Many small savers often wonder what to do with their money to get more out of it. Given the lower attractiveness of deposits and pension plans, one of the most frequent questions is how to invest in the stock market.
Despite the fact that they are largely unknown to the majority of the population, financial investments are something as simple as a sale, that is, like going to the supermarket to buy something. The curiosity is that when investing in the stock market, what is bought and sold in that market are shares of private companies, like going to the supermarket to buy something. The curiosity is that when investing in the stock market, what is bought and sold in that market are shares of private companies. Once purchased, this consumer becomes a part owner of that company.
We are going to see how to start investing in the stock market if we are beginners and have no idea how to take our first steps.
How to invest in the stock market if you are a beginner: 7 simple and useful tips
1. First of all, you have to analyze the financial situation of the person who wants to invest and what money is available to buy. Some of the bases to take into account before taking the step are:
- What is your income?
- How much can you dedicate to that investment?
- How much money do you have saved?
- What debts do you have pending?
2. Once you have this information, you can start thinking about whether the bag is the best option or whether you want to opt for another type of product.
3. Another necessary requirement before starting to invest in the stock market is training. An error in the stock market can be very expensive since it can mean losing all the capital. For this reason, financial education is essential to knowing how to manage money and what the risk of each investment is.
Training methods Online classes exist. However, specialized financial media and industry leaders may inform and motivate you to better understand stock market investing.
4. Analyze how losses are dealt with on a psychological level: are you prepared? No? This has a lot to do with the risk profile. Find out what your risk profile is.
5. Define the investment style: conservative, medium, or risky. For example, buying and selling shares by trading or simply investing through a roboadvisor in a diversified way
6. Diversify investments to minimize risks.
7. Save and try to grow your income for greater financial stability.
In summary, the basis for investing in the stock market is to create a solid portfolio with long-term benefits that report the greatest possible benefits, while maintaining constant training and being aware of what you are doing with the money at the same time. every moment.
How to Buy Stock Shares
Let’s go to the next point to understand how to invest in the stock market: how can we buy the shares?
Unlike what happens in the supermarket, citizens cannot go directly to the stock market to buy shares. The acquisition of titles must be done through an authorized agent, which is popularly known as a broker.
There are several types of brokers, such as broker-dealers, broker-dealers, and credit institutions. In addition, traditionally, many Spanish investors went to their own bank to invest in the stock market.
Currently, it is already possible to do this operation on the internet. Naturally, it is convenient to confirm that the platform is under the National Securities Market Commission’s regulation and that it enables you to trade on various stock markets. Avoid financial stalls at all costs.
Likewise, it must be taken into account that these intermediary agents charge commissions to investors. Therefore, it is convenient to take into account the expense involved and compare different options.
What stocks to buy
Once you know the amount of money that can be invested and have a broker, it is time to choose which stock shares to buy. Before buying, you have to analyze the market, the risks, and the fluctuations. This implies taking into account many factors, including being trained and having time.
Finect offers the possibility of contacting a professional financial adviser to advise those looking to invest. To do this, all you have to do is fill out this form, and we will put you in contact with three advisors who will adapt to your profile and needs.
How to invest in the stock market with little money
To invest in the stock market, three concepts must be taken into account: how much money you want to invest, for how long, and what percentage of loss you are willing to assume. If you have little money to invest in the stock market, no problem: there are brokerage platforms that allow you to have free demo accounts and even real accounts for just €1.
Of course, the commissions are a fundamental point to take into account when investing in the stock market with little money.
- Document yourself and choose among the best brokers. Once you have identified them, you can bet on the one that charges the lowest commission to start, so you will save money and have a higher, clean return.
- Do not invest in shares just because you see that they have a low price; analyze whether this investment will report profitability in the medium and long term.
Beginner mistakes you can’t make when investing in the stock market
Of course, when you are a beginner in stock investing, it is normal for you to make a mistake. These are some of the most typical ones that we should avoid.
- Buy shares of companies that are “in fashion” or that any influencer has recommended without the criteria of a financial advisor behind them.
- Buy shares only for their high RPD (dividend yield).
- Sell it all when it starts to fall.
- Invest and operate based on emotions or rapid increases.
- Pay very high commissions.
- Think that a PER (price-earnings ratio) is always a good option to start investing.
Before we continue, we recommend that you do not miss this video: we analyze the opinions of experts such as Michael Burry, Jeffrey Gundlach, Jeremy Grantham, Leon Cooperman, Stanley Druckenmiller, Robert Kiyosaki, and Gary Shilling regarding the possible stock market crisis in 2022.
Diversify with mutual funds.
Another option to invest in the stock market is to opt for an investment fund. These funds are portfolios of securities from different companies created by professionals. This allows the investor not to have to worry about selecting the companies on which to bet. The great advantage of investment funds compared to the direct purchase of shares is that they allow diversification of the investment and, therefore, reduce the risk to which the investor is exposed. By including titles from different companies, if the price of one falls, perhaps there is another that can compensate.
Finect has created a showcase on its website that allows users to analyze, compare, and buy different investment funds. These are organized into different themes or profiles.
To start investing in the stock market, here are some investment funds with low risk or some index funds that may interest you.
Capital Group’s Global Corporate Bond Fund
This fund to start investing in the stock market of Capital Group aims to provide a high level of return with prudent risk management. It invests all over the world, but mainly in corporate bonds.
Among its main bets are the US electric companies Pacific Gas and Electric Company (2.8%) and Edison (2.3%) and the financial services company JP Morgan Chase (2.1%), according to the fund’s file.
“A good active management fund for percentages of moderate portfolios with a long-term time horizon where the fixed-income portion of global corporate debt can be introduced with a very good credit quality of the fund It has an exposure of more than 50% invested in American companies,” , “says Rubén Santn Pérez, financial advisor to Mapfre, an entity present in the Finect network.
Carmignac Portfolio Flexible Bond
Another choice is to place a bet on this global fixed income investment fund that the French manager Carmignac launched in 2007. Its objective is to beat its reference index —ICE BofA ML Euro Broad Market—over a three-year time horizon. 33% of its portfolio is invested in public debt, including 4.92% in Italian debt.
“This is a fund suitable for very conservative investors. Its average annualized return in the last 10 years is 2.53%, which makes it an interesting fund to include in conservative portfolios,” says financial advisor M. Carmen Muoz Gónzalez in a comment on Finect.
Despite the fact that its profitability has fallen by 1.12% so far this year, this fund has achieved an annualized gain of 5.39% in the last three years.
BlackRock Managed Index Portfolio: Defensive
Finally, a third low-risk option is this investment fund from BlackRock. Unlike the previous cases, this fund is mixed when investing in fixed income and variable income, as well as in other assets such as real estate or raw materials. Exposure to these asset classes is through investments in other funds.