In times of low savings interest rates, savers can hardly avoid the topic of shares. Many investors are interested in shares as an investment, but are reluctant to get started. For beginners without much knowledge of the stock market, buying shares is associated with one factor in particular: Risk. Many people perceive share trading primarily as uncertain speculation on the stock exchange and less as a safe investment. However, there are many reasons why buying shares makes sense even for beginners, and why you should not miss out on shares as an investment. In the guide we clarify the questions, what one needs for the share purchase and whether also small investors have a chance on the stock market. In addition, we give valuable tips on the subject of buying shares for beginners, how they can avoid beginner’s mistakes and successfully invest in securities.
What are shares and what makes them a good investment??
Shares are a wonderful way to participate in the success of others cheaply and easily. Investors can easily participate in the most successful companies of our time, whose products and services we use every day, through shares. This makes stocks the most profitable asset class for achieving one’s goals in the long term." – Davor Horvat, fee-based investment advisor // Bafin ID: 10138885
Shares are company shares that are traded on a trading place, the stock exchange, at a certain price. Companies float their shares on the stock market to attract new capital. The additional income from the sale of securities ensures that the equity capital can be strengthened and the company growth can be financed. Anyone who buys shares thus owns a small share in this company. The price at which securities are offered on the trading market depends on demand. The value of a share fluctuates due to the interrelationship between supply and demand on the stock exchange.
On the subject of buying shares, newcomers often wonder whether and why buying securities is a good investment at all. Savings accounts have long since offered savers only low interest rates and are therefore no longer particularly profitable. In comparison, shares offer a good return as an investment. This allows you to build up assets in the long term and save for retirement at an early stage. In addition to the distribution of dividends, you as the owner of securities can also participate in the positive economic development of a company, which is reflected in an increase in the share price and thus in the value of your shares at the same time.
Before buying shares, it is important for beginners to know a few key figures in order to choose the right securities. This includes, for example, the price-earnings ratio, or P/E ratio for short. This indicates the ratio of the share value to the value of the company. In addition, the P/E ratio indicates how many euros an investor would have to invest in this share in order to make a profit of one euro. The so-called cash flow is also helpful when deciding for or against a share. The cash flow indicates how solvent or. liquid a company is. As a rule, the higher the cash flow, the more successful the company. In order for this value to really provide a meaningful assessment, investors should compare the cash flow values of different companies in the same industry with each other.
What do you need to buy shares?
A securities account is needed to buy and sell shares. In the securities account, all purchased securities such as z. B. Shares and funds stored and managed. In addition, a clearing account, usually the current account, is required for stock trading, from which the orders are debited. In the depot itself can be deposited namely no money. Before they can buy shares and securities, beginners or. Beginners can also decide where they would like to open the securities account. There are several ways to do this. In principle, you can open a securities account at any bank or direct bank. However, there is also the option of having the securities account run through an online broker.
Where to open a securities account?
Anyone wishing to open a share deposit account has several options for doing so. The easiest way here is to open a securities account with your own bank or broker. Branch bank. There future investors can speak directly with their bank advisor and have the securities account opened. In addition, advisors may also have a few stock tips for newcomers to help them take their first steps on the stock market.
What is possible at a branch bank is of course also possible at a direct bank. These also offer their customers securities accounts. This can be opened by online application. If one is already customer with the bank, the opening of a security depot is connected besides with less bureaucratic expenditure, since the appropriate data of the bank are already present. However, this applies to both branch banks and direct banks.
A third possibility are the so-called online brokers. These are either offered by banks themselves or the providers work together with banks. They are either part of the offer of a direct bank or are brokers who cooperate with banks. The great advantage of online brokers is that the securities account can be done at any time from home. If you want to start buying shares quickly, this can save time compared to opening a deposit at the bank, as you do not have to wait for appointments here. But even with an online broker, opening a securities account does not happen overnight. After the application to open a securities account, you must identify yourself via video or PostIdent. Here, too, it can take one to two weeks until everything is ready for the first stock purchases. Those who choose a securities account with an online broker often benefit from free securities accounts without management fees and lower order fees. Who would prefer to buy shares online, but is a beginner, but must do with this broker compared to the deposit at the house bank on the personal advice. Would you like to build the stock portfolio rather be advised, you are in the online broker in some circumstances worse off. However, here you can of course the independent investment advice z. B. Use the services of a fee-based advisor. To get assistance with your personal investment strategy, you can simply contact your local personal fee advisor.
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Buying shares& sell – what beginners should know
Which securities are good investments? Should one rather on different individual shares or on share funds set? How to tell how stable a company is and the risk involved in buying stocks? All these questions arise when buying shares for beginners and beginners. Before investing, investors should clarify these questions in advance to avoid losses and unnecessary risks.
Buying shares or share funds as a beginner?
Before you can successfully invest in stocks as a beginner, you must of course first decide which securities to buy. On the one hand, there is the possibility of buying individual shares, but on the other hand, you can also use equity funds as an investment. The difference between shares and equity funds is quite simple. A share is a certain portion of a company. An equity fund contains many different shares. The fund summarizes thereby up to different 50 shares depending upon industry or geographical location. The advantage is the automatically high diversification. Therefore, many experts advise against buying only a single share of a company, as the risk of losses is significantly increased in this case. Buying equity funds is therefore not a bad idea for beginners, but you should be aware that there will be additional costs involved. An equity fund is managed by a fund manager, for which fees are charged.
Who deals with shares, will also come across the topic ETFs. Here the question quickly arises, what are ETFs and how do they differ from a stock fund: Exchange Traded Funds (ETFs) are called passive investments. They replicate the performance of a stock market index. Trading in ETFs takes place exclusively via the stock exchange. Equity funds, on the other hand, are actively managed funds, as here the fund manager attempts to achieve a higher return than the benchmark index through active intervention. So it tries to beat the market. The benchmark compares the various funds with each other. ETFs don’t have that goal at all, but want to keep costs low and track the benchmark index as closely as possible.
Can you buy stocks even with little money?
Basically, it is not necessary to invest particularly large sums in shares. The great advantage of shares as an investment is that even with the investment of little money profits can be achieved. When buying shares, it makes sense, especially for beginners, to start with smaller amounts and share purchases. Since one should invest only the money that is not needed in the near future, some beginners can not raise the very large sums for the purchase of shares anyway. But regardless of whether you invest a small amount monthly in a savings plan, or buy one-time securities that you hold as a long-term investment for many years, shares are suitable for large and small investors.
Which shares should you buy as a beginner?
One of the biggest mistakes that investors make when buying shares is that they focus on the DAX and maybe the Eurostoxx 50 and nothing more. However, this creates a certain "cluster risk", d. h. they have only invested in their home market and thus naturally miss out on returns in the USA, the Pacific region and emerging markets. That is why it is important to diversify and to set up one’s stock portfolio globally. – Davor Horvat, fee-based investment advisor // Bafin ID: 10138885
"Which shares are best to buy?" ask beginners and newcomers to the subject of stock trading. In principle, one should never concentrate on individual stocks, but rather diversify more broadly with regard to the various markets. Diversification not only reduces the risk of investing money. If you focus only on individual stocks, you may miss out on the returns of other markets. When they buy shares for the first time, beginners in particular tend to limit themselves to their home market. In Germany, this is the DAX share index. However, the orientation on the DAX is by no means wrong. Especially for the first purchases it is a good idea to also include the DAX 30 stocks. The DAX 30 contains the 30 largest German companies listed on the Frankfurt Stock Exchange. These companies have the highest stock market turnover and the largest market capitalization. This makes them a good entry point for beginners. In addition to this, however, it is also worth taking a look at the international markets. Here, too, there is a corresponding national index, such as the DAX, which can be used as a guide. In the USA, the z. B. the S&P 500, which includes 500 large U.S. companies.
When considering which securities to buy as a beginner, it is advisable to also consider equity and mixed funds. Mixed funds are a mixture of equity and bond funds. The fund manager can therefore invest in both equities and fixed-income securities. If prices on the stock market are good, people mainly buy stocks. If prices on the stock market fall, investors can switch to other, safer bonds and thus achieve a broader spread of risk.
How many shares should you buy as a beginner?
How many shares you should buy as a beginner depends on several factors. First of all, the number of shares also depends on the risk the investor is willing to take and also his investment objective, i.e. the desired return, plays a role in this decision.
In addition it depends on how much capital is available for the financial investment. Since only money that will not be needed in the next few years should be invested in securities, the amount of money available also determines how many shares can be bought. That is why it is so important, especially for beginners, to check their finances thoroughly in advance and to determine the investment capital before starting to buy shares. If you find this difficult, you can also turn to an independent fee-based advisory service.
Of course, you might now get the idea that buying a lot of cheap stocks might make sense for beginners. However, this is not necessarily the right way. First of all, the price of an individual share is not particularly meaningful. Therefore, before making a decision, you should look at the key figures of the desired shares and then decide whether this is a good financial investment.
The purchase of many different shares also seems to initially follow the recommendation to focus on diversification in the share portfolio. However, buying too many different securities is just as unhelpful as buying just one share. In order to keep track of the development of one’s securities, especially as a beginner, even small investors should follow the rule of not including more than five to seven different securities in their stock portfolio.
Together we will find your optimal level of shares
Buying shares for beginners – Important tips at a glance
- Check finances and determine investment strategy and goal
- Invest only available money
- Open the right securities account (broker/online broker, house bank, direct bank)
- Observe the stock market, research suitable stocks and put together a stock portfolio
- Pay attention to diversification in the portfolio
- Long-term& Invest with patience
- Sit out losses and avoid rash reactions as a beginner’s mistake
These questions should be asked before buying shares as a beginner
Before starting to trade stocks, there are some questions for beginners to clarify. What risk do you want to take as an investor? How much money do you want to invest in securities? It is also important to make an investment plan before blindly investing in shares as an investment. In this one should include also the costs, which result with the share purchase.
How much money should be invested?
Buying shares is often presented as very complicated for beginners. However, it is not, if you consider a few basic steps and proceed according to plan. Get an exact overview of your finances before investing money. Because in securities one should invest only money, which is not needed. How much is taken in monthly, how much money do you spend? And how much do you want to have available as a financial reserve for unforeseen events? In addition, it should also be a sum that can be forgiven in the event of losses. If this advice is not taken into account, buying shares can quickly become a personal risk. In addition, even small investors can achieve an appropriate return with the right securities. So it is not necessary at all to invest particularly large sums of money.
What risk do you want to take?
As with any financial investment, you should leave emotions out of the equation when it comes to shares. One should remain rational, never actively intervene and simply pull through its investment strategy, in order to reach so the goal of the financial investment. Then one will achieve the highest success with shares. Setbacks and losses are normal, that one as an investor simply accept and completely rationally deal with it. It is important to have discipline and think long term and then this will work positively. – Davor Horvat, fee-based investment advisor // Bafin ID: 10138885
The investment in shares is neglected by many investors because they are very afraid of possible losses. This also leads to the fact that the step to stock trading beginners particularly much overcoming costs. Of course, it makes sense to consider the risks of investing money. Because shares are naturally subject to the price fluctuations of the stock market. Your share price can therefore develop just as negatively as positively. On the one hand, this can lead to a loss in value, on the other hand, it can also lead to the suspension of dividends. Not only the company’s performance has an impact on the value of the shares, but crises and global political and economic events can also lead to a slump in the share price. Before buying shares, it is therefore advisable to look at the company’s performance over the last three to five years. If the company is on a stable growth course, this is also reflected in the shares. On the other hand, insolvencies, mergers or similar events can also have a negative impact on the price on the stock market. Put simply, investing in a start-up is significantly riskier than buying shares in a stable company with a long history of success.
However, investors have several options to keep their risk as low as possible. First of all, of course, you should be clear about how high your own risk tolerance is. Investors who prefer the safest possible investment can direct their securities to bonds or mixed funds. If you are willing to take a higher risk, you can bet on equity funds or individual shares. When buying shares, it is advisable for beginners to focus on growth or value stocks, or even to include a mixture of these in their portfolio. With the right portfolio management, losses can be avoided and risks minimized.
What return should be achieved?
In order to be successful with investing in shares in the long term, investors should definitely set an investment target. Decide first for what and how long you want to invest the money and what return should be achieved with the stock trading in the specified time period. One of the most important stock tips for beginners is the recommendation not to focus on short-term gains, but on long-term returns. Many investors fail in the stock market because they speculate on quick profits and therefore buy risky shares. This can quickly lead to losses. Instead of aiming for quick returns through high-risk investments, you should invest in good and, above all, stable companies.
Would you like to z. B. with the purchase of shares a financial investment for your age precaution transact, then a time span as long as possible should be calculated for it. One can assume in a security depot of an annual net yield of five to ten per cent. Calculate how much return you would like to achieve at the end of the investment period and select suitable shares on this basis. Then the success by the long-term investment of money usually adjusts itself. If you also stay true to your investment strategy and avoid the rookie mistake of constantly making changes to your portfolio even when prices fluctuate, you can usually count on a successful investment.
Buying shares& selling – beginners have to expect costs?
Before they begin to buy and sell shares, beginners should know that with each order also costs arise. An order is the purchase and sale of securities. With the share trade these costs consist of an order commission as well as the stock exchange fees. Stock exchange fees depend on the chosen trading venue (z. B. Frankfurt Stock Exchange or Stuttgart Stock Exchange). When buying shares in foreign currency, you should also take into account the loss of value due to changes in exchange rates.
The fee for buying or selling shares, the order commission, on the other hand, depends on the broker and can vary in amount. As a rule, brokers charge a fixed fee for each order placed, as well as a volume-based commission. This means that z. B. an order over 10.000 euros costs more than an order for 2.000 euros. Some online brokers also offer investors an order commission set at a few euros without a volume-based fee. Then it does not matter in what value you buy securities as a beginner.
So-called free brokers are a special case. Since they do not charge order commissions, securities can be bought or sold there without fees. This seems to be a good way to buy shares cheaply, especially for beginners. However, these offers are rarely completely free, as hidden costs can often be found here. These arise, for example, from larger trading margins – i.e. the difference between the buying and selling value of a security – at marginal times. Usually also the offer of shares with free brokers is smaller. If you really want to save money on stock trading, you should open your securities account with a broker who offers free securities account management. This saves at least the annual management fee. In addition, there is also the possibility to buy shares via direct traders. In this case, shares are not bought on the stock exchange as a trading place, but with a bank or a so-called securities house, which offers shares and funds.
Conclusion: That is why buying shares is also recommended for beginners
Buying shares can also be quite simple for beginners and succeed without large stock exchange knowledge. Who wants to buy shares and securities, can build up assets in the long term and thus z. B. invest in his retirement provision. Before buying shares, you should take a close look at your own finances to determine how much money is not needed in the long term and can be invested. Inform yourself in advance about the shares you want to buy, compare the relevant key figures and focus on stable and successful companies.
The most important stock tips for beginners remain diversification, a precise investment plan and thoughtful investing. Avoid also beginner’s mistakes such as hasty intervention in price fluctuations and shares will also be a profitable investment for you.
You are no longer a beginner and would like to go deeper into the topic of shares and ETFs?