Herman Ye

When buying stocks, there are two main type of orders:  Market Orders and Limit Orders . Let's discuss what these are and which is best for most investors.

Investing is great. With the right approach, it enables you to grow your money with little to no effort, setting you up for a rich future ( pun intended ). I love it so much I made a whole blog about it. Before you start shoving money into the stock market, take a step back to assess your finances. Thinking about the future is smart but it should take a backseat to the present. Investing should start on good financial footing. Meaning two things, you've paid off any high-interest debt and have built a solid emergency fund. Paying Off High-Interest Debt That means credit cards and payday loans, the bad debt . The wealth destroyers that drags down your financial life. Interest so high, making it easy for things to spiral out of control. Credit cards typically charge between 15%-20%, and payday loans are even worst, with rates in the neighbourhood of 700%. The average return from the stock market is between 7%-10%, meaning your money is much better spent paying do...

In one corner you have traders , in the other, investors . These labels are often used interchangeably. Both participate in the stock market but that's where the similarities end. These are two very different groups, with very different outlooks. Timeframe  Traders has their eyes on the now. They frequently buy and sell stocks, aiming to profit through short-term price movements. Taking positions day-by-day, even minute-by-minute. An investor is agnostic to short-term price movements. They see themselves as business owners, investing in companies with long-term growth potential. Operating in decades, not minutes. Passive investors  own thousands of businesses across the globe through ETFs, expecting businesses (as a whole) to grow over time. Traders are sprinters, investors are marathon runners.  Market Timing Traders must make the right trades at the right time. Their concise timelines creates a high pressure environment where everythi...

Safety in investing is often associated with lower returns, no risk, no reward. However, diversification presents an exception to this rule. It's been  shown  that spreading your investments across the globe reduces risk while simultaneously increases your expected returns. "Diversification is the only free lunch in finance"         - Harry Markowitz, Nobel prize winning economist Global diversification is indeed beneficial, but it's important to recognize the added factor it brings to your portfolio. When you own international stocks, you gain exposure to foreign companies AND their currencies, thus you'll need to deal with fluctuations in stock prices and exchange rates. Let's demonstrate this with an example. Carl Buys American  Carl is a Canadian investor who wants exposure to the US market. To do this, he buys SPY, an ETF that tracks the S&P 500. Carl is now the proud (part) owner of the largest 500 companies in America. ...

Investing comes with a lot of noise. Changing trends, politics, forecasts, the list goes on. Countless factors influence the stock market. Moving it up and down, sometimes aggressively in a matter of moments. A sudden decline is a scary prospect, leaving new investors hesitant to dive in. Nobody wants to invest $1,000  only to have it be worth  $900 by day's end. Unfortunately, the ups and downs are part of the game. The good news is that the ups are a lot more persistent than the downs. Taking a look at S&P 500 returns from 1926-2015, you can see that as more time passes, the greater the odds are for a positive return. Probability Time Horizon Positive Negative Daily 54% 46% Quarterly 68% 32% Annually 74% 26% 5 Years 86% 14% 10 Years 94% 6% 20 Years 100% 0% Source: Bates, L. (2018) Beat the Bank: The Canadian Guide to Simply Successful Investing Toronto, ON: Audey Press. If you're investing for a day, you're pretty much gambling. It'...

When car shopping, you're face the financial decision of buying or leasing . Buying is the more straightforward option, you exchange money to own a vehicle, simple enough. If the car is cheap, you can buy it outright. If it's pricer, you can finance it with an auto loan. In either case, the transaction is fairly clean and you end up being the proud owner. Leasing is a bit more complicated. When you lease, you're essentially renting a car for a fixed period of time. Leases typically last 2-4 years and during the period, you pay for the amount the car depreciates (plus interest). Since you're only paying for the amount you use, the monthly payments tend to be much cheaper than it would be for an auto loan. The lower monthly payments is enticing but there's a catch. When a lease is over, you don't own anything. You're simply given the option to buy or return the car to lease another, restarting the process. Leasing is cheaper in the short term but wil...

Investing for most people is buying stocks that they think will rise in value. If you're a fan of Apple, you buy shares in hopes of getting a piece of their expected future growth. In fancy terms, when you're optimistic about a company, you're "long" or "bullish". When you're pessimistic about a company, you're "short" or "bearish". When investors are bearish, they can profit through a strategy known as short selling . How Short Selling Works There are 3 steps to short selling: 1) Borrow the shares you want to short from someone who owns the stock. This is usually an institutional investor such as a big bank. No free lunch here, you'll be charged fees for this loan. 2) Sell the borrowed shares. Pocketing the money from the sale. 3) Buy back the shares and return to lender.   The goal is to buy back at a lower price than you sold for, profiting from the spread. When the shares are returned, you're "c...

In 1951, psychologist Solomon Asch conducted a series of studies to test the impact social pressure has on our decision making. The study involved presenting groups with two cards. Card 1 had a single line, Card 2 had three. The group was asked to choose the line on Card 2 that matched the line on Card 1. Simple enough, but there has to be a twist, right? Yup! Would be a pretty boring study otherwise. Each group was filled with actors, with only one true test subject. The experiment would begin with a few rounds where everyone would answer correctly. The answer was always obvious. As the test progressed, the actors would start choosing an incorrect option. For example, with lines above, the actors would choose A when the answer was clearly C. Asch found that social pressure would cause test subjects to conform and select an answer that was obviously wrong. The likelihood to conform being greater the larger the number of actors. There's been a number of studies...

I'm a big fan of credit cards, they're my go-to way to pay. When used correctly, you can reap rewards at no cost at all. Credit card companies are smart though, they're not in the business of free lunches. They know how to make money and lots of it. They make  billions  every year. Interest is the big money maker, accounting for 40% of earnings. Interest is applied whenever someone carries a balance. When your payment comes due, you have two options. You can either pay off your balance in full or pay the minimum. The minimum payment is enticing because it can be much smaller. It's a trap! Don't fall for it. Smart credit card users never just pay the minimum. They pay the balance in full so interest is never owed. How the Minimum Payment is Calculated The minimum payment is typically the greater of: 1% of your balance or a set minimum amount, such as $10  If your balance is lower than the set minimum, then your minimum payment would simply be t...

We humans are notorious for overestimating our abilities. We're a cocky bunch.  Let's take a look at how big our heads really are and its influence on our finances.