March 15, 2019

Five tips for stock market beginners

The proverb "No one is born a master" also applies to investing in stocks. Here are five tips for beginners.

1. Understand what shares are

A share is a stake in a company traded on the stock market and its purpose is to make a profit. As shareholders, you receive a part of this profit.

In the early day of trading there were still physical papers, today everything runs electronically. You need a safekeeping account with a Depotbank.

Investing in shares is always coupled with risks, but - with long-term commitment! - there's also the chance for substantially higher net yields than with just a savings account.

Obermatt published a manual on this and you can download it here. The principles are easily understood.

2. Make a plan

Your investment not only needs funds, but also a plan: How much can I invest? For the time being, only plan ahead for three to five years, during which you invest perhaps 200 francs per month in shares.

Later, with more experience in stock investing as well as with your new investor mindset, you can plan ahead for twenty maybe thirty years.

Ease in slowly - not with large one-off amounts. And later remove yourself slowly again - dissolve one portfolio after the other. In general, only sell when you need the money.

3. Choose the right perspective

Fluctuation is inevitable - during a single year, the difference can be up to 30 percent. This has the appearance of a severe loss and creates negative feelings. These feelings - as so often in life - are only due to the wrong perspective.

You must always have your portfolio in mind in its entirety. That means from beginning to the end of the 30 years, not only the past, but also the future. That also means all past dividends plus all future deposits.

In the end, he who invests in the stock market, will most likely have more money than in the beginning. If you compare two closely spaced points in time during this period, it looks as if you have lost money, but this comparison is as wrong as it is unnecessary, because it is only a temporary phenomenon.

How much have I already saved? How much will I save? That is the right question.

4. Fall down and get up again

You will earn money and lose money. In the beginning, it is all about being able to deal with it. See it in a playful way. Be glad for wrong decision, because it will help you make better decisions in the future.

The first years will not be important financially (unless you enter the stock market too fast and with too high of an amount). Above all it's about learning.

5. Don't be a player

Even if one should see stock investing in a more playful way, it's still not a game of chance. Nevertheless exactly this can be found at the stock exchange: Exchange rate transactions (also known as FX-Trading), commodity futures trade (bets on raw materials), options (also known as Hedging), stop-loss orders (why should one dump stocks when they become cheaper?) and momentum trading (fast in and out trading of investment positions).

These are all games of chance, that one should stay away from. As the case is in Monaco only the bank earns money. Also "hot stocks" should be left alone - they are usually massively overpriced.

And now good luck!

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