Here is a comprehensive guide to buying stocks in ten simple stages, ideal for new traders looking to dabble in the stock markets.
The stock market has always been a world full of opportunities, and stock investment is the world’s most common and popular strategy.
Why is stock investment profitable?
At least five factors contribute to the popularity of this investment:
Initial capital: $50 is now sufficient to become a stakeholder in your favorite firm.
Secure Platforms: Regulated brokers have some of the strongest security requirements in the world.
Market in perpetual flux, with new investment possibilities emerging daily
Apps for learning to invest: There are various apps for investing in the Marketplace.
Today, shares may be acquired online and with highly favorable market circumstances, all from the convenience of a smartphone.
What Is the Best Way to Invest in Stocks?
Starting to invest in stocks is an excellent way to start allocating some of your money. Many significant investors prefer this alternative when investing money because of the stock market’s good performance throughout history.
Of course, certain basic safeguards must be taken for the investment to be beneficial, such as selecting a broker that does not charge fees and concentrating on the long term.
The top stockbrokers, such as eToro, provide all the necessary tools to begin speculating in the stock market, including cutting-edge platforms, real-time charts, and a demo account for practice.
What exactly are stocks?
Shares are securities that reflect the equal halves into which a company’s share capital is split. They may be used to secure loans in the financial sector.
As a result, you will become an active member of the firm, with the chance to attend shareholder meetings and vote on major matters on the agenda.
However, with the advent of internet trading, there is another option to invest in stocks: utilizing contracts for difference (CFDs) and betting on stock performance without acquiring ownership.
Aside from the selected medium, it is useful to clarify the notion of action. It is beneficial to read certain literature on the subject to explore this issue.
Before investing your money in any company, you should thoroughly research the market.
2. How much money do I need to start investing in stocks?
To explain, investing activity was limited to affluent individuals or wealthy enterprises in the past.
Securities accounts, execution fees, consulting fees, and other expenses are only a few of the expenses required to begin betting on the finest stocks. To date, the situation has fundamentally altered due to the emergence of CFD brokers on the market.
How much money is required to invest in stocks? Many stockbrokers request a deposit of $100 to $200, which is quite reasonable.
With a $100 starting capital and leverage of 1:5, you may speculate on CFDs and invest as if you had $500 in the account. To be more specific, the top brokers need the following to activate an account:
1. Prices range from $10 to $99
Among the brokers in this category is XTB, a highly regarded and globally recognized broker. It has a standard license, and $10 is enough to establish an account and trade CFDs on the world’s finest equities.
It will cost $50 to register a stock account on eToro, another broker regarded as one of the finest in the world, with over 1,000 tradable equities on the site.
2. Between $100 and $500
Most brokers are found in this range. AvaTrade, for example, asks $100 to establish a real account.
Brokers with a minimum deposit of more than $500 are uncommon. Among them are Interactive Brokers ($1,000) and a few others.
In summary, $100 is plenty to invest in stocks via reputable brokers and certificates.
3. How do I choose the finest stockbroker?
Investing in stocks necessitates the use of a broker, who acts as a go-between between you and the stock market. As a result, selecting a licensed broker to buy and sell shares via the platform will be required.
How do you choose the best stock broker? Apply for a Free Demo account to test the platform with virtual money. We also recommend that you explore three or four platforms at once to see which one best meets your requirements. Without a doubt, you should focus on the following aspects:
- Ordinary license
- Low spreads
- H24 Customer Service
To experiment without spending any money, sign up for a free demo account.
These dealers are secure and regulated, making them ideal for a risk-free investment.
Manual or automated bargaining?
Another critical factor to consider when investing in stocks is the sort of investment you intend to make.
The alternatives vary and depend on the evolution of the sector, which allows for investment in previously unavailable ways. Do you intend to purchase and sell stocks? Then a CFD contract is for you: it is safe, simple to use, and has no fixed charges. CFDs allow you to establish a bullish or bearish position and profit depending on the number of Pips moved, regardless of whether the market moves up or down.
This is the most popular way for novices and experienced investors to invest in inequities. Creating an investment plan will assist us in becoming lucrative with CFD stock trading.
AvaTrade also provides a Mirror Trading-based investing method. Copying the moves of high-yield investors is a terrific approach to effectively invest in stocks, especially if you are new to the stock market.
Do you want specialists to advise you on your investment? In this instance, contacting Robo Advisors, which has increased in recent months, would be beneficial. After completing a form with your data, the amount to be invested (with a relative risk profile), and the time horizon selected, these robots create investment portfolios that adapt to your requirements.
5. Buy Shares Or Trade CFDs?
Here is an important aspect that needs to be established before investing in stocks.
Through the best Brokers listed above, you have two options for investing:
- Buy the shares and become a shareholder of the company
- Speculating on financial derivative contracts
In the first case, you must equip yourself with stocks that allow you to become a shareholder, through the entire purchase of the shares, possibly without fixed costs or management fees.
In this case, the most suitable solution is offered by eToro and Markets, which offer direct access to the market and specific shareholder benefits, such as dividends.
All you have to do is log in to the trading platform, select the action of your interest and click on “Buy”. Remember to deactivate financial leverage to proceed with the actual purchase:
On the contrary, if you only want to speculate on the performance of stocks and the possibility of making a profit even in case of falling prices(short selling), CFD contracts are the right tool for you.
Zero fixed fees and ease of use: investing in stocks through CFDs is a very popular activity among investors when investing in stocks, cryptocurrencies, and other assets.
Undecided which option to choose? Well, eToro offers both options, and with a minimum deposit of $50, it will be possible to invest both ways!
6. Stocks, indices, or ETFs?
Investing in stocks involves a multiplicity of options to choose from. Stocks are present in thousands of indices or in specific ETFs, created specifically to diversify the portfolio and optimize long-term returns.
Is it worth investing in indices? Many wonder if it is more convenient to bet directly on stock indices, that is, stocks grouped by category, market segment, or stock exchange where they are listed.
For instance, the Nasdaq will be made up of the best US stocks in the technology sector, that is why investing in stocks through Indices is a highly valued option to diversify your portfolio or trading account.
How to invest in ETFs? Exchange-traded funds are passively managed investment funds, and some specialize in stocks. In essence, professional analysts make up an ETF with the best stocks of a particular market segment within it.
With rapid growth over the past five years, numerous ETFs now have the best-performing stocks. An example? ETFs with Pharma shares are among the most in-demand of all!
7. How to choose the best stocks to invest in?
In the light of what was said in the previous paragraph, it is clear that a fundamental concept when investing is diversification. The value of shares fluctuates continuously, so it is necessary to have a suitable financial instrument such as CFDs.
Now specify what the parameters to consider to choose the best stocks to invest in today are:
- Capitalization: focus on well-capitalized and stable companies, capable of resisting even in times of crisis.
- Cash Flow: A company with ample liquidity will surely react well to market fluctuations.
- P/E: This price earning indicator is the most widely used among analysts. Values below 50 will indicate a company with ample room for growth.
- Invest in companies linked to growing sectors for a greater probability of profits in the medium and long term.
- Management: Companies led by competent people will have a better chance of achieving excellent performance in the stock market.
Net of volatility, typical of all financial markets, it will be necessary to filter out rumors and choose the best stocks to buy.
Some precautions though:
- Avoid penny stock
- Stay away from overly volatile markets
- Always ask about the company
- Don’t invest more than 20% of your portfolio in a single stock
8. Let yourself be guided by an expert
There is no need to use external consultants or pay high commissions to specialists in the field. To date, it will be enough to request the support of an Account Manager of the broker you have chosen to invest in.
To offer an increasing quality service, many brokers have specialists who guide, advise and suggest the investor (especially if he is a beginner).
It is not necessary to pay any commission, and the broker offers the service. It will be possible to request a telephone consultation with one of these experts and discuss the best stocks to buy, the time horizon to follow, and the capital to allocate.
XTB is one of the main brokers that offer this service, with experienced and very professional Account Managers.
An alternative? Of course, the eToro Community: thousands of traders to discuss and exchange opinions. Above all, each user will have their Track Record highlighted: lying is impossible.
Then you will have the opportunity to follow the investment advice of true stock market experts.
9. Monitor investments
If you have followed the steps described above, your stock portfolio will be active and well-diversified. However, you should not make the mistake of stopping and setting aside your investment account.
Investments must be followed with care and attention every day. It will be necessary to check the returns obtained, establish Stop Losses to avoid losses, and above all, be attentive to new shares to buy.
The equity portfolio should not be “static”; on the contrary; it should be observed and optimized every day, even with the help of the Account above Managers.
It is very useful to observe what other famous investors, such as Warren Buffet, are doing for this phase. Replicating or simply following the example of your choices is an excellent idea for the daily management of your portfolio.
10. How Are Shares Taxed?
A very important aspect to consider when investing in stocks concerns taxation.
Even if you invest through online brokers, your profits will be taxable and, in any case, must be declared to the tax authorities.
The aspect is long and complex; we simplify it for our readers: the profits obtained with investments in stocks are taxed at a rate ranging from 19% to 23%, depending on the amounts made.
At the end of the year, it will be important to ask the broker for history with all the operations carried out to have an overview presented during the income tax return phase of the following year.
Dividends also have a rate ranging from 19% to 23%, with a minimum threshold of $6,000 below, which is unnecessary to declare.