How can you start investing in the stock market?
SAVINGS AND INVESTMENT I January 27, 2021
Initially, investing in the stock market might seem like a financial expert's game. However, when you understand a little more about how the markets work, and following these basic tips, anyone with even a little capital can start to invest in the stock market.
The stock market is a market on which marketable securities, such as shares, currencies, bonds and other more complex products are traded. The stock market is structured around the principle of supply and demand: if there is significant demand for a share, its price increases; if everybody wants to sell their shares in a company and not many buyers are interested, the share price falls. Companies raise funding on the stock market and, in turn, investors can become shareholders in a company.
To get started, you need to bear in mind that investing is not the same as saving: investing involves assuming a certain level of risk, in the hope that your money generates a return. Therefore, our first tip would be to discover what your investor profile is before you start investing. To find out your profile, you need to:
Having defined all these factors (goals, available capital, risk profile), it's time to look for a broker who will be responsible for investing in the stock market for you, with your authorisation. They must be authorised by the National Securities Market Commission to offer investment services. To make sure they are authorised, you can consult the public registers of the CNMV, where you can also find out whether the company in question has been issued a warning by the supervisory authorities.
To process investment orders on behalf of a customer, the broker provides investment services consisting of the reception and transmission or execution of orders. An advisory investment service may or not be provided (advised or non-advised sale). To this end, assessing a customer's suitability is mandatory (performing a suitability test or via any other means).
Based on this information, the broker can recommend the investment product that is best suited to you.
You might already have a good idea of the product you want to invest your money in, for example, shares in a company that periodically distributes dividends. When it comes to non-complex products, i.e. products that can be understood by the average investor, the broker may simply execute the purchase order without having to check whether the product is suited to you.
If you are a newcomer to investing, you should ask your broker for the information in writing, so you can analyse the characteristics of the product offered in depth before contracting it and making sure that it adapts to your needs. Limiting your investments exclusively to the products that are suited to the risk level you are willing to assume (the greater the complexity, the greater the risk) is recommended.
Having invested your money in the stock market, you must keep track of how your investment is performing, seeing how the company you have purchased shares in is performing, whether the expected returns are being met, whether the risks have increased and even whether the agreed fees are being charged. Furthermore, you should keep up to date via specialist media, the company's website, or the relevant information section on the CNMV website.
One basic tip, which is valid for everybody investing in the stock market, is diversifying your portfolio and making investments with a different time horizon.
In summary, when you start to invest in the stock market you should bear in mind that this is not a game of chance. The decisions you make must be well thought out, not influenced by what is fashionable or your impulses and bearing in mind that there are no returns without a little risk.
This information is provided solely for informational purposes and its content should not be considered an investment recommendation or any form of advice.
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