Why Invest, and Is it Proper for Me?
You have a deposit in a bank, but you are not satisfied with the interest; they are too low, and you want to earn more. But you must understand: the higher the opportunity to make, the higher the probability of losing all the money.
It is not valuable to invest the last money if you do not have savings and a bank deposit. If a bank goes bankrupt, the state will return the money to depositors – within $1.4 million. There is no such insurance on the exchange; you can lose everything. Moreover, the fall in the value of securities occurs much more often than bank failures.
I Want to Try. Where to Initiate?
The present exchange is electronic; you can trade online without getting up from the couch. Before looking for it, it is worth determining a few essential things for yourself.
Estimate how much you want to invest
Theoretically, you can start with any quantity, even with $1,000. It is worth investing if you are ready to risk several tens of thousands of dollars. It is better to imagine a situation where you will lose your money in advance. You can try if you realize this is not a disaster for your budget.
Consider how much time you want to spend
If you are ready to get trained, immerse yourself in the topic, study statistics and stock reports in the morning, and follow the charts throughout the day, you can try to trade on your own. You will conclude buying and selling, and the broker will follow your instructions.
Another choice is to invest in mutual funds (mutual funds). These are ready-made sets of various securities or other assets. The mutual management company manages the mutual fund funds and sells assets, changing their composition by strategy and investments.
Decide where you will invest. Stick to specific methods.
What is a strategy?
A strategy is a group of investment parameters that determine your style of behavior on the exchange: what assets do you trade, how often do you sell, and what guides you when making decisions (for example, do you watch news that affects the market).
The simplest version of the strategy – you choose:
- Assets
- The time for which you want to invest
- Maximum loss
Let’s say the assets are shares of pharmaceutical and chemical companies, the period is one year, and the number of losses is 20%. If you have selected trust management, you must also decide on a strategy. Only in this case will you will from offers already on the market or discuss an individual plan with your manager.
Find an intermediate company
When you decide on a strategy, finding an intermediary will be easier. When choosing a broker, trustee, or management company of a mutual fund, the necessary and paramount thing is to make sure that they have a license from the Bank of Russia.
If you have chosen to invest on your own, you have to go through the following path:
- Agree with a broker
- Open and fund a brokerage account
- Install a unique program for trading
- Start buying and selling
If you have chosen the way of trust management, it will be enough to decide on an agreement and transfer the cash to the trustee or Management Company of the mutual fund.
Common Mistakes: What Not to Do
You can’t invest everything you have in stocks.
Set aside money for living and unexpected expenses first. Create a “safety cushion”: open a bank deposit – and only then start stock trading. Invest the quantity that you are willing to accept losing.
Don’t act Randomly – Get Trained
If you decide to trade on the stock exchange on your own, be sure to complete the training. Most brokers run courses for beginner investors. Trading programs often have a demo mode: you can try your hand at it without the risk of losing money.
Don’t Get Emotional
If you act impulsively, you can make many mistakes. A novice investor should not behave sharply to the slightest price movement on the stock exchange. But you need to act decisively if the price changes significantly. Set a limit on the losses you are willing to bear: for example, if you want to accept a 20% loss and end the trade to avoid even more significant losses. The desire to wait some more – it will suddenly “bounce off” – will be great, but there is no need to succumb.
Don’t Put All Your Eggs in One Basket
It is good to buy securities from companies from different industries. For example, when oil prices fall, and if you buy securities of companies in various sectors of the economy, such as engineering, the chemical industry, and telecommunications, this will help you reduce the risk of losing your money (or, as financiers say, diversify risks).
Do Not Believe Promises to Earn 500% Per Day
Only fraud can guarantee anything in the stock market. And a responsible broker should warn you of the risks. The situation on the exchange is changeable, and only you are responsible for the decisions made.
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