Looking for alternatives to traditional savings, you will sooner rather than later get the recommendation to buy shares or other securities. As sensible as this tip is – stock market beginners who have never been active on the stock market can quickly feel somewhat intimidated by this topic and its diversity. We have put together a guide that addresses the most important issues: Your crash course for buying stocks.
What you need to buy shares?
If you want to buy shares, you can usually do so on the stock exchange. Trading on official stock exchanges is supervised. The Vienna Stock Exchange, for example, is supervised by the Austrian Financial Market Authority. As a result, stock exchange trading offers investors good transparency and a high level of security. At which trading place you buy shares, is ultimately up to you. However, when choosing your broker, you should also make sure that it is active in the desired trading venue.
The way to your own stock portfolio is easier than you think. You can lay the foundation for your securities investment with just a few steps.
What you should look for in a securities account?
In addition to the necessary capital, the prerequisite for buying shares is usually the possession of a securities account, for example with an online broker. This acts as an account for your purchased securities and can be opened at many banks. As an investor, you can buy and also sell shares online via direct banks and brokers. Going to a branch or calling the broker is no longer necessary.
To find a suitable securities account, you should think about what you expect from it in advance. This includes not only the conditions such as the deposit fees, but also the question of which securities you want to trade at all and – as already mentioned – at which trading venues. The broker should offer a good selection and favorable fees for your favorite asset classes. What use are good conditions for buying ETFs if you do not want to trade them at all?
Each securities account has a clearing account
Profits made are credited to the clearing account, which is part of each securities account. This happens especially with dividends from shares as well as distributions from funds. But even if you sell shares again, the proceeds are first transferred to the clearing account. Afterwards you can put the money into other securities or transfer it to an account at your house bank. And even if you want to buy shares, you must transfer money to the clearing account in advance.
How does stock exchange trading work?
Once you have decided on a broker and a suitable securities account, as well as your investment strategy, you can place your first securities order. Brokers offer protected access to their own securities account via their respective websites, so that buying shares online is easy and secure.
The trading of shares and other securities such as bonds, for example, does not take place exclusively on official stock exchanges. In recent years, over-the-counter trading venues have become increasingly popular, as they often offer particularly low fees. In return, however, they are also less transparent than stock exchanges. This may include the prices of shares and other securities.
Once you are logged into your personal securities account area, you can – z.B. by entering an ISIN (International Securities Identification Number) – search for tradable securities. You can then see the current buying and selling prices of the security on several trading venues. If you want to buy, select a trading venue and determine the trading volume, i.e. your investment amount. Then it is one more click and you have bought your first securities.
How can you minimize risks?
In order to trade successfully with shares, a sound knowledge is necessary, but often also a little bit of luck. However, if you take a few points to heart, you have a real chance of achieving good investment results in the long term.
- Define goals: For what purpose do you actually want to invest your money in the stock market? Pursue a sustainable asset accumulation? Do you want to invest specifically in individual companies? Speculate on rapidly rising prices?
- Set up a schedule: Closely linked to your goals is also your schedule. You want a long-term asset accumulation? Then your time horizon should also be set over several years.
- Identify financial opportunities: Of course, your goals also depend on what your financial possibilities are. You should never use your last money reserves for stock exchange trading, but always only money that you could do without if necessary.
- Selecting the right securities: For example, if you want to invest for the long term but do not have large financial reserves, an ETF savings plan could be an option. ETFs track indices such as the ATX. So you rather invest in an equity fund. You should also ask yourself: How willing am I to take risks?? Securities and investments should be selected according to your risk profile.
- Broad diversification: Which shares and securities are in your portfolio?? It makes sense not to focus on just one company or industry, but to spread your investment widely. This considerably reduces the overall risk.
How much money can you invest?
Basically it is even with small amounts possible to buy shares. In this case, however, you must also expect that the profits will be correspondingly smaller. Regardless of the amount invested, you should be aware that stock trading involves a certain risk. Although you can certainly minimize the risk with the right strategy and thoughtful trading, it does not make sense to invest your entire assets in stocks or similar securities. Experts therefore advise, no more than 15 percent of your own total assets to invest in shares. If you have only little free capital available, it becomes more difficult to spread risks over several shares. If you are saving for your child or grandchildren to give away the shares, you should be particularly careful.