Tip 1: Buying Shares or Another Form of Investing?
Asset management is the most accessible for novice investors. You can invest your assets there and then outsource the buying and selling of shares. Investing for beginners is, therefore, no longer difficult.
You can also spread over multiple strategies or services. For example, you buy shares and outsource some to an asset manager. Another option is to buy broadly diversified index trackers or funds in addition to your chosen shares. Therefore, you are less dependent on the profit or loss of your strategy.
Buying stocks can still be fun and profitable. If you want to choose and purchase the shares, read the following tips carefully.
Tip 2: Make an Investment Plan First
Most people who buy and sell shares themselves do so because they like it. This is crucial in choosing to invest yourself or have them invest. But it is precisely with these investors that the danger lurks that a good long-term investment plan is missing.
Many people start investing to earn more than the interest on savings but then begin investing without a goal and a precise long term. That is a bad plan!
At a minimum, your plan should meet the following:
- You have a concrete investment objective.
- You invest for the longer term.
- You have determined your (periodic) contribution.
- The available amount does not have to be used in the coming years.
- You have a sufficient financial buffer for unforeseen expenses.
- You have determined when or why you will sell again.
To earn with shares, you naturally want to sell for a higher price than you bought. But in practice, timing the right buying or selling moment raises many questions for investors. By determining your investment plan, you can decide what reasons would be for you to buy and sell shares.
Investing involves risks. The savings account is a better option if you only have an amount available for the short term. Or, in that case, look at the amount to be invested very critically.
Do you not have an investment plan yet? With the five steps from this eBook, you can easily create a successful investment plan yourself.
Tip 3: Gain Knowledge About Buying Shares
Basic knowledge is necessary before you buy shares. What exactly is a share? How do you determine the value of the share?
Many online brokers allow you to use fundamental analysis. You can use this to determine the value of a share, for example. And using the technical analysis offered, you can interpret graphs, for example, to choose your buying or selling moment. If you are unfamiliar with this, a lot of information will come to you immediately. How do you use these analyses?
Below are a few recommendations for where you can gain knowledge:
- The book “The Intelligent Investor” by Benjamin Graham. According to Warren Buffet, the most successful investor ever, this is the book you must read to invest. The book teaches that your character and attitude determine the money you make, especially your behavior during stock market fluctuations, which can cause you to make or lose a lot of money.
- The book “Common Stocks and Uncommon Profits” by Philip Fisher. Morningstar calls him one of the best investors ever. Among other things, Fisher describes a 15-point model for assessing the potential of a stock.
- With the book “Investing for Dummies,” you can quickly acquire basic knowledge about investing.
- In the Netherlands, IEX.nl is the best-known website for financial news, background, and share price information. Here, you will find more details, mainly about Dutch shares.
- Finally, an investing course is also an option
Tip 4: Know Which Products You Buy
which stocks to buy? Invest in products and companies you understand. A wise lesson from Warren Buffet is, “after you think, then think again.” He states that if he cannot write down varied reasons for buying the stock on paper, he does not.
The same applies to the choice of the type of product. You can often invest in options, turbos, CFDs, or futures at a broker where you buy shares. You can use these products to increase your potential return or to go short. But do not be tempted too quickly. These products also entail additional risks. Only invest in products that you fully understand and for which you can think of good reasons.
Tip 5: Spread Your Risk
We often see it happening in practice: investors who state that they do not want to take too much risk but, in the meantime, invest in only one or a few shares of companies. Even when it comes to a stable oil company or a large bank, we still speak of a hugely offensive or speculative investment portfolio in this case. In comparison, professional asset managers put together a much more diversified portfolio. For example, an average risk profile usually involves 50% equities and 50% bonds. The portfolio is spread worldwide over at least tens, but usually hundreds of underlying companies.
Some companies pay an excellent and stable dividend; the profit goes to the shareholders. You can generate an income stream by paying the dividend to your contra account. But do not forget that these shares can still have a declining price. You always run a price risk. You can reduce this risk by spreading it.
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