Two Years Later: My Sister's First Step Toward Investing

In June 2022, I sent my 17-year-old sister, Tiff, a detailed email about investing. (Read Here) At the time, she didn’t feel ready to dive in—didn’t have much money and wasn’t sure how to begin.

Fast forward two years. Out of the blue, she messaged me:

I was caught off guard—but in the best way possible. Advice, even when it doesn’t land right away, sometimes sticks around and resurfaces when the timing feels right.

I told her:

What follows is the email I sent:

Hey Tiff!  To answer your question on where to start.  Let me give you a short answer, and then a longer answer.

Short Answer:

• You need a job so you have regular income. 

• Open up a brokerage account so you have the tools to invest.  Many beginners use WealthSimple(I think Austin uses that).  Supposed to be very easy to get set up, just download the app.   I personally use IBKR but it's not really needed unless you wanna get into more advanced stuff later.

• Start buying the S&P 500 Index Fund EVERY month with part of your paycheck.  The amount should be something you do not mind losing.  I'd say start with $100 a month, and see how it impacts you.

This is the most basic, safest, and proven form of investment strategy.  Even Warren Buffet recommends this for most people and it's been working for the past 100 years. This works the best if you are young, which you are! That's your superpower!  If a 40 year old asked me, I wouldn't be able to recommend him to do this with as much conviction.

With that said.  Nothing is guaranteed in life.  Just because something in the past has been, doesn't mean it will always be.  Statistically, this should work but you never know.  This brings me to the longer answer.

Long Answer:

Risk vs Reward

WW3 could come and your investments could be worth nothing and never go back up.  But if that were to happen, money might be your last concern.  That's the worst case scenario.  But There could be less devastating events in the economy where life is not over but your investments are gone forever.  That's why you should always ONLY invest amounts that you do not need for your life to continue functioning.

Given that statistically the probability of the US stock market collapsing AND never recovers is 0%, since it has crashed on average every 6-10 years but always recovered.  I personally choose to go with that probability than to bet on the opposite.  That's why I choose to invest.  I couldn't convince myself to do it if that were not the case, as it would be just gambling and hoping to get lucky.  But if I were somehow wrong, again, I NEVER put all my money in the market.  Just in case!

What Is a Stock

What does it mean to invest in a stock? I'll use an analogy to explain.  Think of all the thousands of houses in Edmonton.  Each of them can be bought and sold by people.  Think about the house you live in.  That's one of the houses that's on the market.  Instead of a stock market, it's a real estate market.  I bought that house because the vacancy rate in Edmonton is low, lots of people move to Edmonton cuz it's one of the most viable places to live with good jobs.  I know that it can rent out for like $1000, so over time this house will make more and more money.  And for that reason I was willing to pay X amount $ for it.  Rent generally increases each year(I don't do that for you guys but just for example's sake we'll pretend we do).  Let's say if the rent increases to $3000 a month eventually, then another investor might be willing to buy the house for 2-3x the amount that I bought it for.

So buying a stock is a lot like buying a house.  A house is in a way a business, it generates money.  You can buy a bakery too, if it is something you think makes you money.  Buying a stock is very similar.  Except you are not buying an entire business, you are buying a small portion of the business.  E.g. If I had a  business and I wanted people to invest in my  business, but nobody wanted to buy my whole business, but just part of it.  I can logically divide my company into say 100 pieces.  Each piece would be called a share, or a stock of my company.  Whether anyone wants to buy it, would depend on how much they believe that my business would make money.  The more money my  business makes, the more people would be willing to pay for the stocks of my business.

People generally buy the stocks of a business for these reasons:

1. They think it would either go up in price cuz they think the company is gonna make more money each year. 
   Kind of like when a house you bought goes up in price, and you sell it, now you made some money.

2. They buy the stocks of a company because the company pays them a dividend.  Some stocks pay you a percentage of what they make if you own it. 
   Kind of like buying a house that has tenants in it, they pay you rent each month even if the house didn't go up in value you still make money.

3. or both of the above.

Traders vs Investors

When it comes to the stock market there are many types of things to do, many of which I don't even have a clue about but generally you can divide the types into two camps.  There are Traders, and there are Investors.  

Traders generally don't care about the long term direction of the market, or how a company is operating, they care if the price is going to go up or down in the short term, either the next month, next week, or even next minute, and they bet on that.  Some people succeed at that, but statistically most will lose money.  I don't know too much about trading, but I have tried for a while and haven't gotten any good results from that type of mindset.  Any money I made I eventually just lost it all. so I don't really touch that.  To me that's more like gambling and I don't like it.   

Trader mindset of real-estate: If I bought a house that I simply think by next year it will go up 50% because that's the direction of the current market and everyone is hyped about it, not because I know this house can actually rent for a good amount of rent or even has a tenant.  If the price actually goes down next year I would lose money because I have no clue how much this house should be worth since I don't know how much it rents for, or if it has a leak, or if it's in an area where there is enough jobs, or population, etc.

On the contrary, an investment mindset has actually been working well for me, and many others who stuck to it.  Investors put their money on something they think that given enough time that thing they invest in will do well.  e.g. If I bought a house because I know it's being rented out and can generate money each month, so even if the price doesn't go up next year, or even goes down, I know it eventually would go back up due to it being a business that is functioning properly.  I would keep that house instead of selling in a panic.  Eventually when the house goes up in price again, I could sell it for a profit, or just keep it since it's generating income.

Types of Investors

Now that you know that I'd recommend investing over trading.  There are generally 2 main types of investors.  There are stock pickers, and there are index fund investors.

Stock pickers will study each company, their business model, their income statements, etc, and just be very into each company they invest in.  It takes a lot of time and passion.  It's generally not recommended for most people, especially beginners.  But if you do get into this, it does have the potential to make a lot more money and can be very rewarding.

Index fund investors don't need to bother with that.  What is an index fund?  Basically instead of buying shares of Apple, Google, LuluLemon, individually.  You buy 1 "stock" that contains a whole bunch of different businesses in it. The most popular index is called the S&P 500.  It contains the top 500 companies in the US stock market.  Index fund investors invest in the fact that the past 100 years the top 500 companies always keep growing.  Underperforming companies will get rotated out of the S&P500 index and better ones get added in.  The average growth of the index is 8-12% each year.  It's not as good as individual stock pickers who picked the right stocks.  But you also don't have to worry about picking the wrong stocks that go bankrupt.  And it's much better than money sitting in the bank and losing value each year.  

Dollar Cost Averaging

Remember in the short answer above, I recommended you to invest x amount each month?  This is called Dollar-Cost-Averaging, or DCA.  Instead of trying to guess when the stock market is at its lowest or highest (which is almost impossible to do consistently), you invest the same amount of money every month, no matter what the market is doing.

Here’s why this is helpful: when the prices of stocks are low, your monthly amount buys more shares. When the prices are high, your monthly amount buys fewer shares. Over time, this balances out and can lower the average price you pay for your investments.

For example, let’s say you invest $100 each month:

• If stocks are $10 each, your $100 buys 10 shares.

• If stocks drop to $5 each, your $100 buys 20 shares.

• If stocks go up to $20 each, your $100 buys 5 shares.

By doing this, you’re not trying to time the market—you’re just building your investment steadily.

Another big benefit is that it keeps things stress-free. You don’t have to worry about whether now is a “good” time to invest because you’re investing consistently. This also helps avoid emotional decisions like selling when the market drops (because it feels scary) or buying too much when the market is high (because it feels exciting).

Finally, DCA makes investing affordable and simple. You don’t need a big lump sum to get started—you can begin with just a small amount each month. It’s an easy way to build wealth over time without needing to be an expert stock picker. All you have to do is stick to your plan and let the process work for you.

Let's Start From There

So this is where I would recommend you to start.  I personally don't do exactly this because I don't have the advantage of your time horizon! So DCAing into index fund won't make me enough to live off of. So I use options to multiply my investments.  It's more work but I enjoy it and it still follows the investment mindset I mentioned.  But you have time as your leverage and chances are you will do really well in the long term if you take advantage of this perk!  Just be sure to stick to it.  I'm pretty sure WealthSimple has an automatic investment option to do it for you so you don't need to remember doing it each month.  Don't look at the investment, just set it to auto-invest, and look at it in 5 years, 10 years.

Should you be interested in the more advanced stuff like what I'm doing later on in life, and assuming my methods continue to work, we can talk more!  For now, start with what's been proven the past 100 years!  

If you're really interested in this stuff I'd highly encourage you to read up more on investing on a regular basis, don't just take my words for it.  I started late and there's a lot more that I don't know!

Vio

Sometimes, the simplest act of sharing knowledge can make a profound impact. Two years ago, I sent my sister an email about investing, and while she didn’t respond right away, I’m glad she reached out now. The seed was planted, and even though it took time to grow, it eventually sparked her interest. By sharing valuable insights, you can inspire others to take action that they might not have considered otherwise. It's a reminder that sometimes people need time to process, but by planting the seed, you give them the opportunity to make better decisions when they’re ready.

It’s never too early to start investing. The earlier you begin, the better. Time is a powerful tool, and starting young gives you a significant advantage. Don’t wait for the “perfect” moment. Start small, stay consistent, and watch your financial future grow. By planting that seed now, you’ll be setting yourself up for long-term success.