what are stocks?
Stocks For Beginners. Shares are shares in stock corporations that can be purchased with money. The shareholder, or investor, thus becomes a co-owner of the company or the company’s assets. The income that investors get from stocks is called “return”.
Who is offering stocks?
Companies go public in order to offer shares and thus shares in their company. One of the goals of an IPO is to inject new capital into the company by issuing shares. The additional income can strengthen equity and finance growth. The stock exchange is the trading place where securities are traded at certain prices. The value of a share is constantly re-determined in the course of a trading day by the interaction of supply and demand.
How and where can I buy shares?
You can purchase your shares independently via a custodian bank, for example comdirect, or have your custody account managed. You need a deposit to own shares. This securities account serves as a kind of warehouse for your securities. By the way: Buying and selling shares is also called “ordering”.
What are the costs of trading stocks?
Always up-to-date: Buy stocks – how is the market currently doing? How do investors behave?
The fees for buying or selling shares are usually made up of an order fee or a commission from the bank as well as exchange fees. The costs of buying shares can vary depending on the bank.
TIP FOR BEGINNERS: When buying international stocks, be aware that stocks denominated in a foreign currency may lose value due to changes in exchange rates.
As a shareholder, you have the right to attend the annual general meeting in addition to other rights. Participation in this event includes the right to vote in decisions at the general meeting as well as the right to information on legal and business transactions. You also have the right to a dividend payment, which, however, can be suspended by the stock corporation if the course of business is not successful.
14 TIPS: THIS IS WHAT BEGINNERS SHOULD KEEP IN MIND WITH STOCKS
Many newcomers are entering completely new territory by buying shares. To give you some guidance, we’ve summarized 14 tips on stocks for beginners:
Stock tip # 1: self-assessment
As a beginner in stock trading, you ought to first consider how much you are willing to invest and what maximum risk you would like to take.
Stock tip # 2: short term vs. long term
Check whether you can do without your investment in the long term – i.e. a few years – or whether you want to achieve short-term profits. Based on this, choose your strategy for buying stocks.
Share tip # 3: Flexible investments
Check whether you are looking for a more flexible investment, where you can buy and sell and, if necessary, payouts are possible.
Stock tip # 4: Always up to date
Before you order shares, you should inform yourself in detail about the company in question and the current prices on the stock exchange. Even if you are a beginner: start your own stock research. Do some research on the public companies that interest you.
Stock tip # 5: consider funds
Think about whether you want to invest everything in one area and consider alternatives such as funds. With funds, you invest in several values such as stocks, commodities or bonds. These are managed by a fund manager and adapted to the market situation. Funds offer you the opportunity to minimize your investment risk due to the diversification of your capital. A loss in value cannot be completely ruled out.
Stock tip # 6: Knowing about stocks and indices
On the stock exchange, stocks are combined into so-called indices, which provide a better overview of the overall market. An index shows the development within a certain market area.
Companies whose shares are listed in one of these four indices have to meet special requirements known as the “Prime Standard”. However, this award should not be understood as an unreserved buy recommendation for a share. The price development as well as the general situation on the stock market should always be taken into account when analyzing stocks – and not to forget the numbers.
Stock tip # 7: It’s the numbers that count
In order to make possible buy recommendations and share recommendations, financial experts differentiate between 2 different approaches when evaluating shares:
With fundamental analysis, you as the investor determine information about the company, for example about its management or industry environment as well as key figures such as B. the price-earnings ratio of a share (P / E). In addition, a comparison with past key figures and the key figures of competitors provides information about the potential of the share.
In contrast, the second stock analysis, the so-called technical analysis, is based on the assumption that the previous course of the stock price offers the best inferences about the future price development. For this purpose, the price charts are examined for resistance and support lines, for example.
Stock tip # 8: Intelligent helpers make stock trading child’s play
When it comes to finding suitable stocks, comdirect especially supports beginners with easy-to-use analysis tools. They also provide valid judgments and predictions for beginners. With the help of a portfolio analysis, you can find out where the strengths and weaknesses of your investment strategy lie. As a stock owner, with the right tools and stock tips, and taking the risks into account, you increase your chances of good returns.
Share tip # 9: Portfolio management is the be-all and end-all
Probably the most important rule when investing money is: Spread your investments and thus the risk. You should keep an eye on your entire financial situation. Many beginners make the mistake of investing all their money on a single security when buying stocks. However, this equity strategy is very risky. One of the best tips about stocks for beginners is therefore to build a portfolio over time that contains as many different stocks as possible. However, you should also make sure not to collect too many securities in your securities account so that you do not lose track.
Stock tip # 10: let profits run, limit losses
Some savers tend to just ditch their stocks after buying them. However, there is a smart alternative to this investment strategy: you have the option to reduce the risk of loss. For example with a stop-loss order. The stop-loss order is converted into an unlimited order, which is only executed at the next possible price. However, this can also be lower than the limit set – so there is still a certain risk of loss.
Stock tip # 11: reinvest profits
Reinvest profits, i.e. the money that ends up in your account through the distribution of dividends, in new securities. In this way, your wealth can grow in a similar way as it used to be the case with compound interest on a savings account – but with securities you also have to be aware of the risk of loss.
Stock Tip # 12: Establish a Stock Savings Plan
With a savings plan, you can invest a fixed amount in selected top investment products monthly, bi-monthly or quarterly. Practical: With a share savings plan, you retain full financial flexibility. Because the amount and interval of the savings rate can be changed or completely set at any time without additional costs. So you can buy stocks as time and financially as possible.
Stock tip # 13: Trust numbers, analyzes and yourself when investing your money
…not on rumors, dubious promises, trends or “insider tips”. It is better to use comdirect’s tools and expert assessments. Also, relying on your own knowledge can be useful when selecting and trading stocks – even if you are a novice stock trader.
For example, someone who is involved in automobiles will find it easier to assess companies in the automotive industry.
Tip # 14: Get expert help when needed
Beginners in particular are often unsure or have further questions about custody accounts or share trading. Feel free to contact our community with your questions.
WHAT ARE THE BENEFITS AND RISKS OF BUYING STOCKS AS A BEGINNER?
Securities can pay off twice for investors. On the one hand, dividends, i.e. income, can be distributed. On the other hand, you can participate in the positive economic development of a company through price increases.
BUT BE CAREFUL: shares are risk paper, which means that the price of your securities on the stock exchange can also be negative. So there may be a decline in the value of your stocks or the dividend may be suspended. Here are some possible reasons:
Stock buying for beginners – Risks in buying stocks
The bankruptcy risk refers to the entrepreneurial risk that is based on the fact that a stock corporation can develop differently: positive and negative. As an investor and therefore a co-owner, you share both opportunities and risks. The risk of price changes exists because share prices can be subject to unexpected fluctuations. The values rise and fall in periods that cannot be planned in the short, medium or long term. While business success naturally contributes to course development in the long term, other influences such as the overall economy, politics or events such as strikes and international disputes can occur. The dividend risk includes the risk that a dividend will be lower or even complete, as a company can develop unexpectedly negative.
The psychology of market participants also plays an important role when it comes to the risk of buying stocks. Investors assess stocks individually, which can happen according to rational and irrational criteria. This investor behavior accordingly influences the stock market and prices. At the risk of the rate forecast is a risk that analysis and the assessment of performance hides prove to be incorrect. For shareholders, therefore, the question of the right timing regularly arises, i.e. when is the best entry and when is the optimal exit from a stock investment.
Your shares are subject to the risk of losing or changing your rights. Reasons for this can be, for example, a change in legal form, mergers or divisions.
TIP: Before buying a share, take a look not only at the company figures, but also at the environment, history and potential risk factors.