Week 4 - November 25

INTRODUCTION TO THE STOCK MARKET PART TWO

Hey Finance Club! This week’s lesson will be shorter compared to the rest to give everyone a break to
catch up.

We’re going to begin by comparing two different market conditions. Bull market vs Bear market.

Bull Market Bear Market

● Represents a rising stock market, ● Represents a falling stock market,

where prices are increasing in value
● Higher level of optimism in the market,
so more people are buying rather than
selling
● Reflects a healthy, growing economy
● Looking at the long term, history
shows that the stock market is mainly
“bullish” throughout the years
○ Bullish: An average of having
more gains than losses
where prices are depreciating in value
● More pessimism and fear, so people are
frantically selling to cut their losses
● Reflects a sluggish or slowing economy
○ Past bear markets include the
Great Depression
● For some investors, the bear market is
an opportunity for them to buy stocks
at a lower price in hopes of big gains in
the long term

As you can see, these two markets dictate investor behaviour within the stock market. When the
pandemic hit, markets descended into a bear market where prices fell and people rapidly sold their
stocks. On the other hand, other people have found this as an opportunity to buy stocks for a cheaper
price as they slowly gain back their value.

These two terms are used a lot to describe the stock market. As such, they are a great way to begin
understanding the language used by investors.
Week 4 - November 25

As you can see from the graph on the previous page, the history of the S&P 500 does indeed tend to be
more bullish! However, don’t get too optimistic. Bear markets can sometimes last for a couple decades
at a time, as seen in between the 1969-1984 markings. The most important thing is to look at current
trends and to stay informed, through news and other outlets!

How do I get started in the stock market?

Try your best to do most of your investing within a TFSA (Tax Free Savings Account), because the
government won’t tax you on your investments. There are many ways you can enter the stock market,
but first you must decide what type of investor you want to be:

The Hands-on Investor

This type of investor is interested in choosing stocks by themselves and

making most financial decisions through their own opinions. A lot of
investors choose this option because it allows them to have the most
control over their investments. To invest in stocks, you will need to have a
brokerage account: essentially, an arrangement that will allow you to
deposit money with a brokerage firm that will place trades on your behalf.
An online brokerage account is likely the least expensive and quickest
option for trading stocks, funds, and bonds. Therefore, this is most likely
the option that you should take on your journey to becoming a trader. But be warned: it offers the least
security! If you are just starting out, exercise caution and don’t put too much trust in the system.
Examples of these services for Canadians include Questrade, Wealthsimple, etc. You can also open a
brokerage account with your bank like TD, BMO, etc. However, these are usually for more experienced
investors that are willing to pay extra fees for added security and features.

The Passive Investor

For this type of investor, they are willing to let other people invest their
money for them. Our guest speaker Hassan works as a wealth manager -
so his job is to help other people invest by doing it for them. This is a
convenient way to enter the stock market and have somebody more
experienced handle your portfolio. It leaves out the hassle of picking out
individual stocks that you believe will be good investments, allowing
you to save time so that you could spend it on other things. However,
the drawbacks are that you do not have much control over what you
want to invest in, and instead most of the decisions are made by the
portfolio manager.
Week 4 - November 25

Our tip: If you are interested in investing in the long term without having to pay someone else to do it,
look into purchasing index funds! They are a great and reliable way to increase your net worth over
many years.

Some reads that were recommended during our guest speaker meeting:

The Barefoot Investor - Book. Here’s an online review:

https://www.theguardian.com/books/2018/dec/10/its-a-movement-how-the-barefoot-investor-
changed-whats-in-our-wallets

Canadian Couch Potato - Blog. https://canadiancouchpotato.com/

Wealthy Barber - Book Series. Website: http://www.wealthybarber.com/

(Shout out to Nolan, who was cutting our (Kevin and Stuart) hair when we came up with the idea for
Finance Club!)

Richest Man in Babylon - Book. Wikipedia article:

https://en.wikipedia.org/wiki/The_Richest_Man_in_Babylon#:~:text=The%20Richest%20Man%20in
%20Babylon%20is%20a%201926%20book%20by,classic%20of%20personal%20financial%20advice.

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Image References:
Bull vs Bear Market Graph: https://seekingalpha.com/article/4200284-longest-bull-market-in-history-
and-what-happens-next
Wealth manager/Financial advisor icon: https://icon-library.com/icon/financial-advisor-icon-10.html
Hands-on trader/Day trader icon: https://iconscout.com/icon/day-trading