Learning to invest in the stock market is easier than we think, we just need information and training to face the first investments in the stock market. In this article we help you get started in the world of the stock market : advantages and risks, tips and basic information to start investing if you are a beginner.
The Stock Exchange has greater security, profitability, liquidity and flexibility than any other asset . Therefore, investing in the Stock Market is interesting for the public, since in the long term it is very profitable; In addition, through dividends you can get a regular source of income.
How to invest in the stock market from scratch?
Before starting to invest in the stock market from scratch, it is important that we know what the benefits and risks of investing in the stock market are. Let's start with the advantages:
Advantages of investing in the stock market
🔸Periodic income : It is a very important advantage since the portfolio of securities that we create will generate income for us through dividends from the shares.
Keep in mind that the money obtained by collecting the dividends can be reinvested in buying more shares, or used for own consumption, depending on the needs of each investor.
Dividends are the benefits that companies have each year and that they decide to distribute among its shareholders.
🔸Low commissions : They are low if we compare them with those of other assets such as investment funds or expenses of investing in a property, but of course we must bear in mind that they are charged every year or per operation, depending on the broker we use for carry out the operations, therefore we will have to inform ourselves very well about the commissions of the broker before starting to operate.
🔸Total freedom to invest : We do not have any obligation to buy or sell if we do not see that it is the moment for it, that is, we own our movements at all times.
🔸Diligent to decide to enter or exit : We can enter or exit the market at any time, our positions have no influence compared to the size of the market.
🔸Invest in securities that are outside of the stock market indices : We have the possibility of investing in very good companies that do not meet the requirements due to size or liquidity to belong to any index and to which surely no investment fund pays attention
🔸Way to fight against inflation : the stock market allows us to invest in assets that protect us from inflation such as real estate companies, raw materials, etc.
And what are the risks of investing in the stock market?
🔸Market risk : it is the possibility that when you decide to sell your investment it is worth much less than what you had invested.
🔸Liquidity risk : you cannot find someone to buy the shares you have bought and you have to offer them at a discount.
🔸Exchange rate risk: if you invest in shares in dollars or another currency other than the euro, it may happen that, even if your investment goes well, the exchange rate is unfavorable and you lose money.
If you are interested in getting to know them in depth, I recommend that you read the risks of investing in the stock market.
It is important to know that in the stock market you can lose all the money you invest if the companies go bankrupt, but you will never lose more than what you invest and the risk of this happening in a diversified portfolio is almost impossible.
10 steps to investing as a beginner
We know that the future in the economy of any person is determined by:
🔸The money you earn
🔸The money you save
🔸The money you invest
We are wrong when we think that the idea of getting rich is to earn a lot of money, we get rich when we save ; just by making money you don't get rich; As the saying goes, it is not the one who earns the most who has the most, but the one who needs the least.
Although we earn a lot if we spend it all, we do not get rich either, therefore we must know how to save and invest those savings in creating more wealth.
1)Analyze your financial profile : income vs. expenses, life stage, savings capacity, future plans, professional career, liquidity cushion.
2)Analyze your psychology: How do you face losses? Are you consistent
3)Establish an investment term : 1, 5, 10, 20 years
4)Establish your loss limit: the stock market fluctuates and you must be aware that when you need the money it may not be the most favorable and you will have some losses.
5)Establish your target return : always keep in mind that more return is more risk and that in the very long term the best investors of all time have not generated more than 20% per year. Be realistic, if they promise you very large returns, be suspicious.
6)Decide your investment style: many investors just want to save and have someone create a diversified portfolio (for example roboadvisor ), while others like to select stocks and even the most risky want to buy and sell frequently by trading
7)Select your broker : the differences between the most expensive and cheapest brokers on the market is impressive. So compare brokers and find the one that best suits your profil
8)Save : it is essential that you save in the long term and invest that saving. The sooner you start, the sooner compound interest will work its magic.
9)Diversify: It is important not to have all your eggs in one basket. You must diversify by countries, sectors, assets.
10)Try to grow your income : an important part if you are young is that you do not stop training or look for ways to grow your long-term income and help you with your investment goals.
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