But have realistic expectations, Speziale warns.
He recalls that he first bought five stocks he had researched and “not all did well.”
“If you buy a basket of five or 10 or 15 or 20 stocks, not all of them are going up,” he says. “Don’t ever expect that you might get some winners early on.”
One of the most basic strategies he thinks new investors should use is diversification — having stocks in multiple companies to offset some of the lows a stock might face.
“Those glorious stories about someone putting all their money in Apple in 1995 and now they’re a millionaire, that’s few and far between,” Speziale warns.
Buying stocks in too many companies could become unmanageable and risky and certainly don’t ever believe you can predict what will happen to a stock with certainty, he says.
“Even Buffett would say we go through business cycles where there’s recessions that naturally occur in North America, and the stock market will lag. It will drop,” Speziale says.
“It’s a marathon. It’s not a sprint.”