Stocks are an affordable investment tool for everyone. In the long run, they generate income higher than bank deposits, protect money from inflation and economic shocks. To invest, you do not need to be a millionaire. You can start with a small amount of 20-30 thousand rubles.
What are stocks and why do they buy?
Shares are securities that give the right to own part of the company and to a share of its profits. For example, when you buy a share in Gazprom or Microsoft, the business of these corporations, and therefore their income, begins to belong to you “a little”. Companies issue stocks to raise money, and investors buy them to make money.
They earn on stocks in two ways:
- Buy, wait, when they grow in price and sell.
- Hold and receive dividends.
Dividends are payments to shareholders from the company’s net profit. You do not need to sell shares to receive dividends..
For example, the company earned $ 1 million for the year and decided to give half of this amount to dividends, that is, to distribute it among all investors who invested in it. Suppose that the company has 10 thousand shareholders in total, so everyone will receive a payment of $ 50.
How much can you earn on stocks in five years?
Apple
- Price January 1, 2014 = $ 79.02
- Price January 1, 2019 = $ 157.74
- Five-year yield = 99.62%
- If you invested 100 thousand rubles, you earned +99 620 rubles
Apple is an American corporation, a pioneer in the field of personal computers, a cult manufacturer of smartphones and consumer electronics. Apple Shares Listed on Sustainable and Reliable Securities.
VISA
- Price January 1, 2014 = $ 55.25
- January 1, 2019 price = $ 131.94
- Five-year return = 138.81%
- If you invested 100 thousand rubles, you earned +138 810 rubles
VISA is a multinational payment system that serves bank cards. VISA card acceptance points for payment work in 200 countries. Business development in various regions and areas supports the growth of company shares.
Lukoil
- Price January 1, 2014 = 1 990.20 ?
- Price January 1, 2019 = 4,997.00 ?
- Five-year yield = 151.08%
- If you invested 100 thousand rubles, you earned +151 080 rubles
Lukoil is one of the largest oil producers in the world. Every year, millions of people in more than 100 countries buy the company’s products, energy and heat. Lukoil is a stable player in the oil market, which regularly pays dividends to its shareholders.
Tatneft
- Price January 1, 2014 = 200.4 ?
- Price January 1, 2019 = 737.90 ?
- Five-year yield = 268.21%
- If you invested 100 thousand rubles, you earned +268 210 rubles
Tatneft is one of the largest Russian oil companies. The main activity is concentrated in Tatarstan, but Tatneft’s business projects also work in other regions of the Russian Federation and abroad. Included in the top ten companies in Russia in terms of market capitalization.
Raspadskaya
- Price January 1, 2014 = 30.33 ?
- Price January 1, 2019 = 129.00 ?
- Five-year return = 325.32%
- If they invested 100 thousand rubles, they would have earned +325 320 rubles
Raspadskaya is the largest coal company in Russia, a giant complex for the extraction and enrichment of coal in the territory of Kuzbass. One of the key suppliers of coal for Russian metallurgical companies.
Netflix
- Price January 1, 2014 = $ 51.82
- January 1, 2019 price = $ 267.66
- Five-year yield = 416.52%
- If you invested 100 thousand rubles, you earned +416 520 rubles
A major global manufacturer of streaming video content. Produces hundreds of films and TV shows a year. Netflix audience of over 100 million users.
Pole Gold
- Price January 1, 2014 = 781.00 ?
- Price January 1, 2019 = 5 399.00 ?
- Five-year yield = 591.29%
- If you invested 100 thousand rubles, you earned +591 290 rubles
Russia’s largest gold producer, one of the top ten global gold miners. Assets are concentrated in Yakutia, Irkutsk region, Krasnoyarsk Territory. Polyus Gold has one of the lowest production costs in the world.
NVIDIA
- Price January 1, 2014 = $ 15.86
- January 1, 2019 price = $ 133.50
- Five-year yield = 741.74%
- If you invested 100 thousand rubles, you earned +741 740 rubles
NVIDIA is a global leader in GPU manufacturing. The main profit of the company is provided by video cards that are used in the gaming industry and for cryptocurrency mining.
Why buy stocks right now?
In investments there is a principle “the sooner you start, the more you earn.” Here, time is indeed a valuable asset. The reason for the work of compound interest (interest capitalization).
Imagine that every year you invest $ 1,200 with a yield of 10% per annum. After 40 years, your capital will be $ 585 422. Of this amount, only $ 48? 000 will be the money that you earned and invested yourself. Everything else is accrued interest. If you reduce the period to 30 years, profit will decrease by two and a half times, to $ 218 332.
This happens because every year interest is accrued not only on the amount of your annual investments ($ 1,200), but also on the interest that you have already earned, that is, on each other:
The more time we give compound interest, the more effective they are. If you are 25 years old now and you started investing, as in the example above, then by the 40th anniversary you will earn $ 25,139 in interest. Starting 5 years later, you will receive only $ 10,237 in interest – almost $ 15,000 less.
“Compound interest is the eighth wonder of the world. The one who understands this – earns it, the one who does not understand – pays it ”- Albert Einstein.
Can’t invest $ 1,200 a year? Reduce the amount to $ 600 or $ 400. The main thing is to make compound interest work and get a small but growing passive income.
5 reasons to invest in stocks
1. Investments can provide a pension
As the calculation showed, after 20-30 years of active investment of money, you can provide yourself with passive income no worse than a state pension. In our socio-economic environment, there are no guarantees whatsoever that the state will adequately support older people in the future..
2. Investments help outrun inflation
From 2009 to 2018, the average inflation rate in Russia was 7.3%. That is, accumulating money “under the pillow”, you save only their face value, but every year you can buy less goods or services on them. Send them to a bank deposit – a rational approach. But the average rate in Russian banks is about 6-8% – it’s definitely not possible to get around inflation significantly.
Investing in stocks gives more than 10% return. Yes, this is not such a risk-free tool as a bank deposit, but in the long run it is the most profitable. History shows that the stock market always grows in the long run.
3. Regular investments give freedom
The more you invest, especially in the first few years, the higher your passive income for retirement will be. Over time, you can give up work, become a professional investor, open a business for the soul and travel.
4. Financial tone
The deeper you understand investment, the better you understand the financial and economic situation. It’s easier for you to assess risks, predict mistakes and prepare in advance for market “shocks”. The investment area helps to become financially literate, use money more prudently, safer and more profitably.
5. Extra income that does not require much time
A sensible investor does not check quotes or the composition of his investment portfolio regularly. He monitors the situation every 3-4 months and does not spend time on this every day..
Only professional traders are engaged in tight tracking of stocks, because this is their job, which is associated with great risk and playing on the daily rise or fall of the course (this is called day trading).
Get answers to other important questions about investments
Go to Investlab Online Store Homepage
View the list of shares of leading Russian companies
View the list of shares of leading US companies
View the list of ETF funds
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