Stock Market Smarts: Where to Begin?

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Stock markets have been hot but what should you do if you’ve been sitting on the sidelines?


Q – I am a beginner in stock investing and I would like to know if you could recommend stocks with which I could begin (between 10 and 15). The reason I am asking is that certain analysts are saying that there are no more opportunities, as most stocks are expensive and also the markets are now too high. In other words, unless you have a lot of money there are no more possibilities for now. I am very lost with all I hear and read!” – Pierre L.


A – I understand your dilemma but if you wait around for stocks to become “cheap” again you could wait a long time. Here’s my advice in this situation.

 For starters, focus on quality. Anyone who does not already have a stock portfolio in place should begin with core companies. By this I mean industry leaders that are going to retain that status for the foreseeable future. Typically, these firms will have a history of solid revenue growth, increasing earnings per share, regular dividend hikes, and a clean balance sheet.

Canadian issues that I regard as “core” include Bank of Nova Scotia, BCE Inc., Brookfield Asset Management, CN Rail, Enbridge Inc., Fortis Inc., Intact Financial, Suncor Energy, and Teck Resources.

In the U.S., look at AT&T, American Express, Boeing, General Electric, Google, MetLife, United Health Group, Wal-Mart, Walt Disney and Wells Fargo.

Any combination of those stocks is a good starting place for a portfolio.

Build the portfolio over time – say six months to a year. With indexes setting new records, it’s not a good idea to rush out and spend all your cash at once. You could end up buying at the top of the market.

Instead, decide on which stocks you want to own and then gradually build a position using dollar-cost averaging. Keep some cash in reserve to take advantage of any market correction.

Always keep in mind that you’re investing for the long term. When you make your decisions, don’t worry about what the markets will do next week. Rather, ask yourself which companies are likely to be thriving a decade from now while rewarding you in the interim with dividends. If you base your stock choices on that kind of analysis, you won’t go far wrong. – G.P.



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