Investing in stocks is often referred to as a stock market game. However, the stock market is not a casino where most people come for entertainment, hoping that their luck will smile at them. In practice, the purchase of shares with growth potential requires a detailed analysis of the company. So where do you start investing in stocks to make a profit and limit your risk? Accepting the risk The risk of losing capital is inherent in investing in the stock market and every professional investor accepts this fact. On the other hand, inexperienced people often ignore this factor, which is why they make ill-considered purchases without proper knowledge about a given company. In such cases, you end up wasting your money or freezing your capital for many years. That is why the "old men" never put all their money in one bag, but divide it. It is worth investing capital in stocks, specially set aside for this purpose. This avoids time pressures and tensions due to price fluctuations. In the shorter timeframe, the fluctuations in the price of a given asset may appear drastic, while in the longer term it is less felt by investors. Fundamental and technical analysis The awareness and acceptance of the existence of the risk prompts the investor to perform a fundamental analysis of the company and obtain as much information as possible about it. Fundamental analysis allows to assess the probability of an increase in share prices, among others based on the economic, political, financial condition and development plans of the company and on the basis of other factors that affect its economic situation. Technical Analysis (AT) allows you to forecast the future prices of a given stock, based on historical charts. Important are, among others support and resistance lines that show the maximum and minimum price levels in given time frames. AT allows you to learn about long- and shortterm trends and choose the best time to buy. However, it is worth combining these two types of analyzes, because this will allow you to assess the condition of the company and relate it to the situation on the chart. Analyzes allow you to increase the likelihood of an increase in the price of a given asset, but do not give 100% certainty that the share price will rise as expected - which should be aware of. Information tracking Before and after the purchase of shares, it is worth following information about a given company, including from the financial markets. In addition, you need to monitor the situation in a given industry, which can significantly affect the valuation of given assets. Information can be obtained on your own or you can use websites where it is provided on an ongoing basis (including brokerage houses), and analysts comment on the course of trading. Investors who purchase stocks on a short-term basis have to follow the market situation on an ongoing basis, which is often time-consuming and generates a lot of stress. On the other hand, long-term investments do not require such vigorous actions. Choosing a brokerage house The purchase of shares takes place through a brokerage house, so before choosing it, it is worth getting some key information: commission for the purchase and sale of shares (the brokerage house charges a
commission on each transaction) annual account maintenance fee access to a platform that allows you to track and execute transactions in real time access to a website with asset data analysis costs of transferring money from a brokerage account to another account It is worth checking whether a given inwestujfinanse.pl brokerage house also charges other fees. Risk diversification Risk diversification is based on the principle of "Never put all your eggs in one basket". Therefore, professionals divide their stock capital into several parts that invest in stocks of companies from various industries. The risk of several companies going bankrupt is much lower than that of one. When investing capital, you have to take into account the risk, because you can never predict all the events that affect the condition of the company, e.g. natural disasters, terrorist attacks, etc. There are several types of actions: registered shares bearer cash in-kind ordinary and privileged voice and mute free jointly owned inculcated A rational approach to the stock market increases the probability of making a profit and reduces the risk of losing capital. However, it must be remembered that the risk is always there, and for some companies it is especially high. How to invest in stocks? Complete Beginner's Guide Is it worth investing in stocks? Which companies to choose? What strategy to adopt and how to build a good portfolio? A beginner investor has dozens of questions and the further he delves into the subject, the more fascinating he discovers. It is commonly believed that longterm investment in stocks is one of the better and safer ways to build wealth. Let's take a closer look at how to take the first step on the Stock Exchange.
What are stocks? Simply put, stocks are securities that reflect pieces of companies. By purchasing them, we become full-fledged co-owners of given companies and, depending on the nature and number of shares, we gain various rights, for example the right to vote on the company's future or share in profits. Actions are not assigned once and for all. You can trade them and this is where you can earn the most. By buying shares of a company that is in a pit and selling them when the company is doing well, you can count on even several hundred percent increases. You can buy shares not only from listed companies, you can become a co-owner of almost any existing company. What makes most investors choose companies listed on the stock exchange is primarily transparency (required by the WSE), wellestablished market position (appropriate scale of operations) and, above all, liquidity of shares, i.e. the ability to quickly buy or sell them, which with small and less known startups
can be a big problem. How does the stock exchange work? The stock exchange is guided by the laws of the market, in fact, it can be said that the stock exchange is the market, the market of companies, and more precisely their shares. We will find there companies, funds, natural persons who buy and sell shares of various companies. You can also trade bonds, investment certificates and futures contracts on the stock exchange. The transaction takes place when there is a seller who is ready to get rid of some of his securities for a certain amount, and a buyer who is willing to pay that amount. Currently, the stock exchange is available online, almost everyone can start their adventure there, the conditions that must be met are: being of age, opening an account with a licensed broker and having capital. Having such an account allows you to buy and sell all publicly traded companies, securities and financial instruments. Advantages of investing in stocks Earnings - This is undoubtedly the main reason why so many people are interested in the stock market and investing in stocks. You can multiply your money by investing in stocks in several ways. One of them is short-term speculation, i.e. quick response to market information and purchasing shares based on it, hoping that their value will increase significantly in a moment. Another opportunity to earn from investing in stocks is through a long-term approach. Buy stocks and forget about them for a few years. If you choose the right company with solid foundations, you should sell your assets at a profit after a few years. Yet another form of earning on shares is the dividend paid by some companies, which is nothing else than sharing the profit with their shareholders. Market liquidity - choosing to invest in stocks of listed companies, you gain another huge plus. It is enough to adapt to the hours of the stock exchange and you can almost immediately buy or get rid of stocks of companies available on the stock exchange when you need cash quickly. When investing in gold, bonds or art, this liquidity is much lower, and it can take you months to recover your cash. Availability and choice - the stock exchange does not close to any investors or any industries. You can invest in chemical, development, food and technology companies with a really small budget. In such conditions, it is very easy to ensure a solid diversification. The choice of companies depends on your strategy. Emotions - the stock market is also extreme experiences, enormous stress and euphoria of happiness can intertwine with each other even in one hour. It is in vain to look for such impressions by investing in the aforementioned metals or bonds, and as many believe, the most interesting and the best is the road itself, not its finish. Disadvantages and risks of investing in stocks Losing Capital - Investing comes with risk, this often repeated slogan has probably been with you for a long time. Unfortunately, it is no different with investing in stocks. The valuation of companies is influenced by a multitude of factors, both economic, political, natural and psychological. One mistake in media communication or a misinterpreted statement by the company's president can correct the value of shares by tens of percent. You should be
aware of this. Lack of certainty that you will get your deposit back - when you buy gold or bonds (preferably those that take into account inflation) you can be almost 100% sure that you will get back what you deposit. In the case of investing in stocks, unfortunately, If you can't be sure, the market is very volatile and it is possible that the stock you buy will drop to almost zero and you will lose your entire investment. Stress and addiction - stress is an inseparable element of strong emotions, it is no different on the stock exchange, large losses can threaten the health of many people. People who are prone to such strong emotions can become addicted to them and start acting irrationally, taking loans and exposing their family to losses. How to start? How to buy and sell stocks? To start your adventure with the stock market, theoretically, you only need a brokerage account. Many banks offer them, perhaps even the one with an account. However, in order to operate on the stock exchange reasonably, you need a solid dose of knowledge and patience, when buying or selling stocks you cannot get carried away and act under the impulse or rush caused by the masses of investors. Often unconventional actions bring better results. There are 427 domestic companies listed on the WSE, the total value of which is PLN 550 billion. This impressive amount is, however, a small fraction of the global stock market, with the largest centers in New York, London and Tokyo. On the investment map of the world, the Polish stock exchange is only 0.2%. In other words, all stock markets except the Polish stock exchange represent as much as 99.8% of investment opportunities. How little in the global economy do all companies listed on the Warsaw Stock Exchange together weigh in? The map from The Economist shows perfectly well, where the overall share of Poland is compared with the value of one company, TimeWarner. As a consolation, Russia is the size of P&G, and Turkey's share is comparable to Starbucks. The largest companies in the world Shares only from Poland Although the importance of the domestic stock market is so modest, all the statistics show that the Polish investor cannot imagine investing abroad. Probably many of them have heard about portfolio diversification, which is to reduce risk and increase profits, but the choice of their investments is limited to the decision of how much to invest in large companies (from the WIG20 index), and how much in smaller ones. Thus, we are looking at a grain of sand that accounts for 0.2% of the global sandbox from a different perspective. If our investment passion was transferred to the holiday area, we would all visit Warsaw intensively, sunbathe only on the Baltic Sea, and go skiing only in the Tatra Mountains. Poland's share in global investments The prospect of going abroad would be as pleasant as the vision of root canal treatment at the dentist's. It can be risky locally The Warsaw Stock Exchange, being only a small part of the global capital market in recent
years, unfortunately had to face problems that had a significant negative impact on its perception by foreign investors. In 2014, the transfer of PLN 153 billion from OFE to ZUS proved that one cannot be sure of seemingly inviolable funds from citizens' retirement accounts. The redemption of bonds and the announcement of the review of the pension system in a few years' time create uncertainty whether the shares currently owned by OFE will not be acquired in a similar way. A foreign long-term stock market investor must already take such risk into account. Apart from local problems, with the growing geopolitical tensions between Russia and Ukraine, the risk of the entire Central and Eastern Europe region increased significantly, which also effectively scared off foreign investors. Due to, among other things, these problems, the Warsaw Stock Exchange is not participating in the boom in the global stock markets. And when the American indices in 6 years from the bottom of the bear market reach historical records and the Japanese stock exchange climbs to 15-year peaks, the Warsaw Stock Exchange is boring and ... no profits. Apparent diversification The 2008 crisis and massive declines on the WSE, followed by the bankruptcy of Greece and local Amber Gold scandals made investors associate the foundations of the economic theory related to diversification. It is often referred to as the principle of "not putting all eggs in one basket", which is to warn our portfolio against losses resulting from the specific problems of a given investment. Diversification However, practice shows that the emotional commitment to investing in the country I live in (home bias) is as popular as it is deadly for our long-term profits. Additionally, it is a paradox that an investor who buys domestic stocks or equity funds, who additionally runs a company operating in the country and wants to diversify his funds, invests in the domestic stock market. Ultimately, it is even more dependent on the domestic economic situation, the zloty exchange rate, as well as the atmosphere in the banking sector and local political risk. Another problematic issue noticed by investors with capital exceeding several million is also the problem of liquidity of funds on the domestic stock market. Global opportunities A global ocean of investment opportunities is at hand. What's more, the available solutions are easy to implement, allow them to be quickly introduced into the investor's portfolio and, what is equally important, they are cheap. Brokerage accounts for enthusiasts allow direct investment in shares of companies listed on stock exchanges in the US, Japan or Germany, but it requires a lot of time to analyze and hedge currency risk. Much simpler and cheaper solution to start investments in the world are investment funds widely available to investors. One hundred percent capital opportunity So little is enough for the capital to work at 100% of the capacity, and not be limited to 0.2%