Long-term stock investment - is a science. People who engage in similar activity, have to constantly watch market changes and incessantly study the financial diploma. Stock investment requires patience and continuous acquisition of financial knowledge. If you are a beginner, look for books, articles, biographies and interviews of the most successful investors. It will help you to understand the essence and the main principles of this activity. The more you will find and study information concerning investment, the more chances of success will appear.
The first steps in investment
So, on your bank accounts has collected a certain sum. You know that the stock acquisition will be a good way to force this money to work. Where to start? First up start searching a good broker. Stock trading takes place in the stock exchange. Quite recently, this concept was associated with a certain room in which stock trading took place. Now all actions happen in the electronic exchange.
Beginners should stay away from this place. Newbies and people with experience, trust this mission to the brokers. The first step toward investment profits is to find a good broker. Rushing to the first advertisement and trusting money to unchecked, people - is not a smart decision. Important to address only to the solid company, with a long history in the market and faultless reputation. This system is extremely difficult and for a beginner it is very simple to get confused on terminology and nuances.
To find and choose the professional broker is a key to success at the stock exchange. A good broker will not only invest your money in profitable stocks, but also will become a very valuable financial consultant whose opinion is necessary to listen. Brokers earnings represent a percent from carried-out transactions, the higher is transaction price - the more you will pay the broker. You shouldn't be greedy in this plan, good experts take worthy money for the services. With the highly professional broker, you will win much more. It is necessary to sign the contract with this person. For this purpose, you should fill in the questionnaire and the application and provide the documents certifying your person.
At the exchange, the company will open for you the deposit and brokerage account. Some exchanges provide this service free of charge, some take a symbolic payment. On the account, you should grant the sum which you plan to enclose in stocks. Some companies, for stock investment have a restriction on the minimum sum called the minimum threshold. It means that you can begin stocking acquisition only in case you have the necessary sum.
How are stocks bought and sold?
The broker will get for you the special personal account on which your stocks will be stored. Today they're not necessarily having to be a hard copy, modern technologies allow creating electronic registers in which it is accurately stated with how many and what stocks this or that shareholder holds. Having made the decision to get bonds, you simply call the broker or give orders through the worldwide network.
You can watch market movements too, on the Internet. There is a special program which broker offers to you at once after signing the contract. It is connected to the exchange auction. The broker also has to give out you a requisition form for acquisition or sale of shares. After that, it is worth studying attentively a situation to choose stocks for investment in this or that company. If you made the decision to sell or buy stocks, you should call the broker and send the demand with the signature. The broker will transfer the document to the trader who is directly at the exchange and the transaction will be made. After that, the broker will provide you the report on the conclusion of the transaction.
It is impossible to predict all market changes. But it lives under certain laws, which are studied by scientists and practicians all their life. In the planet's history was people who have a gust of financial operations. They exist now too. All of them developed strategies which we use with profound gratitude. Following the plan accurately will allow you not to lose the head during the crisis periods and not to take silly steps. At the moments of mass hysteria when having given in to a panic sale or stock acquisition begins, people who lost their mind – lost their money, but those who kept calm and adhered to the planned strategy – made a profit.
The most recommended strategy for beginners is “buy and hold”. Acquiring stocks for long-term investment, it is necessary to take a simple decision not to sell them at all and after that only to get new from time to time. The price of stocks will change, sometimes the situation in the exchange will be simply menacing, there will be a strong desire to get them off the hands. But at this moment it is worth remembering the chosen strategy. All essence is that, despite the crisis moments and inflation, the growth of the market will surely bring in the income, and in final option you will earn money anyway. Stocks of even the most powerful and influential companies aren't insured against full depreciation, it is possible to lose. For the beginner which is poorly guided in the jungle of the financial market, this strategy will be the best.
The close attention deserves Benjamin Graham's strategy. Undoubtedly, very clever person used this and recommended the following methods:
- Acquire stocks of the company while the market suggests it to buy 30-60% cheaper than the cost of the assets of the company.
- To sell stocks of the company while the market overestimated it cost 30-60% more expensive than assets.
To use this strategy, it is necessary to own accounting skill and to be able to analyze a situation in the market. One more valuable advice from Benjamin Graham: “You store the eggs at 20-40 baskets and you sleep peacefully if suddenly one basket was worn out”. It means that for safe investment it is necessary to take shares of different companies working in different branches. If one of the companies or the whole branch fails – you will have other assets which will make the expected profit.
Warren Buffett is known as the financial genius and the greatest of the strategists of rather a long-term investment. His advice is very useful too:
- Look for the companies which will be successful even without management. Production or service of this company has to be so demanding that the success of activity doesn't depend at all on the one who operates it. If management works correctly, it will only improve a situation and cost of your stocks.
- Take stock only of that business which you understand and which is pleasing to you personally.
If to summarize information stated above, the following picture turns out.
The beginning investor needs to conclude the bargain with the solid brokerage firm. You shouldn't believe promises of fabulous profits for a short period. Before stock acquisition it is necessary to check carefully assets of the company if you aren't able to do it – pay the expert, this money will pay off with interest. Irrespective of a situation in the market – don't give into a general panic and follow the chosen strategy. Acquire stocks of different companies and whose activity is clear to you.