Many people think they know how to invest in stocks and make money from it. In fact, there are relatively few true professionals.
It is advisable to start by learning some simple truths. There are only three ways to make money from such a popular financial instrument as stocks:
- Buying securities and then selling them after the price rises.
- Buying stock options with a price up or down clause
- Receiving profits in the form of dividends.
If you are thinking about investing in shares, you can read the following:
- Save money. You will need money to invest. Do not invest unless you have a good job and a financial cushion with 12 months to spare.
- Read. Read some good books on how to invest in stocks – The Intelligent Investor – Benjamin Graham, The Writings of Warren Buffett, his annual letters to stock holders, Individual Investor Strategy and Tactics – Peter Lynch
- Portfolio. Think about your portfolio, don’t invest in stocks of just one company, have a portfolio of 10-15 companies. You can systematically increase your portfolio or investment capital.
- Long-termism. Invest with the expectation of 7-10 years, do not choose companies that may not outlive that period.
- Do not take advice. You alone are responsible for making investment decisions.
- 50%. If the shares of a company in your portfolio have risen by 50%, consider selling the stock and exiting the investment with a good profit.
- Information. Don’t be afraid to consult a broker or your financial advisor if necessary. Gather as much information about the stock as you can.
If you have chosen to invest in shares of a company with which you can become personally familiar, do so as much as possible. For example from Long Jing Capital’s experience – he wanted to invest in shares in a mall in China.
Having followed the business of 400 malls in China, you can see that most of them are unpromising, not profitable or even unprofitable. Many have irreparable flaws – location in the wrong places, awkward design, incompetent managers – all an indicator of building a business from scratch. Clearly, the creators are inexperienced.
Distinctive companies Golden Eagle and Springland own large class A-/B+ malls in Jiangsu province, one of China’s affluent areas. Golden Eagle was strongly in the lead according to reports and comparisons. All investment banks except Citi and Deutsche Bank advised to buy Golden Eagle shares. Springland was not interesting – it was analysed by less than 10 analysts (Golden Eagle by more than 30). Golden Eagle ended up with several times the value of Springland.
We visited half of the 28 Golden Eagle malls and all 16 Springland malls. What we saw was astonishing: Golden Eagle from an investment point of view was not an attractive company at all. Only two malls out of all seemed successful. The condition of the other malls was sad, we saw outdated empty halls with sleeping salespeople.
The Springland malls were excellent – more conveniently located, they were not big affluent cities of 1-3 million people with no strong competitors, the malls had modern design, well known brands and shoppers. In Wuxi we saw a queue for the first time at the Rolex boutique.
All the other investors came only from reports that made an unpromising company the most popular with investors. Last autumn the situation began to change – investors realised that Golden Eagle was not the most interesting business. The share price fell by about 40%, while Springland’s stock was up about 10%.
Instruction for first-time investors
With the help of a broker, private investors have access to every trading floor in the world, regardless of their country of origin. Exchanges from the USA, EU, China, Brazil, India and even Australia are all available for trading, enabling traders to purchase traded securities.
Once you have completed the registration process, all you need to do is make a deposit, choose the most appropriate plan and gain access to the trading floor of your choice. The next step is to choose a stock, check it against the current exchange rate and fill out a purchase order. When working over the Internet, the most convenient way is to buy securities using such programs as MetaTrader5, ROX, QUIK, etc.
What companies’ stocks would you like to buy?
Alternative investments in shares
How to invest in shares
Not everyone who thinks about investing in stocks has sufficient capital to invest in them. But that does not mean that there is no way to make money on them now. You can invest in binary stock options. What makes options different is the timing and the profit.
To make money on an option you have to specify the option term, the investment amount and the main condition – price prediction – whether the price will be higher or lower at the time of closing the deal compared to the time of buying. You don’t care about the level of price change, only about the fact that the price is going up or down. If your prediction is met, you will make a profit. Profits from each trade start at 70%, irrespective of the amount and term of the investment. You specify the term of the option yourself, from 5 minutes up to a month. I.e., you can get 70% of the profit for 5 minutes, as well as for an hour or a week. Profit from each transaction is fixed.
How to invest in stocks
Every investor chooses how to invest in stocks – directly, through a broker, funds, mutual funds, options, and so on. This choice will be influenced by an investor’s capital, strategy, existing portfolio and experience. The shorter investments, i.e. without intermediaries and companies, but directly, are less accessible, as they require tens of millions of dollars. Brokers and investment companies lower this threshold because of their own turnover, which is based on the capital of multiple investors
The important thing now is not how to invest in shares, but how to start doing so, in any of the available ways, because thoughtful investments in shares always bring good returns to their investors.