Stock Trading For Beginners
A share represents one share in the capital of a listed company. It entitles the holder (the shareholder) to an equal claim on the company’s profits. Furthermore, the issue of shares is a way of financing a company, in this case equity-based financing.
However, the investor is not possible in this from any form of liability beyond the investment value, which is why, in principle, shares are also interesting for beginners. There are two main types of shares, which are divided into common shares and preferred shares. Ordinary shares represent a normal entitlement to the profits of a company and the right to participate in the management of the company, while preferred shares offer an entitlement to additional participation rights.
Shares are a normal form of investment and have been around for over a century. In general, shares for beginners probably represent primarily a bet on short-term price gains. However, shares are in fact a long-term investment, which represent profits of a company in the future. Often, the company even distributes part of the profits in the form of dividends to save investors any order fees. Generally, the management of a company is primarily beholden to the investors who fund the company. Like real estate, the share represents a possibility of a fixed financial investment, behind which a fixed value is hidden. Thus shares should be so interesting for investors also above all because they offer a certain inflation protection, because the value of the share is independent of the value of the superordinate currency.
Furthermore, the yield of a share is much higher than that of fixed-interest investments. While in the entire 20th century companies increased in value on average more than a hundredfold in real terms, fixed-income government bonds only gained about 15 percent in real terms within those 100 years.
The dangers of stocks for beginners
In general, however, it must be said that stocks naturally offer a higher return than fixed-income investments, but also a much higher risk. Despite all the euphoria, you must not think that you can make a lot of money in the first few months. This can seem scary at first with stocks for beginners. This is because the high deviation of stocks can lead to an investor’s stock being down 50 percent at times, especially in turbulent times.
- Thus, there have always been times in the history of the stock world when some shares have halved in value within a few days.
- Nevertheless, shares retain an existing value in the long term, which will also rise again when the economy improves.
- In the midst of the 2007/2008 crisis, for example, share values fell by around 50 percent in just a few days, only to rise to an all-time high in the current course of events.
- The DAX is currently at 9200 and an end to this rally is not foreseeable. All in all, shares are a worthwhile investment for beginners, but they should inform themselves thoroughly beforehand.
Buying shares nowadays is easier than ever. It is not necessarily an advisor on the part of a bank necessary to participate in the stock market. Nevertheless, there are some tips and tricks to take to heart, because who buys shares online is more or less on his own.
1. As a beginner on the stock market read analyst opinions
Before investing money, professionals should be consulted. There are a lot of analyst opinions, which differ among themselves. Nevertheless, the different opinions often reflect a tendency for or against the purchase of a particular stock. So even if the price targets of the individual analysts differ, investors get a good impression of the overall valuation of the respective stock.
2. Beginners should also already evaluate charts
Every stock has a chart that reveals the stock’s performance over the past days, weeks, months and years. Knowing the price of a stock a few years ago may not be too relevant for the current purchase decision, but the trend of a stock can be read very well from it. If a chart has been in a sideways movement for years, it is likely that this will continue for a while.
3. Follow company news
It is also important to stay informed about the company. Simply buying shares based on share prices and analyst opinions is the wrong way to go. What plans the company has in the coming months and years, what orders are beckoning, or what is threatening to break away – all of this is important for a healthy assessment of the stock.
4. Know differences in order options
Anyone who buys shares online should know what the individual order options mean. Cheapest, limit, ultimatum, ultimatum +1, etc. should not be foreign terms. With every order you have to choose how the stock should be bought. These terms play a central role.
5. Diversify portfolio even as a beginner
Putting everything on one horse backfires in most cases. Thus, one’s own stock portfolio must contain a variety of different stocks. In this way, losses can be minimized.
6. Compare deposit fees
There are various providers of stock portfolios on the market. These all have different fees. It is worthwhile to compare them, because as a rule, fees are also incurred per share order. Depending on which stock exchange is purchased, additional fees are incurred. These values differ sometimes seriously from provider to provider.
7. Know special conditions of the providers for beginners
- Some depository providers offer certain special conditions.
- These can be that the purchase is free of charge at certain stock exchanges or that certain shares can be bought cheaper than others in terms of fees.
- Some custody account providers waive selling fees from a certain number of transactions, etc.
8. Think outside the box
It doesn’t always have to be the familiar stocks or big names. A look beyond the horizon reveals that there are countless very interesting shares worldwide. It is also worthwhile to look at these. Thus, even small or seemingly unknown companies can bring immense potential with them.
9. Think long term even as a beginner in stock trading
It is not worth thinking too short-term, because shares sometimes only develop the returns that investors dream of after years. Of course, this can also be the other way around, but anyone who is only interested in short-term profit-taking will not have fun and enjoy stock trading for long. Especially those who act on their own and do not take advantage of professional advice tend to sell too quickly.
10. Do not shift too much
Containing losses by selling stocks immediately when their price crashes is also not advisable. If you think you can do this and then invest in the next stock, you can quickly lose a lot of money. It is therefore worthwhile to build up your portfolio consciously and not to sell too early. Also, in the rarest cases it is worthwhile to buy loss-making shares in order to polish up the purchase price.
11. Compare dividends
In addition to the respective share price, the dividends that a company pays out are also important. These can significantly increase the yield of a share. A look at the past years at least gives a tendency regarding the dividend. Of course, it is not said that a company will continue to pay out these bonuses in the future, but if a stock is in question, then looking at past dividends is quite interesting.
12. Define investment goal for beginners
Just investing in the blue is not much fun. It is advisable to define a personal goal. This way, one’s own investment work also makes deeper sense. At the same time it is also a psychological aspect, because who is only on profit maximization, acts possibly in the wrong direction. If you have a clear goal in mind, you will invest more consciously.
Test a sample portfolio
- It is not necessary to invest real money.
- A sample portfolio allows you to test shares.
- In such a depot you can define how much money should be invested in which share.
- Of course, it makes sense to align this as realistically as possible with your own available funds.
- Who has only 5,000 € real money available should also operate a sample depot with this value.
- This allows you to check and readjust your own investment strategy.
Stock Trading Tips For Beginners
Monitor prices daily
Even if long-term thinking brings the most success, prices should be checked daily. This usually results from reading analysts’ opinions and news about the respective company. In the long run falling prices and permanently constant negative analyst opinions could encourage to sell a share to minimize losses.
Before even taking the step to the stock market, it is absolutely necessary to be clear about your own financial resources. It should be invested absolutely only money, around which it is also not too pity, if it is completely lost.
Do not invest outside capital
Who takes up credits or restricts itself in its life, only in order to chase at the stock exchange the financial luck, becomes fast unhappy. Those who invest money that they have left over and do not need, act much more relaxed.
Patience is important
As a rule, nothing works on the stock exchange overnight anyway. Who decides to invest and invest in shares, must be clear that the stock exchanges of this world require a long-term thinking and planning. Now and then it happens that one of many people once lands a big lucky strike, but the rule is not.
The euro and refugee crises continue to weigh on the old continent, and key interest rates remain at record lows. Reason enough, therefore, to take a look at other investment opportunities and leave the savings account aside for the time being. In addition to gold and silver as well as the classic fund at the savings bank, it is increasingly shares that appeal to citizens, because these promise some advantages.
On the one hand, there are the dividends, which in most cases significantly exceed the interest level, then the chance of a timely increase in value and, last but not least, the fact of participating in the future success of a company and being able to vote at the annual general meeting. In addition, shares are now easy to buy online, which saves the long and cumbersome trip to the bank and makes it possible to react to current developments at any time.
Invest regionally
The majority of all share owners worldwide prefer to invest in shares from their own country. Over the past years, securities have been among the most stable in value and those with the highest dividends. Also, by buying shares, the regional economy is strengthened and ultimately everyone benefits knowledge of what the company makes.
Buying shares is easier than ever before thanks to the Internet and the temptation is great to invest in a wide variety of companies. However, one thing should not happen in any case: That the shareholder has too little information about the company in which invests. Before buying a share, the company and its products should either be well known or extensive research should be carried out beforehand.
- Even if it seems so simple at first glance, earning money with shares is not child’s play.
- Rather, only money that is left over at the end of the month and is not needed for other things should be invested.
- A regular income is therefore the basis, stock transactions are the freestyle.
The purchase of shares in the network is carried out in most cases by a bank. The number of providers is anything but small, but not all banks offer the same services or similarly good conditions. Anyone who opens an online securities account should seek advice or ask friends which bank is best for managing the securities account.
- Yes, with Start up enterprises can be made under circumstances much money at the stock exchange.
- And yes, the higher the sum, the higher the profit.
- But at the same time, the risk with this type of company is also incomparably higher and total failure is also a possibility.
- It is better to invest in already established companies that are expected to succeed in the future.
A broad diversification for security
If you want to further minimize your risk on the stock markets, you should invest in shares of different companies, which should also do business in different sectors. Any price falls can thus be cushioned and dependence on individual companies significantly reduced.
If you want to invest in stocks, you should take a look at the stock markets at least every 2 days and also get an insight into the stock market environment from time to time. A normal daily newspaper is sufficient for this. It should be noted that political instability can also lead to a crash of the stock market and it is therefore also important to at least roughly skim the political news.
A stable internet connection for stock trading
Online stock trading offers a number of important advantages over buying at the bank. However, it is also associated with certain risks. In addition to the rather small danger from hackers, it is especially the speed of the Internet connection that plays an important role. If the home wifi is intermittent, the purchase or sale of a share is delayed and this can result in the desired price has already changed. A stable Internet connection is therefore indispensable.
Not only in terms of the quality of the Internet site of the providers, there are huge differences, even the fees per trade vary in part considerably. In any case, it is worthwhile to check the individual banks with regard to the fee per trade and to decide on the best offer.
Anticyclical stock trading
A classic tip for trading stocks online is to do what no one else is doing at the moment. So if the markets are in a celebratory mood, it is important to take profits, but if the stock markets are suffering from a hangover, then the purchase of shares is the order of the day.
Who enters an order in the network, which can enter in most cases a limit, which represents the absolute maximum for the purchase of the share. This entry should be made in any case, because in the time between order entry and actual purchase, the price can change and the purchase may be to the buyer’s disadvantage.
Anyone investing in shares should always see this as a long-term investment. This offers some advantages to the buyer. For another, there would be the annual dividends that most companies pay out and the possibility of the stock increasing in value within that longer time.
Focus on producing companies
Especially shares of banks are often exposed to large fluctuations, but can also rise sharply in value from time to time. Nevertheless, producing companies are preferable to service providers, because here the potential buyer can get a much better picture of the current situation of the company and, moreover, test its products for their innovativeness himself. On the other hand, gaining an insight into all business areas of a bank is much more time-consuming.
Get tips from Warren Buffett
Admittedly, this tip sounds a bit unrealistic. Hardly any of us will ever have the opportunity to talk to Warren Buffett in person. But that doesn’t have to be the case, because the most successful shareholder of all time gave and still gives public tips from time to time for all those who want to be successful on the stock market.
Strength lies in calm
What seems very simple at first glance, only very few of the stock market participants succeed in doing. In fact, however, it is of immense importance to remain calm in the event of a slide in the share price and, ideally, to buy additional shares in the company at a lower price.
