Beginner tips

​My beginner tips for stock market beginners

I myself am not yet so long as a private investor on the stock market.

I only started in October 2020 and this is not really a long time. However, in this short time I have already experienced quite a bit and have also traded too emotionally.

Thus, I have learned quite a bit in the few months and would therefore like to take the opportunity to briefly explain my tips for stock beginners.

Inform first

There are many tips on how to buy shares and especially as a beginner you can easily be put under pressure. Here you often jump on a hype and are surprised that you have lost money.

Therefore, it is very important, as I myself had to determine, to deal in advance exactly with the respective share or the respective company. So everyone should know what he wants to invest his money in. Of course, tips from third parties can flow in here, but you should not rely only on that.

It is advisable to take a closer look at the company. Thus also times the share price of the last years examine. It can also not hurt to look at the annual reports. Here especially compare the sales and profits of the last few years. Also the indebtedness plays a role. Also look at the business area itself and determine for yourself whether its products and services will continue to be in demand in the coming years. So whether the company is also stable in the future and can possibly continue to grow in its field.

I myself can only advise against buying shares on instinct. I also did this in the beginning. But I was lucky, because I usually got out in time. However, I only got out because I took a closer look at the stock afterwards and then evaluated this investment in a completely different way for myself.

So you should look into the respective stock in advance and then decide calmly whether an investment makes sense for you or not.

Spread the risk

Especially as a stock beginner, you often focus on one particular stock. But especially in the beginning with not so much money to invest, this is not the best idea. The risk should be kept as low as possible and therefore it is important to invest in several companies, from several industries and countries. The risk is thus much more diversified. If then times shares should go into the minus, other shares can absorb this and so limit the loss or one has overall still even a positive return.

For many stock beginners it could therefore be much better to invest in an ETF at the beginning. As a start I can call here the iShares Core MSCI World UCITS ETF. Hundreds of companies from different industries and countries are represented here. The risk of a loss is therefore very widely spread here and can be a much better investment, especially at the beginning. So the earlier you invest here, possibly even as a monthly savings plan, the more you get out of it over the years.

So don’t put your money on one stock as a stock beginner. At the beginning, think carefully about what you want to do. Think long-term and spread your risk.

Available capital

To invest you need money, of course. I can only recommend to invest money here, which is not needed somehow in the long run. From taking a loan to invest money in shares is not the right way.

So before buying shares, think about whether you might need the money in the next few years or not. It is important to think in the long term. The stock market can always have periods of weakness, as the Corona crisis in 2020 impressively demonstrated. Prices almost always recover after crises, but at that moment you have less money than you invested beforehand. Such phases can always occur. Here it is important to remain calm and not just sell frantically.

So really only invest money in shares that you can really spare for the next few years.

​Thinking in the long term

Only very few people make money on the stock market with quick buys and sells. Especially as a private investor, you should invest for the long term. I therefore tend to buy & hold, i.e. buy shares and hold them for a long time.

In this course, a monthly savings plan on shares or ETFs can therefore also be very useful. Here you invest money regularly and do this over a long term. If you start with 20 years here and really pull this through once 40 years, will be able to generate a good return over the long term.

Of course, you should also check your investments from time to time and see whether the purchased shares and their companies are still solid and suit you. Patience pays off in the end.

Losses through shares

Of course one will also make losses and exactly this makes many share beginners completely particularly much fear. This scares off many and they prefer to put their money in a savings account. Many do not understand here that the money on the savings account loses more and more value due to inflation over the years. So you save money, which slowly becomes less and less value.

One cannot hide from losses on the stock market. Even if there is no crisis in the country, stocks also have price fluctuations every day. So the price goes up and down constantly. So here, as a stock beginner, you should not immediately lose your nerves and panic.

Therefore, I am also of the opinion here to rather rely on Buy & Hold as a strategy for a solid company. If the company is healthy and does business properly, the share price will continue to rise steadily over many years. of course, not all shares are true price rockets and therefore a long investment period is much more important to me than short-term gains.

If one is convinced of the company, a setback in the share price could also be a good reason to buy shares of this company at a good price.

Surefire stock tips

If one informs straight as share beginners to the topic, one meets all kinds of share Tipps. Somehow such stock tips are always surefire and enormous returns are given.

Especially here there are many “experts” who offer you something else, so that you invest your money exactly there. Of course, not all offers are unserious, because even here a few bring the whole industry into disrepute.

Therefore, I can only recommend here, do not just blindly believe everything that you get in stock tips so presented. Really look into the matter and form your own opinion. Especially as a private investor, you quickly think of the fast money. So always keep in mind, if it is so easy, many more people would have to be enormously rich!

Using compound interest effect

Even without regularly investing your own money, you can still increase the capital you have invested. This is called compound interest.

If a share is doing very well, you could consider selling part of it. A share in this company is sold and the profits are reinvested in other shares. Here again ETF can be interesting for stock beginners. With many ETFs, the dividend is not paid out to the investor, but directly reinvested in this ETF again and again. Thus, the invested capital continues to grow and you have generated more money than you have paid in, even without price gains over the years.

For me, the compound interest effect is therefore very important in a long-term investment and should not be underestimated.

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Check investment regularly

As already mentioned above, you should check your investments from time to time. Always ask yourself, does the company still suit me and am I myself convinced of this company?

Just because a company is doing well today, it can look different in ten years. Therefore, do not only inform yourself about the company before buying. Here it can not hurt to read economic news from time to time and look where the market is going.

It may therefore be necessary to sell shares again, because you are no longer convinced of a company and its business model. Maybe there are new companies on the market where you see more potential for the future.

So always keep an eye on your portfolio and react accordingly.