Why invest and is it right for me?
Let’s say you have a deposit in the bank, but you are not satisfied with the interest rates, they are too low, and you want to earn more. But you must understand: the higher the opportunity to earn, the higher the probability of losing all the money. If you are aware of the risks and have free funds, it may be worthwhile to master investing in securities that are traded on the exchange.
For example, a share is an equity security that indicates ownership. When you buy shares in a company, you buy a stake in it (even a very small one). You can receive income from the sale and purchase of shares or dividends – a part of the company’s profit based on the results of a certain period.
A bond is a debt security for which the issuer – the government or the company that issued it – undertakes to pay a certain percentage in the future.
The easiest way for a beginner is to buy securities, and after a certain time sell at a higher price – and so make money. The main thing to remember is that profit is not blind luck, as in a casino, but the result of well-thought-out actions. Not a game, but a job.
It is not worth investing your last money if you do not have savings and a deposit in the bank. If the bank goes bankrupt , the state will return the money to depositors. There is no such insurance on the stock exchange, you can lose everything. Moreover, the fall in the value of securities occurs much more often than bank bankruptcies.
I want to try. Where to begin?
The modern exchange is electronic, you can trade via the Internet without getting up from the couch. But this requires an intermediary – a company that has a license for stock trading. Before looking for it, it is worth identifying a few important things for yourself.
1.Estimate how much you are willing to invest
Theoretically, you can start with any amount, even from 10. But such a volume does not compensate for either the intermediary’s commission or the time spent on the trades. It is worth starting to invest if you are ready to risk several tens of thousands of rubles. It is better to imagine in advance a situation in which you will lose your money. If you realize this isn’t a disaster for your budget, you can give it a try.
Think how much time you are willing to spend
If you are ready to undergo training, immerse yourself in the topic, study statistics and stock reports in the morning, follow the charts during the day, you can try trading on your own. Then you need a broker to act as your intermediary for accessing the exchange. You will make your own buying and selling decisions, and the broker will carry out your orders.
If you do not intend to spend a lot of time and effort on investing, then it is better to consider one of the forms of trust management. In such a system, you make a minimum of decisions, entrusting the investment of your money to professionals.
You can conclude an individual agreement with a trustee, transfer money to him – and he will decide for you when and what assets to buy and when to sell. Its goal is to invest your savings with the maximum benefit at the level of risk that you choose.
Another option is to invest in mutual funds (mutual funds). These are ready-made sets of various securities or other assets. The funds of the mutual fund are disposed of (buys and sells assets, changes their composition) by the management company .
You can choose a suitable fund and buy its shares either from the management company itself, or through a broker on the stock exchange. If the company invests well, the share price will rise – and you will make a profit. If it falls, you will incur losses.
Choose your strategy and assets
Decide what you will invest in. Stick to a specific strategy.
What is strategy?
A strategy is a set of investment parameters that determine your style of behavior on the exchange: what assets you trade, how often you sell, what guides you when making decisions (for example, do you watch the news that affects the market).
The simplest version of the strategy – you choose:
• the period for which you want to invest;
• the maximum amount of losses.
Let’s say the assets are shares of pharmaceutical and chemical companies, the period is 1 year, the amount of losses is 20%. In this case, you immediately sell assets if they have fallen in price by 20%, even if the year has not passed yet.
If you have chosen trust management, then you also need to decide on a strategy. Only in this case you will choose from the offers that are already on the market, or discuss an individual strategy with your manager.
Once you have a strategy, it will be easier to find a middleman. The most important and paramount thing when choosing a broker, trustee or management company of a mutual fund is to make sure that they have a license.
If you have chosen to invest on your own, there is the following path to go:
1. conclude an agreement with a broker;
2. open and replenish a brokerage account;
3. install a special program for trading;
4. start buying and selling.
If you have chosen the path of trust management, then it will be enough to conclude an agreement and transfer the money to the trustee or the management company of the mutual fund.
Frequent mistakes: how not to do it
• You cannot invest everything that you have in securities
Set aside money for living and unforeseen expenses first. Create a “safety cushion”: open a bank deposit – and only then start stock trading. Invest an amount that you are willing to accept the loss of.
• Do not act at random – take the training
If you decide to trade on the exchange yourself, be sure to complete the training. Most brokers offer courses for beginner investors. Trading programs often have a demo mode: in it, you can try your hand at no risk of losing money.
• Don’t give in to emotions
Acting on impulse can make many mistakes. A novice investor should not react harshly to the slightest price movement on the stock exchange. But you must act decisively if the price changes significantly. Set the limit for the losses that you are willing to incur: for example, if assets have fallen in price by 20%, you need to sell and, as they say on the stock exchange, fix the losses. In other words, you are ready to accept the loss of 20% and complete the trades to avoid even larger losses. The desire to wait a little longer – suddenly “bounce off” – will be great, but you do not need to succumb to it.
• Don’t put all your eggs in one basket.
It is better to buy securities of companies from different industries. For example, when oil prices fall, the securities of all companies in the oil and gas sector suffer. If you purchase securities of companies from various sectors of the economy, for example, the chemical industry, mechanical engineering, telecommunications, this will help you reduce the risk of losing your invested money (or, as financiers say, diversify your risks).
• Do not trust promises to earn 500% per day
Only charlatans can guarantee anything in the stock market. A responsible broker should warn you of the risks. The situation on the stock exchange is changeable, and only you are responsible for the decisions made.