Nowadays, the world offers us many alternative opportunities for growing wealth. More and more often, people decide to buy shares, invest in funds or deposit their assets in other forms that allow them to increase profits. If you want to start investing, you need to learn the basic rules of investments.
Basic question: what are shares?
Shares are securities of a joint stock company, that is vested interests in the capital of a company listed on a stock exchange. Depending on their nature, shares are classified as privileged, that is dividend-bearing shares that allow their holders to make decisions concerning the company during general meetings of shareholders, and ordinary shares, with no additional rights or privileges attached to them.
Next: how to buy shares?
If you want to learn how to invest in shares, it is good to know how to buy them. Buying shares at a stock exchange is really easy. It is done online, with an investment account referred to as a brokerage account. After opening the account, the investor transfers a certain amount of money, creating a purchase order for shares of a given company. In the purchase order, the investor specifies the number of shares they want to buy and the price they are ready to pay.
What is a direct purchase of shares?
A direct purchase of shares is, in fact, buying shares via a brokerage account. You can do it very easily, by opening an online account. This method allows you to respond quickly to shifts in share prices and rates. If you hold your own brokerage account, the investor is able to carry out several transactions a day, basing on the fluctuations in the prices and rates. However, this method requires a great amount of attention, dedication, time and self-discipline. Investors can only rely on themselves.
And what is an indirect purchase of shares?
Another method is an indirect purchase of shares, that investing in shares via funds. When choosing this method, the investor does not have to follow market changes every day, because the investments are analysed by teams of professionals who manage the assets and observe market events on a regular basis. This is an option for people who plan to invest money that they have kept so far in bank deposits but do not have time to learn in detail about the rules governing the financial market. It is also chosen by investors with limited assets. However, the investor must bear in mind that buying shares indirectly involves a risk of losses as well as extra fees and commissions for managing funds.
Main information on how to invest in shares. Information for amateurs.
The method of investing depends on the temperament, skills and abilities of the stock exchange investor. Investors may opt for short-term investments, which means buying shares on occasion and selling them on a regular basis. Before purchase, the shares are usually analysed on the basis of communications with the company that issued them and the economic situation. We may also invest long-term and choose low-cost shares of companies that are likely to grow over the next few years. It is also possible to buy and sell shares in one stock exchange session.
When investing, certain rules are worth following from the start to avoid mistakes:
- Choose shares of companies with good liquidity so that you can sell and buy them at any time;
- Set up stop-loss orders – that is define the level up to which you can accept losses when buying shares;
- Refrain from investing when share prices reach record peaks that are often followed by declines in their value;
- Take into account permanent positive or negative trends when investing on the stock market;
- Buy shares during periods that follow rapid declines in their prices.
Cold calculation, controlling emotions, trusting only in facts and numbers should be the defining features of the investor’s behaviour. When deciding to buy shares directly, it is important to you read quarterly reports of the relevant companies that offer an analysis of gains from sales as well as margins and profits. An analysis of macroeconomic data is also vital because it allows you to make forecasts concerning further performance of the companies and behaviour of other investors.
When opting for a direct purchase of shares, you need to first analyse your personal preferences. What also needs to be investigated is the type of assets in which the fund invests, level of profits it reaches, costs of the service, presence of additional fees, and actual chances for successful investment of savings. Experienced traders and people who run the investment portal know the rules of investing. However, not everyone has this kind of knowledge, so if you want to start investing on the stock market, you need to know some basic rules of its operation.