How to invest in the stock market being a beginner
How to invest in the stock market being a beginner? In this article we will help those who want to start in the world of the stock market. People think it is difficult, but in this case it is the opposite, because investing in the stock market is easier than we think, only we need information.
The stock market has greater security, profitability, liquidity and flexibility than any other asset. So, investing on the stock market is interesting for all the public, as far as in the long term is very profitable, through dividends gives stability.
- Advantages that we have when investing directly on the stock market
- Total freedom to invest : We have no obligation to buy or sell if we do not want to. We have freedom to make our choices.
- Guidelines to follow for investing in the stock marketWe know that the future in anyone's economy is determined by:
- There are two types of analysis recommended to make an investment decision in a company.
- When in the previous point we talked about the strategy, we also referred the creation of a solid values portfolio, in other words, with benefits that grows in the long term. For this, it would be convenient:
Advantages that we have when investing directly on the stock market
Periodic profitability: This is a very important advantage, since the portfolio of securities that we believe will generate a profitability with the dividends from the shares. We must keep in mind that the money obtained from the collection of dividends can be reinvested in the purchase of more shares, or allocated to the consumption itself, depending on the needs of each investor.
Low commissions: they are low in comparison with other assets, such as funds or expenses to invest in real estate, but of course we must take into account that the charged each year or per transaction, depending on the broker that uses to perform the operations, so we will have to inform ourselves very well of the broker's commissions before starting to invest in the stock market
Total freedom to invest : We have no obligation to buy or sell if we do not want to. We have freedom to make our choices.
Decide to enter or exit: We can enter or exit the market at any time, our positions do not influence the size of the market.
Invest in assets that are outside the stock indexes: We have the possibility to invest in very good companies that do not meet the size or liquidity requirements to belong to any stock index. These companies tend to have greater profitability. One thing to keep in mind is that companies that meet the requirements of capitalization and liquidity volume are often introduced in the indices, but their fundamental analyses are unfavorable. Just because a company belongs not to a main index means that we should invest, because not everyone is solid and profitable.
Dividends paid: We should know that the dividends paid by companies are not reflected in stock indices.
A moderate person gets that the returns obtained by investing in the stock market are good and stable, more than in any other investment, in spite of what the great majority thinks, only that one should learn some simple guidelines without having previous knowledge.
Guidelines to follow for investing in the stock market
We know that the future in anyone's economy is determined by:
The money he makes
The money you save
The money he invests
We are wrong when we think that the idea to get rich is to make a lot of money, because that is not true, we get rich when we save. We mean that even if we earn a lot if we spend everything, we don't get rich, so we have to know how to save and invest those savings in creating more wealth.
Going back to the subject of how to invest, the first thing we do is to create a management of our patrimony, which is that we know what we have and decide the total percentage of investing in the asset, which will depend on each investor. Next, choose a strategy, and this step if we need some basic knowledge, for which we must be clear about the fundamentals of the company's result. Once invested in security, it is important to follow the quarterly results presented by the company.
There are two types of analysis recommended to make an investment decision in a company.
The fundamental analysis tries to determine the value of the companies based on their results and the assets they have.
PER: It relates the market capitalization of a company with its net profit, that is, its profit per share with its price per share. It informs us how many exercises are necessary for the benefits generated to be equal to its market capitalization.
PRICE / CASH FLOW: rate used to compare the market value of a company with its cash flow. The lower the proportion, the better its value.
PRICE / ACCOUNTING VALUE: measures the relationship between the price at which stocks are quoted and the value of their own resources, i.e. the book value of their assets less the book value of their debts. <1: The price at which it is quoted is lower than its book value and therefore we would have an opportunity to purchase.= 1: The company is quoted for a price close to its book value.> 1: The price at which it is quoted is higher than its book value.
ROE : measures the performance obtained by the shareholders of the funds invested in the company, i.e. the company's ability to remunerate its shareholders.
NET DIVIDEND BY ACTION : it is the amount of net profit obtained by a company that is divided or divided by the number of shares.
DIVIDENDED INCOME : measures the percentage of the price of a share that goes to the shareholders in the form of a dividend each year.
NET INCOME: is the profit that remains in the company after covering all expenses and taxes.
EBITDA: is the gross operating result calculated before depreciation and amortization expenses.
EPS: is the part of the profit that corresponds to each share of a company, indicates the profitability of the company.
The technical analysis should look at the charts of the quotations, the evolution of its quotation and does not take into account the results or assets of the company. It is advisable to use 2 or 3 indicators in order not to be disconnected from the analysis. These programs are usually provided by our broker's platform (they can go in some cases with a certain delay), it would be convenient for them to be in real time.
Simple Mobile Average Trend Indicators that is used to identify the beginning of new trends. Its interpretation in general terms is that if the price moves above the MM, so the MM has a direction of high (positive slope), it can be considered as a sign of strength (purchase). If the price moves below the MM, so the MM has a downward direction (negative slope), it can be considered as a sign of weakness (sale). Valid buy and sell signals do not occur when the MM changes. only when the price moves above or below the MM.
Volume indicator that tells us the amount of securities traded in a chosen period (intraday, day, week ...). According to DOW theory, the volume should follow the trend. The magnitude of the volume is indicative of the consistency of the movement.
The RSI relative strength oscillator measures the strength of the price. Graphically, the RSI oscillates in a range from 0 to 100, which indicates the areas of overbought (from 70 to 80 to 100) and oversold (below 30 to 0). It indicates the upward trend when it approaches 100 and indicates the downward trend when it approaches 0. In practice, buy signals usually occur when the floor of 30 crossroads and sell signals when crossing the roof of 70.
We must do both things, the fundamental one, because it tells us the situation of the company and the technique, because it gives us the entrance and exit signal.
When we invest in security, it's important to follow the quarterly results presented by the company.
When in the previous point we talked about the strategy, we also referred the creation of a solid values portfolio, in other words, with benefits that grows in the long term. For this, it would be convenient:
Diversify the assets : It is not necessary to have great assets to invest in several companies, so it is advisable to diversify both companies, sectors ... to minimize the risks.
Diversify temporarily: you can invest in a company temporarily, in other words, decide for as long as you want or good for, for days, months, years, so that allows us to avoid the risk of a steep decline.
Liquidity: we can have the liquidity of the investment when we need it. It is also important to keep in mind that having shares of a solid company can access to obtain credit.
Transparency : We will find on the internet many web pages that provide us with free information about quotes, dividends, fundamentals and techniques of any company. Thanks to these transparencies, we can know the price of our shares quotation.
Profitability : Profitability depends on the growth of profits and dividends of companies.
Security: The gains obtained from the transfer of shares, as well as the dividend, are directly recorded in our account.