Almost every individual on the road to financial freedom sees passive income as a kind of Holy Grail. There are only so many hours you can work in a day, and only so far that budgeting will take you. If you want to progress, you need to either advance in your career or find a side-hustle for which you don’t need to quit your job.
Forms of passive income really do make millionaires out of people. Property is one of the most popular and most reliable. If you own a number of properties that you are renting out, you can bring in a lot of money every month which you can invest in interest earning accounts.
However, passive income is a misleading term. Renting out property, for example, is actually a lot of work. You need to manage your properties, ensuring that your tenants are taken care of and repairs and maintenance are carried out when necessary. Most landlords really don’t enjoy the work, even if it is financially rewarding.
But that does not mean all forms of passive income need to be energy draining. One side-hustle that is becoming increasingly popular is stock trading. The stock market used to be inaccessible for most individuals. If you had the money to invest, you still needed the know-how. Nowadays, as long as you have access to the internet, you can start trading immediately.
How does modern stock trading work?
Trading today looks very different from how many people still imagine it. In the past, you would trade through a major financial institution like a bank, or find a broker who would help you invest your money. You would pay a lot of upfront cash as well as significant commissions for the service.
You’d also have very little control over your stocks on a day-to-day basis. Instead, you would trust the broker to monitor your portfolio and come to you with big decisions when necessary.
Now, however, there are countless so-called discount brokerages which you can access online. Rather than connecting you with an expert, they use artificial intelligence to give you the ability to execute trades in real time. You control every trade you make, and set up your portfolio to function according to your own conditions.
This is how millions of people around the world are making money. They trade as a hobby, enjoying doing it in their free time while earning an extra income. It is passive, in that you are not working for your earnings, and what work you have to do is exhilarating.
If you know nothing about stock trading, online stock brokerages might strike you as irrelevant to your life. After all, just because you can do something doesn’t mean you should. Trading with real money despite knowing nothing about it sounds like a surefire route to financial ruin.
Why would a responsible amateur even consider trading stocks?
Learning on the fly (and the internet)
It’s no revelation to say that you can learn anything online. Technically, you can learn how to build a plane, although you probably don’t have the resources to do so. Of course, trading and the stock market are two things you can learn plenty about online and actually do something about.
Being able to start trading in 2021 is not just about looking up terms and concepts through Google. Rather, most online stock brokerages build education into the process of trading. You learn on the fly, and much of what you learn comes from experience.
This means you should start trading with a small amount of money. It should be money you can afford to lose. If you start trading with your grocery money, you are asking for catastrophe. Not only do you risk your daily bread, but you also make yourself more likely to panic and make bad decisions. When you are desperate, it is much more difficult to think straight.
There are demo trading account options which might interest you. They give you the experience of trading without the risk. This is a good place to start for anyone who is unwilling to risk even what they can afford to lose.
Tools of the trade
The accessibility of trading is not just about the educational material being available. It also comes down to the tools your online stock brokerage will make available. These are functions which you can set up to handle decisions automatically when necessary.
To some people, this will sound like a bad trade-off. You are eschewing a human touch for the capabilities of an algorithm. But if you think about it, an algorithm is a far more likely means to make informed trading decisions. After all, there is almost no limit to the amount of information it can process, whereas the human brain can only take so many factors into account. It takes a lot of the guesswork out of trading.
As long as you know what you are doing with these tools, you have an advantage that traders from yesteryear never had. You can rely on them to keep you out of trouble, ensuring that you never go all in when it looks like your stocks might take a turn for the worse.
Since these tools are so important, you should go with a discount brokerage that is renowned for their functionality. The good news is that they are also offering some really great promotions.
Qtrade vs. Questrade
Two of the biggest discount brokerages in Canada are Qtrade and Questrade. Both have excellent platforms that give you all the tools you could possibly need, while providing information to educate yourself as you trade. They have desktop and mobile apps so that you can trade on the go or when you have the free time.
Qtrade and Questrade are also two of the cheapest online brokerages in Canada. Questrade charges no fees or commissions when buying exchange traded funds (ETFs), which are the popular option among beginner traders. They do however charge you when you sell your ETFs.
Qtrade charges no fees or commissions on ETFs whether buying or selling, which makes them a particularly attractive option. They do charge slightly high fees on certain other types of trades.
In 2021, Qtrade is offering up to $2,000 bonuses to beat Questrade. These bonuses are available to new clients, according to various terms and conditions. For the full $2,000 bonus, you will need to invest a minimum of $25,000, which you should only be doing if you have a lot of experience as a trader. However, you will get at least $50 when you start with a small investment, which gives you a great buffer to play with before risking your own capital.
Is it worth choosing Qtrade over Questrade just for the bonuses? That depends on you. It is worth noting that Qtrade is also cheaper if you’re trading ETFs. Qtrade also has a great reputation when it comes to customer service. This is hugely important when you are working with real money and something goes wrong.
Should I trade?
If you want a new hobby that can bring in some good passive income, trading stocks is worth looking into. You can do so responsibly, without risking your ability to put food on the table.
Trading should be something you take up as both a hobby and a future source of income. It is something that millions of people around the world are realizing is actually very enjoyable. Information that once would have seemed dry and complicated is suddenly very interesting and easy to parse when you are engaged in the world of trading.
Not everyone is cut out for trading. Some people struggle to be responsible with money in general, whether because of certain attitudes they learned growing up or because of addiction issues. In these cases, trading can be a slippery slope towards essentially gambling with money you can’t afford to lose.
If you think you can trade responsibly but have some doubts, start with a very small sum of money and see how you respond to trading. Do you obsess about it? Are your decisions considered or rash? Would you be able to step back if there was more money at stake? You can get an idea of your personality and attitude towards money, and learn when you need to be careful.
But if you are generally very frugal and know that you have good instincts, trading might be your next favorite thing. In these times, when we are all stuck at home anyway, it can be just the way to invest the disposable income you would be spending on nights out.