The end of March and smell of grass has me nostalgic.
I’ve been thinking about my elementary education – all the things hammered into our little bodies during such formative years.
Here are a few things that come to mind that have given me pause:
Stop drop and roll.
As a child, they had me convinced that I would catch on fire. We had to literally practice rolling around on a dirty ground to prepare ourselves for when we would inevitably be on fire. The closest I have come to being on actual fire in the entirety of my life is a bad straightening iron burn in Grade 9.
Step on a crack, you break your mothers back.
I don’t know where this came from but remains a disturbing childhood memory/singsong, nonetheless.
Quicksand.
It was everywhere and you had to be vigilant about it. Except for the fact that it was nowhere. I don’t know a single soul who has ever seen, much less fallen victim to quicksand, aside from Buttercup in The Princess Bride.
(The concept of lava was similarly alarming).
All this to say, we are going back to school today. But unlike the majority of our childhood education (Planning 10 if you’re from BC), this is actually useful.
There are 3 ways that you can make money on your investments:
1. Interest
The thing we all know and hate in regards to student loan and credit card debt. However, interest works in our favor with investments like savings accounts, GICs and bonds.
Think of these investments as a really safe apartment for your money. You know exactly how much you’re going to earn back.
Example:
“If you’re me and have travelled a road antithetical to business and finance, the 0.10% interest generated from your savings account that makes roughly $13 monthly is sufficient. I urge you not to calculate what this reveals about my savings.”
(Quoting yourself is terribly narcissistic but this is from my first article at EG, and, as aforementioned, I’m feeling nostalgic).
Regardless, interest is boring. Putting a little emergency fund or travel money into these types of accounts is perfectly reasonable but if you’re looking to make your money work for you, (I hate this phrase), then keep reading.
2. Dividends
I love this one. Dividends are like the grandparent who always slips you a $20 after you’ve gone over for dinner. When you invest in a stock, certain companies will give you part of their profits in proportion to the total number of shares held. It is a sort of quarterly or annual money gift to say, thank you for owning our shares ‘long-term’ and also please keep investing in us.
I wrote about dividend yields (this is just fancy terminology to describe how much a company pays out each year) here but in the interest of saving you scrolling time:
Dividends are usually higher on shares of industries that aren’t volatile, to compensate for the lower capital on profit.
For example:
BC Hydro probably isn’t coming out with the next hot thing. No one is on their toes dreaming of what brilliant product BC Hydro will come up with. I don’t think anyone ever thinks about BC Hydro aside from the monthly eye roll it elicits when the bill comes around. So, to make it an attractive investment, and because they are steady (a Taurus if companies had zodiac signs), they offer high dividends.
Fine Print:
This is almost always a regular income, (like the grandparents $20), however, a company may skip dividends if business is poor or the directors invest money in things like new equipment or buildings. The amount of the dividend depends on how well the company did that year and what type of stock you own.
3. Capital Gains
This is the tried-and-true classic of how to make money on your investments.
If you sell a stock, bond, mutual fund or ETF for more than you paid for it, you will have a capital gain. (In turn, if you sell it for less than you paid for it, you will have a capital loss which helps with tax season and nothing else).
Capital gains also refer to the profit earned on the sale of a property, business, car, etc.
All things it seems I personally won’t have to concern myself with for far too long – so, will stick to discussing the intangible assets for now.
Capital gains are quite self-explanatory. In fact, I think I could’ve wrapped my mind around this concept at a young age. But alas, I was far too preoccupied looking down:
Must beware of the sidewalk crack and quicksand.
Until next time.