Finding money to invest

Q – I am a new subscriber to your Internet Wealth Builder newsletter. I presently have very little money in stocks and was wondering if you had any thoughts on how to get started (e.g. minimum number of stocks, minimum dollars invested in any one stock). My free dollars are limited and I have leveraged my RRSPs and presently have that money in various funds. I can acquire more money through leverage, but may have trouble sleeping at night if I go this route, since what I have levered so far is down approx. 25%. Any advice? – P.H.

A – I am not a big fan of leveraging, for exactly the reason you have painfully learned B markets go down as well as up, and when you are using other people’s money, the losses are magnified.

The one exception I make is the route you appear to have gone B using borrowed money to maximize an RRSP contribution. The interest on the loan is not tax deductible, but that is more than compensated for by the fact you can claim a deduction for the contribution. As long as you can repay the loan in a year or two, yocome out way ahead of the game — even with the loss you have suffered to date. On that point, however, I should add that RRSP investments should not be speculative B you should not put yourself in a position of potentially losing 25% in a registered plan.

By the way, there’s a full chapter on RRSP borrowing in my 2001 Buyer’s Guide to RRSPs.

For your non-registered assets, my advice is to avoid leveraging and to gradually build a sound portfolio using the more conservative choices from the Internet Wealth Builder and other sources of advice you may have. You don’t have to buy 100 shares of a stock at a time. Go for 25 if that’s all you can afford. But do try to diversify B a portfolio of 6-10 stocks would be good. Don’t worry if you can’t afford them all at once. Investing is a lifetime process. Good luck. – G.P.