Investing in the stock market can be a financial risk if you don’t know what to expect. You can clearly lose money by not knowing the different parameters to study before investing your capital. If you are a beginner and do not know where to start yet, you should inform yourself in this article. Here are the basics you need to know before investing in the stock market.
Know what it really means to invest in the stock market
A stock market investment refers to a purchase of the shares of listed companies. In other words, you are going to get ownership shares in companies. Therefore, a share is the equivalent of a share of the capital belonging to a given company.
This act will elevate you to the rank of shareholder. You will therefore win the title… of “associatedwithin the company. You will be able to participate in decisions concerning the affairs of the company and have a share of the profits.
Apart from individuals, the entities that can invest in stock exchanges are banks, insurance companies, pension funds and companies.
Choose between bearer or registered shares
When you own stocks, you have two choices. First, your shares may be held in pure registered form. Which means you are buying in your name. You will thus have the chance to be spared childcare costs. But you can also be invited to company general meetings and votes. At the same time, you will be entitled to the increased dividends and the double vote.
For the second option, you buy the shares on behalf of a financial intermediary. This will manage your titles by collecting them in the same envelope and putting them in a single tax form. In return, the financial intermediary will receive custody fees. Choosing this option is recommended for a beginner because the financial intermediary will be able to manage your securities effectively. The risk of losing money will therefore be minimized.
Opt for a reliable medium to place capital on the markets
In order for you to be able to invest in the stock market, your securities must be housed in a medium. If you have chosen to appear on behalf of a financial intermediary, it is recommended that you open an ordinary securities account with the latter.
It is also possible to opt for a subscription to a stock savings plan or PEA. Among the media most used by companies of limited scope, there is the PEA-PME. This is a PEA which is intended for Small and Medium Enterprises. These two media offer you the possibility of composing a portfolio that you will focus on your investment projects in local or European companies.
Choose the right investment strategy
To reduce the risk of losing money, you must establish an investment strategy. If your plan is to multiply your savings over the long term, it is advisable to choose shares that are not very speculative. On the other hand, investing in dynamic activities is the strategy that suits you to get a return quickly. However, this short-term project presents risks.
In addition, it is essential to learn regarding the financial market before investing in it. You need to know the stock market news so you know the right time to invest and the prosperous products. Finally, you must invest a reasonable sum so as not to risk a significant loss.
Thanks to Gerd Altmann from Pixabay for the images.
