The stock market is a great place to invest your hard-earned money. You buy stocks or shares (investing) in other businesses and your interest accumulates with time. However, as a newcomer interested in the stock market, you will be faced with many challenges.
We have put together a checklist of what you need to do when looking to invest in the stock market.
Determine your investor type.
As an investor in any business, you need to understand your business acumen. Are you a patient investor? Can you survive losses? These are the kind of questions you need to answer when determining the type of investor you are. This will as well guide you in deciding on where to invest your money.
You can easily find some short test online you can take to better understand yourself and in deciding what business strategy to follow. Or you can contact us on Facebook and we’ll conduct a short quiz identifying your investor profile.
Specify your target budget and expected ROI.
When you want to invest in any business, you have to have to work out how much money you are willing to invest and your expected return on investment (ROI). It is necessary to give you an idea of whether or not the stock you intend buying is profitable. It makes no sense investing in a stock that will not yield interest after a period of time.
Be on the lookout for a stock that will yield 5–10% ROI in a year. This is necessary to avoid investing in risky stocks and avoid the unnecessary pressure attached to investing in stocks especially as a newcomer. You also need to know how much you wish to invest and for how long.
See an example of a personalized template below:
Period — 1 year
Total amount to invest — 10k pln
Expected ROI — 15% or 1.5k
You can set your own template using the one above. A template is important as it guides you defining your target. It serves as a personal analysis of your business outcome throughout your investment period helping you to understand whether you are making profits or not.
Select a Broker and open an account.
The next step will be to find a stockbroker to open an account with. Opening an account with a stockbroker is necessary as it serves as your contact with the stock exchange. When looking for a stock broker it is important that you pay attention to fees. The best option is to have only variable fees which only depend on the number and amount of your trade. At the moment, most of the brokerage houses in Poland have set a fee of 0.30% or 3zl whichever is lower.
Some brokers impose annual or semi-annual fees on managing your account, try and avoid such costs as it will lower your profits, especially if the amount you invested is not huge.
The stockbroker I recommend is DEGIO. I use them on a daily basis. They do not impose hidden charges or anything like that. The only fee you pay is 1zl + 0.08%. Moreover, they give an access not only to GPW but to more than 60 stock markets (USA and EU included), at a very low cost.
We both get 20 Euros to our account if you use the referral link (No gimmicks, it works).
Define your investment strategy and stick to it.
After you define your goals and have decided on how much money you are investing, the next step is to work on an investment strategy to make it happen. An investment strategy is a plan or setup that guides you in making decisions based on your goals, risk tolerance and future need for capital.
A guaranteed way to achieve your financial goals is by investing your money in different investments — known as diversification — in order to balance risk and return. Remember the proverb that says “do not put all your eggs in one basket” this is to say, if you invest all your money in one stock, what happens when the company folds up?
Compounding interest is another form of investment strategy. It simply involves reinvesting your profits from an investment. Instead of paying it out, so that your interest from the subsequent investment will keep increasing.
Make the first purchase and enjoy the feeling of passive income.
After you have done all your research, and defined your target and followed all the steps mentioned above, the next step is to proceed into the exciting world of the financial market. It is time to make your first purchase.
Endeavor to make enough research and inquiry about any asset you are going to purchase. You can purchase stock of popular companies offering services that are in high demand daily. Or if you are up for it, you can pick an undervalued stock which you believe will gain in market price.
If you are unable to carry out necessary research or you get confused at any point, a smart decision will be to consult a professional. Seeking professional help may cost you a little, but it will help in providing you with insights from a stock market professional.
Notifinio was created to assist in making profitable and correct market decisions. We follow every recommendation from Notifinio with our personal money.
Even if you are in a hurry to manage all your investments personally, there is nothing wrong with consulting a professional advisor — just once or occasionally. If you have questions you need an answer to, or you need assistance, there is no shame in asking for help.
The best part is to approach your financial freedom with intention. Successful investing and meeting your short and long-term financial goals — requires someone with the ability to take charge.