How to learn to invest from scratch?

We tell you how to understand investments and invest money wisely if you have never done this before.

Recently, more and more Bangladeshis are investing in stock market instruments. It has long been dispelled the myths that investments are like gambling, in which, sooner or later, every penny will be lost. With the right risk assessment and the right amount of theoretical knowledge, you can create a balanced investment portfolio that will work for you and your goals. How to learn to invest from scratch, we will tell in our article.

Why do you need to invest

Savings on hand make many think about their increase. Keeping money at home in a safe is not very profitable, because inflation can eat it up. Now is also not the best time for making deposits, as interest on them continues to fall following the key rate of the Central Bank.

Naturally, under these conditions, the interest of Russians in stock market instruments is growing: according to the Moscow Exchange, at the moment in Russia, 7 million private investors have access to the trading floor.

With investments, you can:

protect savings from inflation;
receive additional income;
create an airbag and gain financial freedom.

Before you start investing, decide on your financial goals. At this stage, it is important to prioritize and evaluate the cost of your desires.

3 main investment pillars

As a rule, investments require some initial savings. Payroll deductions can be a great way. By saving only 10%, in a year you will be able to accumulate an amount sufficient to enter the stock market. At the same time, it is not necessary to wait all 12 months, because even with 1,000 dollars on hand, you can already buy a government loan bond.

It is false to believe that with 10-20 thousand dollars you will not be able to start investing. Take a look at Warren Buffett, who started out as an investor with $115 and only made $5 on his first trade. Today this man is included in the list of the richest people in the world.

Here are a few tips for a novice investor to follow:

Decide on an investment horizon. When it comes to bonds, there is a conditional division in the stock market into short-term securities and long-term ones. For example, OFZs are limited to a specific period of validity (3, 5, 7, and even 10 years). Stocks, in turn, are considered a perpetual assets. They exist as long as the company operates and remains public.
Choose an investment tool. Decide where to invest your money. The investor decides what securities he will acquire, whether he will invest in business development, whether he will entrust his savings to a mutual fund and a management company, or simply open a deposit in a bank.
Focus on risk and return. Fixed-interest securities (such as federal bonds) are considered less risky than stocks and bonds issued by businesses.

How to learn to invest: choosing instruments for investing

Beginners, entering the stock market with 100 dollars in their pocket, want to increase their capital by 2-3 times in a year. In fact, a high return on investment is only possible in the long run. If you do not have financial knowledge, take online investment courses for dummies or entrust your savings to a management company that will form an optimal investment portfolio for a fee.

Bank deposit

Perhaps one of the most secure investment tools, because in the event of bankruptcy of a financial institution, the state guarantees the payment of a deposit in the amount of up to 1.4 million dollars. The yield of the instrument is low - 3.5-6.5% per annum.

Beginners who open a deposit for a significant period should choose a tariff with capitalization. This means that accrued interest will join the body of the deposit, increasing the base for accruing income.

Company shares

Stocks are considered a risky investment tool since it is not known whether the corporation will be profitable.

Types of returns on shares:

dividends;

exchange rate difference from selling at a higher rate.

Unfortunately, the exchange rate and a dividend yield of such securities are subject to a 13% personal income tax. Do you want to avoid paying income tax? Then invest through an individual investment account. When keeping funds in such an account, the investor has the right to a tax deduction in the amount of up to 52 thousand dollars annually.

There are 2 types of accounts to choose from - "A" and "B". The first option is suitable for officially employed persons. If you do not plan to withdraw money from the account in the next 3 years, then you will annually receive the right to receive a deduction of 13% from the amount up to 400 thousand dollars. Type "B" provides for exemption from tax on income from the sale of securities. Suitable for those who actively make transactions with securities or have no official income.

Management Company

A novice investor does not need to learn financial literacy to manage free funds. It is enough to entrust the money to the management company (MC), which, on a paid basis, will select profitable investment instruments.

How do UCs work? You choose the management company you are interested in and conclude a trust management agreement with it. After depositing funds to a special account, the manager forms an investment portfolio that will correspond to the chosen strategy and your preferences.

At the same time, it should be noted that all securities are considered your property and are separated from the property of the manager, which allows you to avoid unpleasant situations.

Choosing a broker

Buying and selling securities will be through a brokerage or individual investment account. When choosing a broker, pay attention to the following parameters:

license;
accreditation on exchanges and popular trading platforms;
commission (the amount of a fixed fee or a percentage of the transaction);
the threshold for entering the stock market.

Many brokers provide clients with online trading services. All you need to do is select the stock market instrument you are interested in, fund your account and submit a request to buy/sell security.

Investment Strategies

A strategy is a set of behavioral reactions on the stock exchange when trading. Be sure to determine for yourself what assets you are going to trade and what indicator you will pay attention to when making decisions.

Most often, novice investors choose a waiting strategy. They buy securities at a discounted price or at par and then expect an appreciation or fixed income. The investment period, in this case, can reach 3-5 years.

Consider the following points:

asset type;
investment period;
maximum losses.

Beginner Tips

Try not to invest everything you have in stock market instruments. Start with a bank deposit or OFZ, creating a "safety cushion", and later start trading on the stock exchange.

Recommendations of financial market experts:

Set a loss limit and follow it when managing a portfolio;
diversify risks by investing in various securities of various issuers;
do not believe the tricks of dishonest management companies and venture funds that promise to increase profits by 200% within a year;
always stick to the chosen strategy, do not act impulsively, seeing that the stock price starts to fall;
open an IIS to receive tax preferences;
rebalance the portfolio (for example, if one asset rises in price, sell it, and use the money received to purchase a cheaper asset).

Thus, you can start investing even with a small amount, and to make a profit without serious risks, it is enough to choose conservative instruments, open an IIS, or entrust the management of your savings to a management company.