Only an investor who understands the purpose of being on the stock market can effectively invest in stocks. If there is no goal, the strategy has not been worked out and there is no idea about the basic principles of transactions, it will most likely not be possible to make money. Investors without a plan are often left without capital and leave the market disappointed. The experts of the financial marketplace Vyberu.ru figured out how to start investing and choose stocks in your portfolio.
How to invest to get income, not losses
To make investing a habit and regularly generate income:
one. Pay off your debts. Start investing when you have closed all large loans. Early repayment of a consumer loan at 15-18% is as effective as investing funds at the same interest. At the same time, not every investment portfolio manages to achieve this level of profitability.
2. Keep track of income and expenses. It is important for any investor to know how much he earns, spends and what he has in the end. If there is no such understanding, investments will turn into chaotic transactions on the exchange, which are rarely successful over a long period.
3. Build a financial cushion. Save up the amount for 3-6 months of living for the whole family without a constant source of income. Such savings are made in case of force majeure – a sudden illness or dismissal. The financial cushion will insure against the need to urgently sell assets from the investment portfolio.
four. Determine your financial goal, your risk profile and investment strategy. The further in time the goal is achieved, the more risky the portfolio can be. Conversely, the sooner money is needed, the more conservative the instruments should be. It is desirable to reduce the share of shares in the portfolio to 10-20% a year before the due date.
five. Collect your first briefcase for a small amount. Start a brokerage account no more than 100 thousand rubles, you can even start with 20-50 thousand. Analyze the assets you want to buy. Research your closest competitors. Make the first few deals. Be sure to check the portfolio for drawdowns. This will help you figure out whether you are ready to risk large sums or it is safer to choose a more conservative strategy and buy only shares of reliable companies.
6. Diversify assets. To reduce the level of risks and not be left without all the capital at one time, invest in different areas of the economy in several countries. Keep some of your assets in protective financial instruments. They can be bonds, gold or other precious metals.
7. Invest regularly. Fund your brokerage account at regular intervals – once a week, a month or a quarter. The most common way of investing regularly is from each salary.
eight. Reinvest. Use the compound interest rule. If all of the profits earned are reinvested, the money will bring a greater return. 15% of the amount of 100,000 rubles – will bring 15,000, and 15% of 115,000 rubles – already 17,250 rubles.
nine. Analyze the direction in which you want to invest money on your own. Check out any investment idea. Connect logic and common sense, not emotions. Too high or guaranteed profitability is promised only by scammers and financial pyramids. Do not chase excess profits, because there is a great risk of being left with nothing.
10. Be disciplined and don’t panic. The financial goal can change, the investment strategy can change, but the main thing is to invest money regularly and purposefully. If there are several years before the goal is achieved, abstract from the mood that reigns in the market. Sharp price drops are more frightening for traders than for long-term investors.
How to choose promotions
Shares are classified as medium or high risk assets. These securities can quickly rise in price and fall in price. When buying stocks, investors earn in two ways:
• receiving dividends;
• on the difference between the purchase and sale prices.
But not all companies pay dividends, and not every share grows in value, so no one can guarantee a profit. To diversify risks, take into your portfolio promising shares of companies:
• ordinary and privileged;
• Russian and foreign companies.
Most novice investors build their portfolio only from stocks of reliable and successful companies that are widely known in the market. They are called “blue chips” or first-tier assets. Many of these companies pay dividends to shareholders.
Those investors who want to earn more are willing to take risks. They buy shares from the second and even the third tier. Such companies are almost unknown in wide circles, but at the same time they can bring higher profitability than blue chips.
Not all market participants are ready for high risk, so the share of small companies’ shares ranges from 5% to 10% of the portfolio of a moderate investor. Overly conservative investors do not buy such assets. At the same time, aggressive traders can regularly trade second and third order stocks and speculate on their ups and downs.