All investment in the Stock Market is made with the aim of making a profit and, if possible, achieving certain financial independence. The capital that is invested in a company is structured in small participations that are called shares.
When it comes to a small company, the most logical thing is that the shares are distributed among a very small group of people, such as three or four individuals, with hardly any presence in the market. But when it comes to a larger company, the volume of shares will be distributed among a greater number of people. They can generally be easily bought and sold on the stock market. If you want to learn how to invest and know how to make your investments correctly, you just have to keep reading.
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Keys to obtaining benefits in investments in the stock market
Proper management of capital in the stock market will depend on several factors, but we will basically reduce them to three.
1. Record expenses and control them
To operate on the stock market, a product must be opened in any financial institution or authorized intermediary. The shares you own should be registered in the securities account, as well as sales, purchases and dividend payments.
You have to differentiate between various kinds of commissions:
a) Those of banking entities or intermediary
Of course, you must always keep in mind the commissions, which when they are too high will end up eating the profitability. In the purchase, they can vary from 0.2% to 1% on their value. In the case of small amounts, it will be necessary to repair the minimum commission per operation, which will range between 9 and 15 euros. A reasonable commission should be around 0.5%. This implies, for example, that a commission of 10 euros may be normal in the case of investing 2,000 euros per value.
There is also usually a commission for the custody of securities, which in this case is applied to the average balance of each security, and the commission on the collection of dividends, which is usually present in the custody.
b) Those of the market
In buying or selling operations, you have to bear two commissions. On the one hand, the settlement fee, which consists of 0.0026% of the cash of the transaction, with a minimum of 0.10 euros and a maximum of 3.5. The contract fee is also present, which is obtained by dividing the fixed and variable amount based on the amount of the operation. These two commissions are charged by the Exchange.
Therefore, first of all you have to control expenses and choose the most advantageous option. Overspending would completely wipe out profits. As for the minimum portfolio on the stock market, from 5,000 euros is when profits could be made.
2. Select the investment style:
There are two investment methods, such as trading and value investing, if you want to know them better, discover the best online courses on the stock market and financial markets and find out all the details about investment styles and discover what interests you the most:
- Trading: trading seeks to make the valuation differences in the market profitable in very short periods of time, which sometimes goes up to days or hours. The profit resides in the difference between the purchase price and the sale price, with a rather small margin.
- Value investing: called the investment in value or long-term. To choose these companies you have to know the true value of the company and evaluate if it is undervalued. If so, it would be necessary to take advantage of the opportunity to buy and keep it in the portfolio for a long time before leaving it.
3. Strategies to invest
You have to follow a defined strategy to achieve success, regardless of the investment style you use. It is about selecting the securities in which you decide to invest following a series of criteria, conditioned by the tools used, the time frames and the style.
Reference prices for entering or exiting securities, and a forecast of the time it seeks to hold, must also be set in advance.
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