The stock market raises a lot of questions and is fraught with a lot of incomprehensible, especially for beginner investors. To dispel some of the most popular doubts of newcomers, we turned to the Director of the investment and trading training center Sergey Briz.
He gave us some recommendations on what an investor needs to know before starting his journey..
1. MICEX Exchange and other sites
The Moscow Exchange is relatively young and has many shortcomings. The number of issuers, “blue chips”, instruments available on the Moscow Exchange cannot be compared to foreign ones. Of course, you will have to invest in currency, but you also received income in dollars or euros.
Investing on the Moscow Exchange is not possible to implement a number of profitable strategies. In particular, the choice of this site makes it impossible to invest in dividend growth. Simply because we do not have companies that not only pay dividends, but also increase them steadily for decades in a row.
This also includes the fear of not knowing a foreign language for those who want to enter foreign stock markets. However, the language of numbers is universal and in most cases you will not need English. You only need to learn a few terms. If you invest in the West through a Russian broker, then the language barrier disappears by itself, and foreign brokers often have Russian-language support.
2. Losing money
The stock market does not give any guarantees, the events on it change with high speed and it is impossible to predict how the market crowd will react to certain news. In the stock market, you can really lose money.
To protect yourself as much as possible, you need to choose a strategy that does not promise sky-high heights, for example, to make you a millionaire in a year with minimal financial investment. Your every step should be balanced and not based on the opinions of “experts” heard on TV, but on your own criteria for selecting assets for your investment portfolio.
We must not forget about the diversification of assets. History has known successful examples when a person spent his whole life buying shares in only one company and died a millionaire. But an attempt to repeat this experience may end in failure. It is best to purchase stocks of companies from various sectors of the economy and not only stocks, but also bonds, ETFs, trying to bring maximum diversity to your portfolio. In this case, the failure of one or two investments will not cause the collapse of the entire investment portfolio..
Any investment should be thought out and weighted, and it is better to buy securities when their market value is at the local bottom. Or, at least, it is not overpriced, as is often the case with popular assets related to companies with big names. Naturally, you need to buy not by sympathy, but by the results of the analysis. This is a simple process that should not scare novice investors. On the contrary, it captures many so much that it turns into a hobby.
3. Market crash
This happens periodically in any market. Moreover, a collapse in one point of the globe will definitely respond even in the most remote corners. But investing assumes that you expect to keep your investment with you from several years to several decades. During this time, the noise will settle down and those companies that really have value will definitely return to their positions. If you do not succumb to general panic and do not sell assets when they begin to decline in price, then you will not feel the difference. This is what the investor needs to know – it is imperative.
4. The stock market is not only for people with the appropriate education or mathematical mindset
In fact, the investor is really different in his thinking, but this is not related to the ability to solve equations in the mind. An investor is a person who is able to see the big picture without focusing on what is happening at the moment. A broad perspective lies before his eyes, and with such a view of what is happening, it is clearly visible what will matter and what will remain mouse fuss.
We take some events more seriously than we actually are. Ten years later, no one will remember them. No need to postpone entering the stock market until you have studied the books of all investment gurus. It is enough to get a set of initial knowledge and continue to study for the next years, and maybe throughout life.
5. Investing not only for the rich
Of course, it is impossible, having invested a penny, to begin to receive tens of thousands of rubles. On this principle scams and pyramids are built and we all know how this pursuit of easy and quick profit ends.
However, there is absolutely no need to immediately bring large capital to the exchange. Sometimes people get a serious amount of money, for example, after the sale of an apartment or a car and decide that it will be a smart step to buy the amount of stock received. But such an act is fraught with negative consequences. I am a strong supporter of gradual and consistent investment. Lack of an account with a large number of zeros should not stop anyone. You can start with the amount by which you open a brokerage account. It is important to regularly replenish your investment portfolio..
What an investor needs to know, really, is that it is through the regular purchase of securities that have passed your selection criteria that the maximum effect of investing is achieved. Even if the process is gradual.
The fact that for profitable investment you will need the help of specially trained people is a myth that is very beneficial for these people. Financial advisors work exclusively for their own well-being, and not for you. The profit that they can earn by managing your money, they rightfully share with you.
But the losses will be 100% only yours. A lot of people have come a long way in the stock market on their own, have filled their bumps and can teach you how to get around dangerous places. Of course, in this case, you will have to answer for your failures yourself, but success will be doubly joyful.
In the West, investing has long been a part of the life of an average family, and many do without financial consultants, using their own, simple strategy. Experienced and talented specialists are not so easy to find, and even such a professional cannot guarantee profit. In any case, he will receive his salary and commissions, while not risking anything except your hard-earned money. You should not expect that an outsider will advocate for someone else’s financial well-being, except for his.
7. Fear of holding money in stocks for a long time
Investing, unlike trading, has several advantages. In particular, you do not have to often buy and sell assets, which allows you to reduce brokerage commissions. Less commission – you get more benefits.
It must be remembered that the sale of shares generates profits, which are taxed accordingly. But there are strategies that assume that assets have been in your hands for decades. For example, dividend investment. The essence of this method is to reinvest dividend payments back into stocks, thus enhancing the dividend flow. More stocks – more dividends.
No one can look into the future. But if you approach the selection of securities strategically, do not rush from side to side at the slightest fluctuations in the market value of your investment portfolio, investing money in exchange-traded assets for a long period will bring good results.
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