How to Buy & Trade in Stocks: Complete Guide

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Stocks

More and more people are thinking about starting to invest their savings to get a return on their money, especially when interest rates are rocketing. Before we begin, it is important to understand the basics of investing in the stock market, so we hope this article will be helpful in understanding stocks to buy in the market, especially to those who are inspired knowing that if they had invested $ 10,000 in it SyP500 50 years ago, today they would have 1.2 million dollars.

Who can buy shares

In general and in most countries of the world, almost anyone of legal age (or who is under the guardianship of someone of legal age) and who has an account with a broker can carry out the sale of shares.

In the case of foreign investors (for example, Spaniards who want to invest in the US market), they must invest using a broker that has access to that market, since each one will have specific requirements to designate who can or cannot invest.

Many brokers will require investors to have a social security number in order to facilitate the payment of necessary taxes. Those who may not be able to buy shares directly will be able to invest in funds (Mutual Funds or ETFs, which are short for Exchange Traded Funds).

How much money do I need to buy shares?

Today, there is no minimum to be able to invest in the stock market. Yes, it is true that more traditional brokers or platforms can establish a minimum to start investing, but most modern online brokers do not have any minimum, so theoretically you could start investing with as little as $ 1 .

Where to buy stocks

The easiest and most efficient way to buy shares is through an online broker since we will only have to open the account (prior identification) and transfer funds (through a check or electronic transfer) to be able to start operating in question. minutes. We can also use a traditional broker or buy shares directly from the company in which we want to invest, although there are certain restrictions to do this.

How to buy stocks

To begin with the steps of how to buy a share in the stock market, the first thing is to make sure you have access to a broker, either through our private bank (many offer these services) or through a specialized online broker. The commissions charged by traditional banks for stock trading services are usually somewhat high, higher than those of online brokers, so if we are capable and do not mind opening another account on one of these platforms, it is highly recommended.

How to choose which shares to buy

Once we have our account and have transferred funds, we can begin to investigate which companies we want to invest in. The best way to select them is to think about which companies we use as consumers and what we see in our day day, which companies have good customer satisfaction. In fact, one of today’s most respected investors, Warren Buffett, argues that we should invest in companies because we want to own them, not because we want the share price to rise.

Variables to study when we select actions

To understand if a stock is a good long-term investment, we can look at a series of KPIs ( Key Performance Indicators ), which will allow us to choose the best company from among a few in the same sector. Some of the variables to consider are:

Income: is the money that a company enters in a given period. It is interesting to analyze what trend the income follows over the last periods.

Net Income: it is at the end of what is known as the Income Statement and indicates the money that a company has generated after subtracting operating expenses, taxes and depreciation.

Earnings and Earnings per Share (EPS): EPS is obtained after dividing earnings by the number of shares outstanding. This variable allows comparisons with other companies in the sector. Some companies reinvest their profits, while others distribute them to their shareholders in the form of dividends.