How to Start Investing On The Stock Market With Little Money
To start investing in the stock market, contrary to what the myths say, it is highly recommended to start little by little, without emergening and with the aim of gaining experience and training. The financial manager and investor, Shaye Hirsch recommends that the best to do so is with small investments.
The stock market investment is a complex terrain that requires numerous ingredients to aspire to succeed. But, before analyzing what these are, it is important to clarify that for any small saver the doors to invest in stock values are open. The Stock Exchange is a place where every day, from the most experiences and wealthy investors the most novice and small, come together and for all of them the Stock Exchange has the same rules. All of them have their space to operate according to their possibilities and objectives. It is worth clarifying that you can start investing from the most modest budget, with no lower limit.
The capital
Although the amount destined to invest is modest, we must bear in mind that it cannot be a capital or money that you will need in the near future. Hirsch recommended not to invest in the stock market until the coverage of current expenses has been assured. Therefore, the amount to invest will consist of an amount that, if necessary, we can afford to lose without causing any financial imbalance, or have the investment for a long period.
Knowledge
The usual thing is that the stock market knowledge of a novice investor is very scarce. Due to this aspect, a certain investment in a specific training is recommended before starting. The investment does not have to be economic, it can be in education: Internet is an excellent “university” to acquire knowledge, see, hear and share experiences, read the experts, learn in many free formative webs, etc. The possibilities for training today are very numerous thanks to the courses, both on-site and online, that exist, to books and manuals published and to so much valuable information that can be found on the Internet.
Factors to consider before investing in the stock market
When we think about investing a part of our capital it is normal that we consider if we have to be an expert in the matter or it is necessary to mobilize a large amount of money. In this case, the really important thing is to be well informed, to act with caution and, above all, to carry out some preliminary steps that help us make the right decisions.
The time and money spent on education will depend on the intention and possibilities of the future investor, but there are no barriers to the access to a free online education or online.
Some banks have professional experts in stock exchange that will help you to overcome the difficulties of the complex world of the Stock Exchange.
The media offer daily analysis of the markets by independent experts that are useful for both day-to-day monitoring and training. This information is a good complement to the bank manager’s advice.
Previous aspects to take into account
In Hirsch’s opinion, before getting down to work you have to have clear three concepts. How much you want to invest, how long you are willing to hold the investment and what percentage of loss you are willing to take.
A determining aspect when investing in the stock market, and even more if you start with small amounts, is to know the impact that the commissions associated with the investment will have on profitability. There are several types of commissions:
Commissions of purchase and sale
They take place every time a value is bought or sold. Usually they tend to be between 0.20% and 0.70% on the amount of the operation to be carried out and it depends on the intermediary that has been hired. There are two different commissions that are supported in the purchase and sale operations. On the one hand the one that takes the ‘broker’ and on the other, the one that corresponds to the Stock Exchange where the securities are negotiated.
• Securities custody commissions: these are commissions charged by the depository entity for the cost of holding the shares in the portfolio. According to the regulations, the commissions are calculated on the effective value of the shares. If all the securities belong to the national market, commissions are around 20% with an annual minimum of around $12 and if they are from the international market, the percentage increases to 1%, with a minimum of around $60.
• Commissions for collection of dividends: every time a dividend is paid for shares, the entity charges a commission of a percentage, with a minimum that is usually slightly higher than $1 and that varies according to the ‘broker’.
• Commissions for capital increases: the commissions in this case are similar to those in the previous section.
Simple tips to follow by Shaye Hirsch
In the first investments with little capital it is important to make an approximate calculation of how the possible benefit of an operation would be affected by the different commissions.
It is highly advisable to set in advance a loss control order or ‘stoploss’, which generates an automatic sale, if the price of the stock falls below, a certain level or price, which allows us to meet our objective of maximum assumable loss and avoid so unpleasant surprises. It is advisable to diversify the portfolio by incorporating more than one value, so as not to take a single-value risk. The greater the diversification, the greater the distribution of risk between the securities.
Where does the money I earn in the stock market come from and where does what I lose in the stock market go?
Many people wonder where the money we earn in the stock market comes from, who pays it, where the loss is going and who stays with it. That question is linked to the idea that what someone wins must be lost by another.
Investing with a short time range implies greater risk. Shaye Hirsch advices you to invest on long term investments.
Finally, it must be made clear that is not convenient to pay any attention to the rumors since its origin is doubtful and its content may have nothing to do with the reality of what is going to happen.
