Direct Stock Purchase

It is estimated that at least 50% of Americans invest in the stock market. In the EU, this number is very less. For example, only about four percent of Germans invest in securities such as shares, funds or certificates. Brits can take pride as 10% of them have an investment portfolio. However, this number is very low compared to the United States. A lot of skepticism shrouds the stock market. Many potential investors are wary of investing through a brokerage firm. However, it is not necessary to depend on a stock brokerage firm to invest in stocks. You can do all this by yourself.

Buying/Holding Stocks

Trading shares online is the most straightforward option. To do this, you need to open what’s called a ‘nominee account’. This allows you to own shares without becoming involved in any of the paperwork. Paperwork is the biggest hassle in owning shares and nominee account simply eliminates the need for that. This makes a nominee account the most practical option for beginners.

A platform will set up the nominee account and hold the shares on your behalf. Although, you are the legal owner of the shares, your name will not appear on the company’s stock register. You can also hold your shares in a Stocks & Shares ISA or Self Invested Personal Pension (SIPP) wrapper.

Make sure that you don’t forget about your shares. When you’re new to investing, the excitement of it all may mean that you keep an avid eye on how your shares are performing. However, as you build your portfolio up and invest in more shares it’s easy to let things slide, so make sure you keep a track of everything you’ve got by reviewing your portfolio regularly.

Selling Stocks

While each platform’s website will work slightly different, the principle is the same for each website. This makes selling stocks as easy as buying them. If you have set up a nominee account like we explained above, you don’t hold the share certificates, which means, you have to sell the shares through the platform you bought them from.

When you sell your shares you’ll have two options, you can either:

  1. Sell your shares by number, or
  2. Sell your shares by their value

However, if you want to sell the full holding (ie, all the shares you have in that company), you’ll have to select number of shares.

Once you place the deal, you will be shown a quoted price for the sale of the shares. You normally have a limited time period to decide (eg, 15 seconds), and the price quoted will not necessarily be as high as the price you bought them for. If you accept, then any money you have made from the sale will show in the account.

Learning How to Trade

Photo Credit:  adamsmith.org
Photo Credit: adamsmith.org

The Most Important Tips for Your Success in Securities And Stock Purchase.

The purchase of shares is among the most important investments. Before you buy shares as an investor and become active on the stock exchange, you should be thoroughly informed.

What should I watch as a beginner in the trading of securities and how can I invest my money so that it increases? This question is presented to everyone who has something on the high edge and wants more than the meager interest on the giro account.

Keep in mind that many banks still charge fees regardless of your activity. Many private brokers have negligible fees. Choose an affordable and reliable option to serve your needs.

Shares promise long-term high returns

Historically, the purchase of securities is a lucrative business. Let’s take Germany as an example. Investors who had invested in the Germany’s DAX over 20 years (1996 to 2015) were able to pay a return of more than 20% per year in ten out of twenty years. However, the DAX lost more than 20% in three of twenty years. On average, the lay annual return on the DAX, despite sometimes violent ups and downs at 8.1 percent per year.

How Much To Invest?

How much money should I keep as backup for securities trading?

Start as a beginner with small amounts in share purchases. On the stock exchange, you should only invest capital that you do not need in the short term. If the markets go in the wrong direction, you do not have to sell at a loss, because perhaps an expensive car repair is due. The securities trading on credit is not for beginners and at most suitable for long-term experienced investors.

What risk are you willing to commit?

Determine the risk you are willing to commit. Whoever is trading and investing in equities must also expect a temporary decline in prices. Stock prices often fluctuate strongly, so it might go from 10,000 euros within a few weeks or months to12,000 euros, but sometimes fall to 8,000 euros. In principle, the higher the supposed chance of fluctuation, the greater the risk.

What kind of return do you expect from your investments? Determine the yield you want to achieve with your stock market investments in the X period. Decide on long-term, not on short-term return! In a securities deposit, yield ratios ranging from five to ten percent per year are realistic.

Most investors fail in the stock market because they want too much too quickly and buy risky stocks. However, investors of the caliber of Warren Buffett put their securities trading not on quick returns, but good companies. In the long run, the success usually comes by itself.

Compile the Securities Account

If you have answered the above questions, you can devote yourself to the basic composition of your securities portfolio.

Long-term success in the stock market come to those who follow a wise investment strategy. The type of securities investors should buy depends largely on the risk adjustment. While security-oriented investors are more likely to use securities such as bonds or mixed funds, investors with greater risk-taking often rely on equity funds and individual stocks. In the case of the purchase of shares, newcomers – depending on the investment type – should invest on growth, value shares or a mixture of them. Your risk is minimized for successful shareholders, especially through diversification. Experienced investors do not put everything on a card. Instead, you buy shares from several companies from different sectors. In this way, any losses of individual shares can be compensated by gains from other securities investments.

Investments in companies that are active in growth markets (so-called “growth stocks”) can be extremely lucrative as these companies often increase their profits considerably. This also has a positive effect on the share price. On the other hand, the trading of growth stocks is also more risky than “value stocks” of well-known companies operating in established markets where they have been market leaders for years. Value equities are often not as strong as opportunities, but also have a lower risk of loss. Value shares often also offer higher dividend payments than growth stocks. Dividends have a positive effect on the return on your equity investment.

Purchase of Shares: The Remaining On The Ball

Keep in mind that as a buyer of a share, you always meet a salesperson who believes that it is better to own the securities. As a seller it is exactly the opposite. So, before you buy your securities, always ask your opinion from this point of view. If you want to increase your assets with long-term securities, you should carefully select your investments and keep up to date with your securities before and after your purchase.

When you buy a share or before you buy a share, you can get comprehensive information about the investment. Also try to follow some of the most successful investors of all time like Warren Buffet, George Soros, Benjamin Graham or Peter Lynch. They invest exclusively in securities of companies whose business they fully understand.

Putting all your eggs in one basket

 Avoid the biggest beginner’s mistake in trading

Many beginners commit the same mistake in the securities trading. They invest all their money in only one type of securities, usually a fairly speculative share. This can go well, but in most cases it goes wrong. Avoid such a single-item risk and the risk of sitting on double-digit losses during the next downward movement or a negative corporate message. Never put everything on a card at the stock exchange! Instead, spread your risk by distributing your bet to a variety of opportunities.

Start in the stock market cautiously with smaller amounts. Do not put up with too speculative shares in securities trading and do not commit the biggest rookie mistakes, to put everything on one card. Before the first share purchase, a test of your own investment strategy is recommended. You can find several websites where you can make your model portfolio for free and trade with dummy stocks and experiment with different market strategies without employing real money.

Buy stocks – the choice of a suitable trading source

Have you figured out the source you want to buy your shares from? You can involve a third party broker to buy the shares for you, or you can directly buy the shares from the bank itself. With the broker in place, you might have to pay the broker some commission for operating the shares for you.  Now you can also buy securities directly from OTC sale. As an investor, you can save yourself the exchange fees and brokerage fees. You also do not have to wait for your order to run on the exchange. You can now trade stocks directly at various trading venues. The principle is simple: You place a price request for 20 shares in the order form of your online broker. The trading partner of your custodian bank will then notify you of a non-binding purchase or selling price. As exchange rates are changing rapidly, you have only a few seconds to decide on the offer. If you do not, you can then submit a new non-binding price request. You can also trade certificates and warrants conveniently and directly with the issuing bank, provided your depositary offers an over-the-counter trade with this issuer. Check this before opening your securities account!

Which is the best trading venue, depends on many factors, such as your planned volume of securities trading, brokerage (intermediary commission of the agent) and the spread, ie the difference between bid and ask prices. In the case of standard values such  the differences are generally negligible. On the other hand, in the case of ancillary stocks with a small trading volume, you should pay attention to the fact that your securities are traded at the selected trading center in order to buy or sell them at a fair market price. Caution should also be exercised in the case of off-exchange trading outside the regular trading hours. Since the direct trading partners bear a higher risk here, the spreads in securities trading are regularly higher than during the regular trading hours.

Observe Stocks and Speculative Securities

The price of your shares is mainly influenced by corporate news. Good business figures usually lead to price increases, while improper business figures tend to lead to price losses. In addition, other news not directly related to the company also affects its goodwill and share price. For example, a car manufacturer that sells a large part of its cars in China, will tend to grow with good economic news from China.

Even if stocks are usually thought of as a long-term investment, you should also keep tab on the current economic developments and its effect on the shares. Perhaps, you could follow a good portal where you can see updated market reports, or subscribe to newsletters that notifies you as soon as there is something new about your shares.

Run Profits, Limit Losses

While traders tend to focus on fast returns, investors are looking to invest in successful companies over the long term and reap its success through the purchase of shares. However, even in the case of long-term investments, there is a benefit of doubt, until the success does not materialize or whether the stock takes the wrong direction.

Experienced stock exchanges act according to the old stock exchange motto “Run profits and limit losses”. For many investors, however, the psychology makes a difference in their account. They often realize their trade gains after small price increases. In the case of price losses, however, they do not sell and hope to see their share prices come back again at some point.

Orient yourself in securities trading on real investors legends! Let profits run and limit your losses. Determine the maximum loss you are willing to accept when you buy the shares. Many experienced investors are setting their sales limit down about 20 percent below the entry level. If your stock moves in the right direction, simply pull out your exit limit with time.

Also Rely On Funds and Passive Investments

Along with the securities trading and investment funds, invest in passive investments such as ETFs or index certificates. This is good for long-term asset building. These securities can be an excellent alternative, but they offer investors a broad risk diversification with only one investment. Experienced investors, however, do not buy everything that comes along, but choose their investment with due care. The selection of such investment is mainly based on an experienced fund management, that monitors an above-average price development compared to other funds (with the same investment focus) as well as a comparatively small fluctuation range, a measure of the risk. Trading stocks, certificates and warrants can bring high profits. However, you should also use funds and passive investments for long-term asset building.

Conclusion

In buying and selling your shares you need to have complete knowledge on each and every security that you chose to buy. Knowing their current prices, their history of price fluctuations and more, will give you a fair idea on what you need to buy and what to skip. Another important fact in buying and selling your shares is to always enter your order with a limit (a price limit). To ensure that you do not pay an inflated price when purchasing or do not get a bad price for your shares when selling.

 

If you want more information on the subject, visit Market Brent

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