Investing in the stock market is difficult and expensive for many, but sometimes it is due to ignorance. The stock market is a market that puts sellers and buyers of shares or other financial assets in contact to exchange them at a price. This way, allows companies to obtain financing and investors to make their savings profitable.
For beginners, the National Securities Market Commission (CNMV) recommends, first of all, asking yourself if investing in the stock market is convenient. And for this, it is necessary to take into account the expected expenses and savings, debt management and coverage. Thus, for example, the financial regulator recommends Do not invest if there are outstanding debts with a high interest rate: “it will be more advisable to use your savings to lower or eliminate them”.
However, not all investors have the same characteristics and it is important to analyze them to make the most appropriate investment. In this sense, four variables can be analyzed. First of all, the investor’s financial situation. And, together with this, we must take into account the financial goals. That is, the interest that is intended to be obtained and in how long.
The length of time that the investment can be maintained will also determine the decision. It is what is known as a time horizon and the longer it is, the more risk can be assumed and, therefore, the returns will be higher. “Do not invest money that you may need in the short term”, point from the CNMV. And finally, you have to analyze the risk, the level that the investor can afford. This will depend on his financial capacity to assume the possible losses of the investment. But it also affects the “psychological readiness” to take losses.
Copying an investor does not equal investment advice. The value of your investments may go down as well as up. Your capital is at risk.
Choose authorized intermediary
Once the decision to invest in the stock market has been made, you have to choose an intermediary. The market is not directly open to investors, but to operate it is necessary to process orders through an authorized financial intermediary. The latter is important to have a guarantee. “The most important thing is to make sure that you are registered with the CNMV and authorized to provide investment services,” they explain from the CNMV. This information is available in the Official Registers of the CNMV.
These intermediaries They charge commissions for the services they provide.. Experts recommend knowing the rates in advance to assess the investment, since it implies an added expense that will reduce profitability.
The next step is to sign the corresponding custody and administration contract and open a securities account with which you can execute the purchase and sale of shares. Through this account, which must be associated with a current account where the expenses are executed, the financial intermediary is authorized to guard and manage the investor’s securities. On this issue, the CNMV warns that “many brokers offer securities accounts that allow short-term operations with leverage, that is, disbursing only a part of the total value of the operation and using credit for the rest”, an operation that increases the risk .
With all of the above, the investor can now start trading. Trades in shares, called orders, can be Execute in person, by telephone or by electronic means. Each intermediary may offer different services. It is advisable to monitor the investment once made. “It is neither necessary nor advisable to always be aware of the stock prices, but it is advisable to monitor other aspects that may affect you, such as the prospects and evolution of the business, variations in the company’s capital structure or its dividend policy” , indicates the CNMV.
Revaluations in the price of financial assets imply unrealized gains or losses. The value indicates what other investors would pay for the securities at that time if you were to sell them, but keep in mind that the gain or loss will only be real when the purchase is executed. But, profitability can also be obtained through dividends, when the company decides to distribute the profits of the company among the shareholders.