How to Contribute or Invest in the Stock Market with Little Capital?
Invest in the Stock Market – To start investing in the stock market, it highly recommends beginning little by little, without urgency, and gaining experience and training. To escape putting your financial health at risk, it is best to start with small investments and even enlist the help of a financial advisor.
Stock investing is a complex field that requires many ingredients to aspire to success. Before analyzing what they are, it should clarify that any small saver has open doors to invest in stock values. The Stock Exchange is where the most expert and wealthy investors come together daily and the most novice and small. For all of them, the Exchange has the same rules. And everyone has their space to operate according to their possibilities and the set objectives. It should clarify that you can start investing from a modest budget without a lower limit.
Although the amount destined to invest is modest, it must bear in mind that it cannot be capital or money needed shortly. It is optional not to invest in the stock market until coverage of current expenses assure. And the provision of an emergency fund for unforeseen events that may arise. Therefore, the amount to invest will consist of an amount that, if necessary, we can afford to lose without causing any financial imbalance or having the investment for a long period.
The usual thing is that the stock market knowledge of a novice investor is very little. Due to this aspect, some investment in specific training is recommended before walking. The acquisition does not have to be economical. It can remain time: the Internet is an excellent “university” to acquire knowledge, see, hear and share experiences, read experts, learn on many free training websites, etc. The possibilities for training today are numerous thanks to the face-to-face and ‘online ‘ courses that exist, to the books and manuals published and to so much valuable information that can find on the Internet.
Whether you invest in some prior training or not, some banks with which you are going to carry out the operations make available to the professional-client experts in stock market matters that are very useful to overcome the difficulties of the complex world of the stock market. The time and money allocated to training will depend on the intention and possibilities of the future investor. Still, there are no longer any barriers to access to free online or face-to-face stock market education.
The media offer daily market analysis by independent experts useful for day-to-day monitoring and training itself. This information is a good complement to the bank manager’s advice.
Prior Aspects to Consider
Before getting down to work, three concepts must be clear. How far do you need to invest, how long are you willing to keep the investment. And what percentage of loss are you ready to take if the investment starts to go wrong.
A determining aspect when investing in the Stock Market, and even more so if you start with small amount. It is to know the impact that the commissions associated with the investment will have on profitability. There are several types of commissions:
Buy and Sell Commissions
They take place every time a security is bought sell. Usually, they are between 0.20% and 0.70% of the amount of the operation to carry out, and it depends on the intermediary that has been hired. Two different commissions support the purchase and sale operations. On the one hand, the one that the ‘ broker ‘ takes and on the other, the one that corresponds to the Stock Exchange where the securities trade.
- Securities custody commissions: these are commissions charge remain the depositary entity for the cost of keeping the shares in the portfolio. According to the regulations, the commissions calculate the claims’ practical value. If the set of securities belongs to the national market, the commissions are around 20%, with an annual minimum of about 12 euros. If they are from the international market, the percentage increases to 1%, with the minimum being about 60 euros. However, this commission is increasingly link to the level of operations. However, it is being free in many cases when the investor is actively buying and selling.
- Commissions for collecting dividends: each time a premium charges for shares, the entity charges a percentage commission, with a minimum that is usually slightly higher than 1 euro, which varies according to the ‘broker ‘.
- Commissions for capital increases: in this case, the commissions are similar to those of the previous section.
Simple Tip to Follow
In the first investments with little capital, it is important to calculate how the different commissions affect the possible profit.
Investment strategies: Which one best suits your objectives as an investor?
Many investment funds on the market apply different strategies when investing. Each investment fund has a way of operating. And a policy that governs the choice of its investments based on multiple criteria -such as profitability, risk, or liquidity. Moreover, which specifies in its registration brochure with the supervisory entity. It is important to know these criteria. And which ones are best suited to the profile of each investor with a view to future financial health. The set of these criteria is what makes up the fund’s investment strategy. Let’s look at some of these strategies.
It highly recommends setting a loss control or ‘stop-loss’ order in advance, which generates an automatic sale. If the share price falls below a certain level or expense, which allows us to meet our objective of maximum loss assumed. And avoid such unpleasant surprises. It is wise to diversify the portfolio by incorporating more than one security, both so as not to take a risk in a single security. And not to have to remain immobile in one protection for too long if it falls. The greater the diversification, the greater the distribution of risk among the securities.
Investing with a short time horizon implies a greater risk. Usually, it entails a more aggressive behaviour on the investor, so should invest in the long term or, at least, in the medium term.
Lastly, it must be made clear that the stock market should not pay any attention to rumours, since their origin is doubtful. And their content may have nothing to do with the reality of what is going to happen. And also, with the enormous cost that this can produce.