Entrepreneurs.

co
INVESTING GUIDE
Everything You Need To Know To Invest Your Money Wisely

Investing is the best way to get rich. Contrary to popular belief, it is not only for the

rich. Anyone can invest as there are several investment opportunities. You only need

the right information to get started.

This tutorial will answer all questions you may have about investing, from where to

invest to how to invest. Let’s get started.

What Is Investing?

Investing is defined as the act of committing capital or money to an endeavour with

the intention to make more money. Investing is not the only way to earn money but

it’s the quickest if you know how to invest. You must be clear about:

What or how much to invest

Where to invest

When to invest

Investing is also largely about knowing when to take out the profit. Wrong timing can

cause things to go wrong.

What Or How Much To Invest

This is the first question you should ask yourself before investing any money. It can

be very difficult to decide the amount of money to invest since there is no secret

formula.

Pay attention to the following factors to understand how much you can invest:

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1. Calculate Your Earnings: Be aware of how much money you make. Knowing how

much you make will help you decide how much to save and how much to invest.

2. Set Your Financial Goals: People invest to make more money, usually to make big

purchases in the future. They have goals, i.e: to buy a new car or move to a bigger

house. Knowing what you want or how much money you want can help you decide

how much money to invest.

3. Create a Budget or Spending Plan: I emphasize on the importance of saving

money and only investing the money you can afford to lose. Creating a budget can

help you decide how much money you can easily afford to invest.

Remember that saving and investment are not the same concepts. Your savings are

stored in a locker or bank account for you to access whenever needed, whereas

your investment is not always liquid.

We’ll talk more about this later in the guide.

You can invest as little as $50 and as high as $50 million. The only thing limiting you

is your own wealth.

However, where you can invest largely depends on how much you can afford to

invest. For example, you may not be able to buy your own property with only $50 to

invest but you can put $50 in an account that gives good returns.

How Much to Save and How Much to Invest

This can be difficult to answer but most experts suggest saving 15% of your total

income and investing 10% of your earnings. However, it may change from family to

family or person to person.

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Let’s say you make $10,000 per month. You spend $8,000 on food, rent, etc., and

are left with $2,000 to save and invest.

Following this formula means you should invest $1,000 and save $1,500 but that

may not be possible since you’re only left with $2,000. In such cases, it is best to

look at your savings account and make a judgment.

Similarly, let’s say you only spend $5,000 and have $5,000 remaining. Again, make

a call based on circumstances.

If you expect to spend a lot of money in the next few months then you should save

more and invest less, whereas if you feel you have enough money in the savings

account then you can invest more and save less.

All in all, investment and saving are both important.

Not having enough savings can cause you to break your investment portfolio, which

may turn out to be very costly.

Similarly, not investing and only saving means underutilizing the money that you

have.

Where to Invest?

There are several options to choose from. Some of the most common choices

include:

Stocks

Most people think of stocks when they think of investments. They’re the go-to option.

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Buying stocks means owning a small part of the company. You can buy or sell

stocks and also enjoy profits if the company pays divides, however you may not

have the right to make decisions unless you own a large percentage of the shares.

You will make money in two ways:

When the company makes a profit and pays dividends.

When the shares gain value.

You can sell shares at a higher price to make a profit or continue to enjoy dividends.

However, remember that not all companies pay dividends.

How to Invest in Stocks?

You will have to open a brokerage account which you can do by visiting one of the

firms closest to you, the nearest stock exchange, or an online brokerage house.

The broker can help you complete transactions but he or she will not make buying

and selling decisions for you, so make sure to educate yourself.

Real Estate

Real estate is one of the fastest growing markets out there. Real estate prices are

increasing at a rapid pace, it may be a good option to invest in properties.

You can choose from commercial or residential properties, based on your goals.

While real-estate is great, it may only be suitable for long-term investment as it can

take a while for properties to rise in value.

You can make money in two ways:

By Earning Rent: You can rent out your property and earn a regular income. This

can be a good option if you’re in need of a continuous stream of money.

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By Selling The Property: The increase in value is your profit, however, you may

have to pay taxes as well. The good thing is that property can give you huge profits

since prices can rise by 10% or even more in a single year. Hence, a property worth

$50,000 can make you a profit of $5,000 in a year.

How to Invest in Real Estate?

You can invest in two ways:

Buy Your Own Property: This can be a good option if you want full control over the

selection of property. However, you will need a good amount of money to purchase

your own property.

Turn to a Real Estate Investment Trust: It can be a good option if you are low on

funds. Real estate investment trusts work same as mutual funds. You invest your

money with a trust that invests it in different properties.

While it’s a great option, remember that you will have little to no control over the

property and you may also not be able to withdraw money before the expiry period.

In Knowledge

Knowledge plays a part in everything we do. It can help you make more money,

make better decisions, be better at sports, take better care of your health and much

more.

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Yet, too many people think that after high school or college, their education is over.

They breathe a sigh of relief and think they made it. Now, it’s time to just get a career

and go with flow until retirement.

But, this is the wrong outlook to have. Benjamin Franklin once said, “An investment

in knowledge pays the best interest.” He knew the value of constantly becoming

more knowledgeable.

In fact, just about every successful person in the world has one thing in common:

they are constantly reading and educating themselves on a daily basis.

Jim Rohn, the great self development speaker, said, “Formal education will make

you a living. Self-education will make you a fortune.” He says schooling is only a

small part of your lifetime education. Albert Einstein, the genius, said, “Once you

stop learning, you start dying.”

These quotes from extremely successful and wise individuals, say the same thing.

You have to keep improving yourself on a daily basis. You have to keep acquiring

knowledge and improving your skills.

This is what we at Entrepreneurs.Co are offering you, an investment in knowledge.

We are not selling you a rich quick scheme. We aim to positively impact as many

lives as possible, as providing value in the form of distinctive educational

experiences is our biggest goal.

Becoming a millionaire isn’t about being a genius, or investing some product. It’s as

simple as this: it’s whoever is willing to take that first leap of fait hand invest in

something people are afraid of.

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It’s doing what scares the, and seeing opportunities where others see risk. That’s

how millionaires are made.

If you are ready to invest in one of our products or services, do it.

It’s your future we’re talking about, think wisely.

Knowledge is what can separate you from the pack. It can take you as high as you

want to go if you put it into action.

Business And Finance Terms Every Investor Absolutely Needs To Know

Getting started as an investor often times involves a constant learning curve. Even if

you are a seasoned business owner or investor, you always need to keep learning,

no matter where you are in your professional career. There’s always a new app or

tool to learn, new problems to solve, and of course, new vocabulary to understand.

To get a better understanding of what you read, we have put together a list with the

most important financial terms and definitions you need to master as an investor or

entrepreneur. We hope this glossary of terms and definitions will help you find your

way to success as an investor, business owner or both.

Account Statement: Transaction details and their effect on account balances for a

specific period of time.

Accumulation Plan: An agreement that allows an investor to buy mutual fund

shares in smaller or larger quantities.

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Active Investment Strategies: A strategy that involves making regular adjustments

and decision to manage a portfolio. The strategy is concerned with what to buy, how

to buy, and when to buy.

Adjusted Cost Base: The amount required to find the cost of an investment for tax

purposes.

Adverse Market Conditions: An unsuitable period to buy or sell goods.

Alpha: It’s the amount by which a money manager’s performance goes beyond his

or her benchmark index by a certain amount.

Alternative Minimum Tax: A 1986 tax reform act that focuses on collecting some

tax from wealthy individuals, corporations, estates, etc.

Annualized: Converting short-term calculations into annual figures. Investments that

offer short-term returns are converted into annual figures for a better understanding

of the profit.

Annuity: It’s a financial product that offers fixed and continuous payments. Mainly

used for retirees, they are offered by institutions that collect funds from individuals

and then offer a regular stream of payments to help the individual meet day to day

expenses. The annuity is paid for a specific period of time, which is known as the

accumulation period. Once the accumulation period is over, the annuity begins to

pay, known as the annuitization phase.

Annual Report: A detailed financial report printed on a yearly basis.

Appreciation: Increment in the value of a financial asset.

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Arbitrage: The act of buying goods/assets from one market and selling it in another

is called arbitrage. The aim of this practice is to gain profit from the difference in

price in the two markets due to currency differences, or high/low price factor, etc.

Ask price: The smallest price that sellers agree to accept for a stock is called an ask

price. It’s always more than the bidding price.

Asset Allocation: A strategized step of apportioning the portfolio into various assets

such as stocks, bonds, cash, etc. Factors such as age, portfolio size, risk tolerance,

and investment horizon play a vital role when allocating assets, .

Asset-Backed Security (ABS): A collateral taken as a form of financial security in

the form of loans, credit card debts, receivables, royalties, leases, etc. It serves as

an alternative for corporate debt investing.

Asset Class: It refers to a group of investments that are similar in nature and follow

the same rules and regulations. Mainly, there are three common types of asset

classes: stocks, bonds and cash equivalent. However, with changing times, real

estate, futures, cryptos, and commodities also included into the mix.

Asset Mix: Investment of net assets in different classes of securities presented in

percentage, at a specific time is called an asset mix.

Asset Class Performance: The expected future risk and future return from asset

classes is called asset class performance. It is based on previous performance

characteristics and deals in how the different classes perform relative to one another.

Asset Management Company: AMC is a company that looks after and manages

investments made by investors.

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Assets Under Management: When the total amount of all the investments made

are managed by the funds then it is called Assets Under Management.

Asset Management Fee: A fee charged by agents or financial organizations for

handling your assets. They are generally calculated as a percentage and change

from company to company.

Back End Load: The fee paid by investors when they sell mutual fund shares. This

fee is calculated as the percentage of the value of selling share.

Back Office: A part of a company run by administors and support personnels. They

do not face clients but handle matters such as record maintenance, account

services, IT services, clearances, and settlements.

Balance Sheet: A detailed sheet that contains income balance and expenditure over

a period of time. It is divided into three parts: assets, liabilities (debts, etc), and

shareholder equity.

Balanced Fund: A mutual fund in which the companies chosen are from different

regions and belong to different industries. It seeks income and growth in a portfolio

by mixing preferred, common stocks or bonds.

Bears: Investors who believe that stock prices are likely to go down. They also

intend to profit from a declining market.

Bear Market: When stocks begin to face a drastic fall over a prolonged time, usually

with a decline rate of 20% or more, then it is called a bear market. The decline grows

due to the widespread pessimism, recession and spiking unemployment rate. It is

the opposite of a bull market.

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Bearish: It denotes a downward trend in stock prices.

Bell Charts Quartile Ranking: A way to measure a fund’s performance against

mutual funds in Canada. All the funds mostly have similar investment aims.

Bellwether Security: A security that points the direction of a market.

Benchmark: It is a standard way of using an unmanaged index for comparative

purposes when accessing performance.

Beneficiary: A person who receives advantages from an investment.

Beta: It refers to measuring volatility:

1 means neutral

More than 1 means more volatile

less than 1 means less volatile.

Blue Chip: A term used for large stocks, well established companies that have

showed good performance for a long time. It is a combination of high quality and low

risk investment. The term Blue Chip is borrowed from poker, where the blue chips

are the most valuable.

Board Of Trustees: A governing body or a group of elected people who create

organizational policies.

Bond: It is an IOU or a loan provided by an organization, US government or a

municipality. The person on the collecting end promises to pay back the entire

amount on a particular data along with interest, typically at regular intervals. They

are often used by sovereign governments and organizations to fund projects.

Bond Fund: A mutual fund invested in primarily bonds is called a bond fund.

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Bulls: Investors who believe that stock prices will go up. They are excited about the

market and want to profit from it.

Bull Market: It’s a situation when the market is flourishing thanks to an increased

number of buyers and sellers. The prices may also increase during such conditions.

It is the opposite of a bear market.

Capital: Assets owned in cash is capital. The term can also refer to machineries,

equipment, real estate etc. Capital can be anything that has a monetary value and

can be converted into cash.

Capital Gain: Profit earned by selling an asset at a higher amount than it was

purchased. However, a percentage of the amount is taxable based on where you

live.

Capital Gains Long Term: The profit earned over a period of time by selling an

asset at a higher amount than it was purchased.

Capital Gains Short Term: The profit earned in a short time period (less than a

year) by selling an asset at a higher amount than it was purchased at.

Capital Loss: The loss sustained by selling an asset for less than its purchasing

price.

Cash Advance: A short term loan taken from a bank or any other lender. Moreover,

it also refers to the limit offered by credit cards. Cash advances can be very

expensive due to high interest rates but are easy to get.

Capitalization: Capitalization means share price multiplied by the number of

outstanding shares. In finance, it also refers to the sum of a company’s long-term

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debt, retained earnings, and stocks. Moreover, it has a different meaning in

accounting where it refers to how the costs of acquiring an asset are expensed over

a long period of time and not the period the cost was incurred.

Cash Equivalent: Any form of instrument that can be liquified easily into cash is

referred to as cash equivalent. It can be a repurchase agreement or a treasury bill.

Closed-End Fund: A funding company that offers non-redeemable fix number of

shares that are bought and sold in the stock exchange is called a closed-end fund. It

can also be bought/sold over the counter.

Common Stock: A term used to represent stock ownership of an organisation with

voting privileges in its affairs.

Contingent Deferred Sales Charge (CDSC): During the redeeming of a fund, a

back end sales charge is applied as a fee. This is called contingent deferred sales

charge and can decrease with time.

Corporate Bond: A long-term bond issued by corporations to raise outside capital.

Country Breakdown: Security breakdown in a portfolio on the basis of a country.

Custodian: An institution that keeps a customer’s asset/security in custody for

security reasons.

Cut-Off Point: It’s the point at which an investor makes the decision to buy or not to

buy a specific asset. It[s subjective and changes from person to person.

Dealer: A broker who serves as a principal in all transactions is known as a dealer.

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Diversification: A risk management strategy that involves allocating capital into

different securities or assets to minimize the risk. It follows the old age idea of not

putting all your eggs in one basket.

Dividends: A part of a company’s profit that is paid to preferred and common

shareholders. In simpler words, the sum of money paid to the shareholders by a

company from its profits is called dividends. They can be be paid annually or as per

the discussed terms.

Dollar Cost Averaging: Investing a principal amount of money at regular intervals

regardless of the share price is called dollar cost averaging. You get to have more

shares when the prices are less and less shares when the prices are high. This

phenomenon helps reduce the overall average cost of investing.

Earning Per Share: Earning per outstanding share of common stock over a fixed

period of time is called earning per share.

Equities: Equity is the amount of money that’d be returned to shareholders if all

company debt was paid off and assets were liquidated.

Equity Fund: An equity fund is a mutual fund that is principally invested in stocks.

Furthermore, they are principally categorized as per the size of the company,

geography, and investment style of the holdings.

Exchange: A marketplace that allows fair trading of commodities, securities,

derivatives, etc.

Exchange Privilege: The transfer of money from one mutual fund to another but

within the same fund family is called exchange privilege.

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Expense Ratio: It is defined as the the ratio between the average value of net

assets and a mutual fund’s operating annual expenses.

Extra Dividend: A special type of payment made to the shareholders by a company

is called extra dividend. These are larger, non-recurring amounts paid in cash.

Fixed income fund: A fund or portfolio where bonds are bought as investments.

Moreover, there is no fixed maturity date and no guarantee of repayment.

Fixed income security: A security that pays a set rate of interest along with

principal payments on a regular basis. It’s a type of debt instrument that pays when it

reaches maturity.

Fund: An investment fund refers to funds invested by a group of individuals as one.

It may be handled by a person (money manager) or a financial organization.

Generally Accepted Accounting Principles (GAAP): A set of accepted accounting

principles that organisations, accountants, and companies must adhere to when

making financial statements. All publicly traded companies are required to comply

with GAAP requirements.

Group Annuity: A retirement or pension plan that gives out premium periodic

payments to a group of people. The contract is generally issued by a life insurance

firm and involves tax-qualified retirement plans. Employees only own units of the

fund and not entire shares.

Growth Investing: A strategy that helps find organisations whose earnings are

expected to grow quickly and more than the average rates. It’s focused on capital

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appreciation and may involve investing in stocks that appear expensive in terms of

price-to-earning ratios.

Hedge Fund: It’s a form of investment that uses pooled funds that employ a variety

of strategies in order to achieve alpha for investors. They are typically aggressively

managed but some also make use of leverage and derivatives in order to generate

good returns. They are different from other investment options, such as mutual

funds, as they face fewer regulations. However, they may only be available to

accredited investors.

Historical Volatility: Fluctuations in the stock price during a certain time period.

Index Fund: A mutual fund that matches returns by tracking a particular index.

Interest: The extra cost that is charged for borrowing and using another party’s

money. It can be paid or earned and is calculated in percentage.

Interest Coverage Ratio: A debt ratio that tells how easily can a company pay the

interest on an outstanding debt.

Joint And Survivor Annuity: An insurance policy for two people (combined) that

keeps offering payments for both, even if one of the parties die.

Junk Bond: Bonds that have a credit rating of BB (higher risk of loss) or lower are

called Junk bonds. They are high yield bonds that do not require a strong credit

history.

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K

KYC (Know Your Client): A rule that asks investment advisors to learn the

investment goals of an investor and appreciate their recommendations.

Last Price: The latest price on which a buyer or a seller agrees to make a

transaction.

Late Fee: A charge that a customer has to pay to make minimum payment on the

credit car when the due date has passed.

Leverage: An investment strategy that involves using borrowed money with one’s

own cash money to finance assets. The aim is to increase the return on the total

value. However, it’s a risky investment.

Leverage Buyout: A financial transaction that involves purchasing with a

combination of debt and equity. The collateral used in this transaction is the

company’s own cash flow.

Liability: The amount payable by individuals or companies to a creditor for past

transactions. It is often used with the word payable on the balance sheet.

Life Annuity: A plan that pays fixed payments to the annuitant for the rest of his/her

life.

Limit Order: An order that indicates to buy or sell an asset or security at a specified

price.

Liquidity: The process of converting securities into cash is called liquidity. These

include treasury bills, bank cheques, etc.

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M

Management Fee: The fee paid to an investing company’s manager or advisor to

supervise your portfolio and manage related operations.

Marginal Trading: A practice that allows users to buy more stocks by borrowing

funds from a broker. The benefit of this trade is that the investor can buy a stock by

paying only 30% to 50% of the transaction value.

Market Capitalization: The overall market value of a company expressed in dollars.

Market Neutral Funds: These funds help eliminate the market risk by owning 50%

of the assets in short and long positions in stocks.

Market Price: The current price of an asset, i.e: the price at which it can be bought.

Market Risk: A possibility that a particular investment will not be successful and

profitable. It’s present in almost all investments.

Market Timing: A trading strategy that involves switching between asset classes or

moving in and out of a financial market.

Maturity: The remaining life of a debt is called maturity. For example, bond maturity

is the time between the issuance of the bond and when it matures. Most assets give

returns only when they have matured. Trying to cash out an asset before maturity

can be costly.

Maturity Date: The due date of termination when a debt must be paid in full.

Median Market Cap: The center point of market capitalization (number of

outstanding shares multiplied by market price) of the stocks in a portfolio.

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Mid Cap: The stock market capitalization of organisations that have market values

between $3 to $10 billion.

Money Market Mutual Fund: An investment which is aimed at protecting the

principal and creating income by investing in high liquid instruments only such as

treasury bills etc.

Mortgage: It’s a debt instrument that is secured by real estate. The borrower must

pay back the amount, along with interest, as described in the contract. Mortgages

are typically used by businesses and individuals to invest in real estate. They

typically run for several years. The borrower does not fully own the property unless

the mortgage has been cleared. They are also called ‘liens against property’ as the

lender may have the option to opt for foreclose.

Mortgage Backed Security: A loan which is secured by mortgages. It’s aim is to

reduce the bank risk and improve liquidity.

Mutual Fund: A fund that involves investment made by many investors and using

that pool of money to buy various assets. These assets are picked by the fund

manager to make the best possible portfolio. There’s a 0.% to 2% management fee

per annum on the purchased assets. A mutual fund can have investments made in

stocks, real estate, bonds etc. It allows investors to invest into multiple assets which

reduces the risk.

Net Asset Value Per Share: The market value of a single share or one unit of a

mutual share is called NAVPS.

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Net Income: The profit left after deducting expenses and costs of an investment is

called net income.

No Load Fund: A type of mutual fund that helps buy or sell shares without paying

any fee.

Non Registered Account: An open account which is not sheltered from taxes is

called a non-registered account.

Number Of Holdings: The number of individual securities present in a portfolio is

referred to as the number of holdings.

Overweight: It is one part of the three-tiered rating phenomenon in the world of

stock. The other two being underweight and equal weight. Overweight means that a

particular stock offers better value for money compared to other available stocks.

Over The Limit Fee: A fee charged the balance goes beyond the credit limit is

called over the limit fee.

Par Value: The face value of a bond that determines its maturity date is called par

value.

Passive Investing: A mutual fund investment that tracks a market index like

S&P/TSX. The benefit of this type of investment is that it requires lower portfolio

management and hence the management fee is not high.

Payout Ratio: A portion of company’s money given to the shareholders in the form

of dividends. It is the percentage amount of the company’s earnings.

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PEG Payback: A ratio used to figure out the amount of time it would take for a

company to increase (double) their money.

Penny Stocks: These are low priced stocks that are sold for less than $1 per share.

Pension Plan (Canadian): A pension plan in Canada that offers partial earnings to

the contributor’s family or the contributor during retirement, disability or death. It is

also called CPP.

Price To Earning Ratios: The amount of dollars an investor can invest in a

company and expect to receive one dollar of the company’s earning. In other words,

it is defined as the ratio of a company’s share price to the company’s earning per

share.

Qualified Access: This is a type of fund that prevents a certain group of investors

from investing. The restrictions might be religious based, membership based, etc.

Quick Ratio: It is defined as the measure of a company’s liability to fulfill short term

obligations using its liquid assets. In other words, it is the company’s total current

assets (excluding inventories) divided by total liabilities (current).

Rebalance: To reset the asset allocation of the original mix by purchasing and

selling investments.

Recession: A period showing an economic decline in trade or industrial activity.

Redemption: Redemption is when an investor’s principal is returned in a fixed

income security.

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Redemption Fee: The fee charged when an investor’s shares are sold from a fund

is called a redemption fee. This fees goes into the account of the fund company and

is also referred to as “exit fee”.

RRSP: A Canadian contract registered under the section 146 of income tax act that

offers retirement payments to Canadians. The benefit of RRSP over other plans is

that it grows tax-free.

Stock: An equity investment that offers partial ownership in a company is called a

stock. It is a long-term investment option that gives buyers ownership but not

necessarily the opportunity to make decisions for a business. It has many types.

Common Stock: These represent a residual ownership and are controlled by a

board of directors which is why the stock holder doesn’t have a lot of control on the

stock.

Preferred Stock: This type of stock offers priority over common stocks as it gives a

fixed dividend to the stockholder. This means that preferred stock offers higher

claims on assets than common stocks.

Stockholder: The person who owns a stock is called a stockholder. They have the

right to share the company’s profitability, assets, income, to newly issued shares and

voting rights as well.

Technical Analysis: An investment research that collects marketplace information

to check stock price forecast by seeing the previous stock data. It analysis past

prices, trades etc. It is done by reading stock price charts, looking at the volume of

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trades and and filtering out minor price fluctuations. This helps an investor make a

good decision.

Transfer Fee: The fee required to pay during an internal transfer of units from one

fund to another fund is called a transfer fee.

Tax-Exempt Income: The amount of income which is exempted from taxes is called

tax-exempt income.

TFSA: A federal program in Canada that exempts Canadians from paying taxes on

interest in specific savings account. Let’s say you open a regular savings account

and one TFSA account, and add $5,000 in each at 5% interest and 28% marginal

tax. After one year, let’s assume both the accounts will be worth $5,250. This means

that on the regular savings account the final amount will be $5,180 due to tax on

interest but in case of TFSA, which is a tax free account, you will receive the full

amount of $5,25

Top 10 holdings: The ten biggest holdings present in a portfolio based on asset

value.

Top 10 long and short positions: The top 10 holdings that are ranked on the basis

of their market value in each position category. It involves both long and short

positions. A long position involves an investor buying shares of stock to profit when

the stock price rises. A short position involves an investor selling stock shares that

are borrowed. The idea is to benefit when the stock declines.

Valuation: Estimating the worth or value of a company is called valuation. It is

carried out by an analyst by monitoring the business’s management, capital structure

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composition, prospect of future earnings, market value of securities and assets, etc.

It has a strong impact on investments as it helps determine the fair value of an asset.

Value Stock: The stock that is traded below the intrinsic value is called a value

stock. These may include dividends, sales, earnings, etc.

Withholding Tax: This is a type of tax that is deducted at source.

YTD Total Return: A year to date return on an investment is called YTD total return.

Yield: The percentage of return on capital on a yearly basis.

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