How to invest in stock

Investing in the stock market may be a good idea if you have money saved and want to make a profit. You need to know this about the stock market and the steps you need to take before making your first investment. How to invest in the stock

On many occasions, the cinema has shown us the stories of Wall Street stockbrokers who become millionaires. Although we have all dreamed of it at some point, it is a complicated utopia, but you can profit from those savings sitting at the bottom of the checking account.

To do it well, asking yourself a few questions first is important.

  • How does the bag work?
  • Investing requires how much money?
  • How can I avoid running out of money?

We will give you the keys.

What is the stock market?

By definition, the stock market is the economic institution where public transactions for purchasing and selling securities are carried out. Closer to home, “it is the place where companies break up, and people can buy a minority part of them and participate in their profit and growth,” explains the expert in economics and author of the book Investment in Times of Low-Interest Rates, Alexander Grandson.

The bag’s roots are Belgian. It owes its name to the Van der Burse family, from Bruges (Belgium), owner of a building where very important business meetings and economic transactions were held in the 13th century. The coat of arms of this banking family was none other than three bag-shaped leather purses.

The economic activity that took place in the Flemish city began to be called “bourse,” and the word spread over the years to other cities until in 1602, the first official stock exchange was formed in Amsterdam (Holland).

Why do companies go public?

Companies have two main reasons for going public: to raise capital to fuel their growth and to generate liquidity for their private shareholders. Being listed on a stock exchange generates additional benefits, such as gaining prestige and credibility.

First, learn about shares, their stock market values, and how companies split their capital. The theoretical value of each of them is the result of dividing the social heritage among all the shares issued.

Among the players who participate in the stock market, there are also two key terms that you must differentiate:

  • Trader: The operator, or negotiator, “is the person who is dedicated to buying and selling shares through the platform provided by the broker,” explains the trader and trainer of the José Antonio Piero Stock Market Consulting and Institute.
  • Broker: It is the financial intermediary, which can be a stockbroker, a bank like Banco Santander, or an investment company. “It is a platform that gives the option to buy and sell the shares of companies; that is, they are the ones who have a license to operate within the stock market,” explains Piero.

I want to invest; when is a good time?

According to experts, it is always. Juan Haro, The Investment School’s co-founder and executive director, says, “Any citizen, whether a civil servant, greengrocer, or journalist, must be made aware that to improve their lifestyle, they must have an investment mentality, that is, allocate a part of their savings to investments.”

How much money does it take to start?

In figures, it depends on the market we want to invest in. “In the futures market, it is normal to start with about 5,000 or 10,000 USD; in the cryptocurrency space, you can do it with 5 USD “, indicates Haro. Of course, “in the stock market, I would never invest money that I may need before five years; it is a long-term investment,” Nieto explains. How to invest in the stock

How are the benefits obtained?

Once that minority piece of a company has been acquired, there are two ways to make money:

  • Distribution of dividends Some companies distribute their profits, if any, to shareholders in proportion to their participation.
  • The greater value of participation. The company can increase its value on the stock market so that more people want to buy those shares, which are now more expensive, and the benefits of selling them are greater.

Nieto compares the real estate market: “If you have a home and you rent it, you get a monthly rent; if the area of the property rises in price and you sell it, you earn a profit compared to when you bought it.”

These benefits must be declared to the Treasury as savings income, with progressive tax rates of 19%, 21%, and 23%.

Where do I start if I want to invest?

  • Immerse yourself in the stock market environment. Soak up as much of the stock market culture as you can. “Talk to the operating people, have a coffee with investors, put brokers’ videos on YouTube, take a free course,” Haro lists.
  • Memorize the “investor market triangle.” For Haro, three essential legs must always be kept in mind.
    • Money management.    Studying the profitability and risk, we can assume very well to avoid losing all our money.
    • Strategic system. It is the one that marks you when you enter and exits the market. A profit and loss ratio of 3:2 (triple the value and loss double) is used to avoid bankruptcy.
    • Mental health. “People think they are prepared, but the stock market is designed such that they lose their money,” says Haro. No matter what happens, don’t go mad.
  • Start with a simulated account. “Open a simulated account with any broker, start browsing, making operations, and exploring all the available markets as if it were a video game”, says Haro. When you start to get results, you can start trading with a small real account.
  • Find yourself a mentor. If you want to really specialize, “you should look for a professional who carries out the strategies and systems you want to learn to mentor you in the process,” says trader José Antonio Piero.
  • Ask yourself if you really like it. “Some people approach the stock market like a bookmaker, thinking only of making money. If you don’t like it, you won’t last through bad streaks,” says Haro.

How and where should I invest?

The key is diversification in both sectors and geographical areas. “You have to diversify and not bet everything on a company, no matter how solid it may seem,” says economics expert Alejandro Nieto. Nor do you have to stay within the stock market borders of your country; you can invest in any stock from anywhere. “That is the magic of financial markets. With technology, everything is accessible”, says Haro.

The New York Stock Exchange, NASDAQ, Tokyo Stock Exchange, London Stock Exchange, Hong Kong Stock Exchange, Shanghai Stock Exchange, Toronto Stock Exchange, Deutsche Börse, Australian Securities Exchange, and Bombay Stock Exchange are the top ten stock markets in the world, according to the University of Stock Exchange (India).

Tips and strategies to invest without going broke

Getting benefits from our capital, earning money we can use whenever we want, saving for the future, and learning from the stock market’s changing environment are apparent benefits of investing in the stock market.
We could lose our money owing to inexperience or market unpredictability. To avoid this situation, the following strategies must be taken into account: how to invest in stock.

  • Know when to stop. “Piero advises traders to set a loss limit and never exceed it. For example, “you should not exceed 1% or 2% of your capital when doing operations,” establishes Haro.
  • Swim against the current. “You have to buy when everyone is selling and sell when everyone is buying. When you have achieved your profitability objective, even if the shares continue to rise, you leave,” says Haro.
  • Passive investment. Expertise takes time and is difficult. If we don’t have it, a corporation can trade stocks for us. .
  • Lots and lots of patience If your stocks drop a lot in value, don’t panic and sell in a hurry. Hold on, everything that goes down has to go up, at least on the stock market.

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