To invest in the stock market, knowledge is needed. Without pretending to substitute a good formation on the subject, today we will see a basic guide of points for it.
- First of all, you should be clear about what your investment options are. That is, what alternatives do you have to grow your savings: real estate purchases, gold, savings accounts, other investment options of bonds or letters of the state, etc. Not all options are the same.
- The second point is to know what the bag is. The Stock Exchange is a market in which savers and companies that need funds to make their operational investments operate. In general, we distinguish between the primary market (in which shares, bonds, etc. are bought and sold directly). Then these bonds and shares can be bought and sold, not by the companies but by savers and investors, forming the secondary market.
- It is also very necessary to specify the amount that you will allocate to investment in the stock market. To control unnecessary risks, what you invest must be a quantity that you will not need in the short term. In general, investments in the stock market are safer if you lengthen them over time. In the long term there are usually returns and in the short term there is much more volatility, which may mean losing the amount invested.
- Once you have decided that your investment will be in the stock market, you must know what your strategy is. This is perhaps the most complex point of all, since to choose the strategy you must know many concepts. What is your investment objective?
- In which product do you want to invest? Are they shares of a Spanish multinational or is it an investment fund?
- Are you looking for a fixed rate or a variable rate yield?
- What is the level of risk you want to assume? We will see this point with more attention in the next section.
- Are you going to diversify the investment, that is, invest in several places?
- It is important to have control and know the risk that you are willing to assume. As we saw in a previous post, not all times are ideal to invest in the stock market. If the interest rate paid by financial institutions for your savings is low, then it may be a good time to invest in the stock market because there the yield will be higher. Although this argument seems easy, it really is not like that. You have to take into account the risk you want to take with the investment. On the stock exchange performance is variable, which means that you do not know what performance you are going to obtain. And we do not talk about whether we will get 3% or 12%, but that the performance can be negative, that is, that your investment can lose value. In addition, if an investment “promises” very high returns, its risk will be high and that can imply high losses. How to balance profitability, risk and opportunity cost of the investment (which would give us that money invested in another option) is something difficult that should not be improvised.
- In addition, you must understand that, to operate in the Stock Exchange, there are entry, purchase, sale, custody commissions, etc. Not to mention that, if you do not have experience, we recommend that you either train thoroughly, or do it through experts .
- The stock market is a market. There are many competitors, agents and brokers who are very well trained. You will be able to compete with them if you form thoroughly and are up to date in stock terms.
- Do not forget how the returns on investments in the Stock Exchange will be taxed. An investment can be more profitable than another, but at the same time, have a worse tax and that the bonus obtained was cancelled by the tax effect.
- Remember that it is not enough to choose the stock investment. You must follow the investment made, become informed of the results obtained by the company or the evolution of the investment fund. And you must do it systematically over time. With this information over time, you must be able to determine when to maintain the investment, when to sell it or when to expand it.
- Lastly, a very concentrated last recommendation: prepare yourself in this regard, use savings that you do not need in the short term, be clear about the term of investment, what risk you want to assimilate and always diversify your investment portfolio.