Top 6 Ways to Invest in the Stock Market

Find out what investment instruments are on the market and how they work in practice

Suppose you have savings, and you want to put them to good use - in order not only to cover but also to overtake inflation creeping up. In this case, you are probably worried about two questions: what to invest money in and how to do it right. In this article, we will talk about the main investment instruments - how they work, who suits them, and what you need to consider before buying.

1. Stock

Investing in stocks is one of the most profitable but at the same time risky ways to invest money. A share is a security that certifies the right of its owner to a share in the company. Simply put, along with the share, you buy part of the business. If it turns out to be successful, you can earn, and if it goes bankrupt, you risk losing everything.

There are two ways to make money on stocks:

Through dividends. When you buy shares, you are entitled to dividends on them for as long as you own the paper. But the company may not share profits with investors if it needs money to upgrade equipment, develop a new project, pay debts, or for other purposes. For example, in 2018, the M.Video company refused to pay dividends in order to buy the competitor network MediaMarkt with this money.

By trading on the stock exchange. The value of shares is constantly changing, and you can make money on it. For example, buy securities of a promising company, wait for their growth and sell at a higher price. The difference between the buying and selling price is the income. But in this scenario, not everything is so simple: firstly, the market is unpredictable, and it is almost impossible to guess the movement of shares, and secondly, in order to choose really promising security, you need to follow the market, study analytics and take into account many parameters.

You can reduce risks by diversifying: buy shares of not one, but several companies at once from different industries and countries. If one security falls, the growth of the rest can compensate for the losses.

2. Bonds

When people need money to borrow, they usually go to the bank for a loan. And when companies or the government need money, they issue bonds. These are debt securities that oblige the debtor to repay the debt with interest on time. That is, when you buy a bond, you lend to the company on the condition that it will return the money and pay extra for using it.

Federal loan bonds (OFZ) are considered the most reliable. These are securities issued by the Ministry of Finance. By buying them, you are actually lending money to the government and earning a flat-rate income. At the same time, the state acts as a guarantor of the return of your investments.

When choosing bonds, you should pay attention to the following parameters:

The issuer is the one who issued the bond. It could be a company or a government.
Face value - the value of the bond, set at its issuance. Usually, it is 1000 dollars.
Maturity is the date on which the bond will cease to exist and the issuer will return its face value to the holders.
Coupon - the reward that the owner of the bond receives. Typically, the coupon is paid every six months or quarterly, and its size is known in advance.

3. Mutual fund

If there is no time to understand individual securities and study the situation on the market, you can invest in several instruments at once with the help of a mutual investment fund. By investing in a mutual fund, you become the owner of a ready-made portfolio of many assets. It may include stocks, bonds, currencies, ETFs, and other financial market instruments.

Collecting such a portfolio on your own would be difficult and costly. And in the case of a mutual fund, all work on creating a portfolio and managing assets is undertaken by the management company, and the minimum amount of investment in the fund does not exceed 300 dollars.

To become the owner of an investment unit of a mutual fund is enough to buy unit-registered security confirming the right to a share in the fund. Your income will depend on the change in the value of the shares.

4. Trust management

If you do not have time to invest on your own, you can use the trust management service. To do this, you need to contact the management company and choose the appropriate investment strategy based on the goals and attitude to risk. The rest will be done by a professional manager - he will monitor the markets, study analytics, look for promising investment ideas, manage assets and regularly report on the results.

The results of trust management largely depend on the chosen strategy and the competence of the manager, but it is important to remember that the profitability of remote control is not guaranteed.

5. Currency

Keeping all your savings in rubles is not the best idea, especially in conditions of economic instability. The exchange rate of the national currency depends on many factors: oil prices, the geopolitical situation, the situation on global markets, and it is impossible to predict where it will move tomorrow. But you can protect yourself from the fall of the ruble by including foreign currency assets in your investment portfolio.

For example, you can buy foreign currency at a bank or on the stock exchange, open a foreign currency deposit, invest in a foreign exchange mutual fund, a structural product, or shares of foreign companies. The choice depends on the attitude to risk and financial goals.

6. What to remember

When choosing among a variety of investment instruments, always remember your own goals and possible risks. If you want to have a guarantee of savings, pay attention to OFZ or bonds of reliable companies. And if you are ready to take risks for the sake of increased profitability, take a closer look at stocks and mutual funds. If you do not have the time and desire to understand investment instruments, you can use the trust management service.