Working a 9-5 job isn’t going to help me meet my financial goals in time. I need something more. I know I can do more. In an attempt to grow my finance and knowledge, I began studying about investing and trading.
Back in March 2020, interest rates in Canada were hitting all-time lows. Things were nuts. Stocks were sporadic. The news were on fire. Economy was gone to shit - no wait, stocks are going back up. Money printing machine going brrr too hard. With the government stepping in, maybe it’s going to be fine. No wait, massive unemployment. But stocks are going up? Additional aid announced by the Liberals. Great so now stocks are going… down? What?
Nothing was making sense.
Daily sentiment is protean. Things change every day. One day oil is at all-time lows and people buy in. The next day it goes into the negative.
So I tried focusing on the big picture. Focus on the key elements. I tried to understand the companies, the markets, and the influencers. I begin digging around financial statements, earnings calls, conferences. I listened to the questions that are being tossed around at the board meetings. I tried becoming best friends with Investopedia.
But there’s still so much sh** to learn. Instead of feeling the progress of my journey, I can only feel the upcoming mountains of experience and knowledge that I need to trek.
You know what, while interest rates were at all-time lows, there were still some companies with healthy earnings. Some companies still paying out healthy dividends. Is this an arbitrage opportunity?
I thought it was, so I took out $20,000 from my line of credits (LOCs), and begin trading.
Buy 150 shares of Bank of Nova Scotia (BNS) at $56.00. Aiming for their ex-dividend date April 6, but I don’t want to buy right before the ex-div date because the prices will rise in expectation of the dividends and then fall right after to adjust the lower value of the company after dividend payouts.
Given the companys’ history of $0.90 / share quarterly payouts, this is $135. Of course, I’m prepared for a dip but I don’t expect a huge dip for the months of Jan - March.
Buy 100 shares of Lightspeed (LSPD) at $16.22. This is not a smart move, because it’s me just gambling with my money.
I read the financial reports. I researched the market. I researched the competitors. But there’s still so much that I don’t know. And most importantly, I didn’t have a trading plan. What would I do if it dropped 10%? What would I do if it dropped 20%? When would I sell?
I didn’t admit this at the time, but I was basically gambling.
Later end up selling the 100 shares of LSPD at $16.72 for a $50 profit. I don’t know what the heck what I was up to, but hey I made some pocket change. Instead of learning my lesson, I take the profit as evidence of my “smart moves”. Survivorship bias here we go. This naïve boy has a lot to learn.
The next day, LSPD starts above $18.
Buy 100 shares of LSPD at $20.14.
Buy 100 shares of LSPD at $19.97.
My expectation was that LSPD would swing upwards within a week. If not, I was betting that they would grow substantially within 2-3 years. Actually, that was just me justifying my irrational decision. I shouldn’t have done this.
Sell 150 BNS for $56.53 for a $79.5 profit. I got my dividends, which turned out to be $135. No longer needed to keep these. I needed the cash back to get some dividends on another bank. Eyeing RBC or BMO at this point. RBC ex-div date is 22nd and BMO is 30th.
Buy 28 shares of BMO for $69.65. BMO was a better buy for my money considering the price and dividend payouts.
I’m pretty sure the prices are going to fluctuate, so I decided to dollar-cost-average (DCA) from here on.
Buy 28 BMO for $66.93. DCA.
Buy 100 BMO for $66.62. DCA.
Buy 50 BMO for $66.99. DCA.
LSPD goes up. It’s been fluctuating a lot, often below $20, so I decided to sell it at $21.50.
Sold 200 LSPD at $21.50. Given my averaged cost of $20.055, that’s a profit of $289.
Guess what? LSPD goes up to $23 the next day, and $26 the next.
It is the BMO ex-div date, hallelujah. And the markets went up. This was the day before the peak of a small rally.
BMO has been paying out $1.06 / share for the past two quarters.
206 shares will net me $218.36 in dividend profit. Of course, I won’t be suprised if they slash it a bit.
Sold 206 BMO at $71.71. My average cost is $67.164. $936.476 profit.
Monthly earnings: $1708.336
Interest payment ($10,000 LOC at 6% annual): ($50)
Interest payment ($10,000 LOC at 1% annual (promotional)): ($8.33)
Total monthly profit: $1650.006
Because interest rates are at all-time lows while some aspects of the market are still paying out healthy dividends. Even if I rely purely on dividends, I will still be making some money after paying interest. I didn’t want to pass up this opportunity.
Is it a risk? Yes. Could I mess up? Yes. Am I trying hard not to? Yes.
What did I do well that I should keep on doing?
- being prudent and researching a lot for every single one of my trades
- not trying to time the market for the “bottom”, since I’m already taking a risk by using LOCs
- keep researching dividend stocks
- keep learning how to read financial statements
What can I improve on?
- create a trading plan for every stock I buy, before I buy them. Maybe try stop-limit orders.
- by having a plan, I won’t be doing “emotional gambling” as much
- ton of things to learn when reviewing financial statements. For a lot of them, I don’t know what questions I should be asking, what things I should be focusing on, what factors to analyze a company by.
I made more than expected in April. To be honest, I was hoping to make $500 if I was lucky enough. This is a nice plus on top of my full time job.
On the other hand, I don’t take this as a sign of my skills. I was just lucky. Period. The markets could have dipped hard leaving me only with dividends to count on.
Overall, I simply see this as the beginning of my journey in trading.
I don’t expect anything close to these earnings in May. First of all, no bank dividends to count on. Second, I’m not going to gamble in tech unless I gain a better understanding.
I’m looking towards some REITS for dividends and maybe some insurance companies. But my outlook on May is to make enough to pay off my interest, and then some.
I underestimated the amount of reading I had to do to keep up. You gotta read a lot. News. Financial statements. More news. Learn new stuff on Investopedia. More news. Youtube videos (okay this isn’t reading but still).
That’s all. Hope this was informative. Happy trading!