There have been several stories and movies of people who have had a great time investing in Wall Street. It’s possible that you might have thought about doing it and dreamt of becoming a millionaire. This is of course something fantastical, but if you want to take advantage of some money that you might have saved, this is an excellent option.
But before jumping in, there are some things you need to consider. The first one is: what on earth is the “stock market”? If you want to invest in it, how much would you need to invest? And how can you avoid going broke while operating in it?
We will give you some answers here, so keep reading.
Understanding the stock market
Looking for a clear way to explain the stock market, we could say that it is a financial institution where stocks can be bought and sold. To put it in simple words, here companies break into small parts and regular people can invest or buy these pieces and be part of their growth and benefits.
The Stock market origins can be traced back some hundred years ago to Belgium. The Van der Buërse family, where the name comes from, was a Belgium family that owned the building where some transactions were done in the 18th century. The emblem of the family had three purses or bags; the name then carried over from here.
What are the reasons why a company goes public?
Companies have different reasons for going public. The first one is to increase capital to grow more and provide private shareholders with more liquidity. Also, there are other benefits to this, for example, companies are more prestigious when they do this and they also gain more credibility.
What you need to know
Stock Market terminology can be pretty complex and you could easily get carried away with the details. First, you need to know what are stocks. These are the “small parts” that investors can buy or sell and they consist of the smaller pieces of the capital of a company or enterprise after it is divided. The value of every stock comes from dividing the patrimony of the company between the number of shares emitted.
There are two main players that are involved in the normal operation of the stock market.
- Trader: The trader is the person who looks to buy or sell shares through the platform of operation, according to their analysis.
- Broker: this is the financial operator, which may be a bank, a stockbroker, or an investment company.
When is the best time to invest?
According to experts, the best time to invest is always!. Everybody can take advantage of the possibilities that the stock market can offer. If you have some saved money that you would like to put into work, the stock market is one of the best choices for this. It obviously has its risks, but with risks come great rewards. If you prepare properly and learn everything you need to know about it, you could make money from it safely.
How much money do you need to start?
Speaking about numbers, the amount of money needed to enter and invest will solely depend on the type of market you wish to get into. You will need around 5.000 to 10,000 euros to get into the futures market; in the cryptocurrency market, you can start with as little as 5 euros, so this could be a good choice for those who want to invest lower amounts of money. The main thing to know here is that you should never invest money that you might need to use right away. Invest money that you won´t need to invest in the next 5 years because the stock market is a long-term investment.
How are profits made?
Once you have some stocks from a company, usually there are two different ways in which you can make money from your investment. The first one would be dividend distribution; this is really simple. Companies will divide the profits among their shareholders, each one receiving an amount depending on the percentage of the company they currently hold. The other way where you can make money Is when the shares value increases. If the company increases its value within the stock market, people will be interested in buying them and current holders can sell them at a higher price.
How can I start investing?
The first thing you need to do is get immersed in the stock market, learn as much as you can, soak in all the information, learn about the culture of the trader, speak to experienced traders, view tutorials on YouTube, or take paid courses if it’s something you can do.
Memorise the “investment market triangle:” these are three things you need to have present at all times. The first one is Money Management, you are the only one to blame, so be responsible when it comes to your inversions and make informed decisions to avoid losing money. Next, you need to have a strategic system in place. You will use this strategy to know when you have to enter and when you have to leave in order to have profits. Last but not least, is emotional management. This can be really hard because people need to leave the emotions outside and learn how to rely on analysis and objective conclusions to avoid losing money.
Practice with simulated accounts, as nowadays most serious brokers will provide you with the possibility to have a demo account that will let you operate with virtual funds. In this way, you can get familiar with the market and you won’t lose money. Once you feel comfortable, go for the real thing.
Don’t underestimate the need of having a mentor that can answer your questions. In the trading world, you will be always learning, and those who think they are know-it-alls are the ones losing money. Ask experienced people for help so they can validate your strategies and save you from bad times.
Finally, you need to be aware that this is not for everybody, so ask yourself – Am I enjoying this? Do I like this type of work? Do I see myself doing this for my entire life? If you think this is not for you, then the best thing you can do is leave it. The stock market is not a place where you go betting and rely on luck. Here you need to study, you need to make an analysis, so if you think you can’t commit to all of that, it is better to try something else.
Thank you for reading this blog. Please like, share and signup to our newsletter for more updates. You can also check out our previous post on “5 secrets to being a successful investor“.
Recommended books for further reading:
- Intelligent Investor: The Definitive Book on Value Investing – A Book of Practical Counsel
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits
- Stock Market Investing For Beginners: The Investment Guide – How to benefit from the crisis, invest in stocks and generate long-term passive income incl. ETF and Stock Picking Checklist
- Smarter Investing: Simpler Decisions for Better Results
- Investing QuickStart Guide: The Simplified Beginner’s Guide to Successfully Navigating the Stock Market, Growing Your Wealth & Creating a Secure Financial Future
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(‘68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.)