The most popular way to invest in the stock market is online, through certified and regulated platforms. The amount of money needed to access the financial markets is also low: often, with 100 euros, it is possible to buy and sell financial assets.
What is the stock market?
It is a financial market where buyers and sellers come together to exchange assets, such as shares, for a price agreed between them. The stock exchange plays a very important role in an economy, allowing companies to raise money to carry out their activities.
How does the stock exchange work?
To define how the stock exchange works are necessary to indicate the three stages of a company’s listing:
- IPO: in this preliminary stage, the company announces its intention to go public. The financial statements are then made public, and an initial listing price is set.
- Primary market: at this stage, institutional investors are starting to buy shares in the company, which is soon listed on the main financial markets. This is a very important phase, as it measures the interest of the financial world in the company.
- Secondary market: the company’s shares can also be traded by retail investors. At this stage, it will be possible to connect to our online broker and become the shares, even with limited initial capital.
The best brokers allow you to invest in the stock market even with an initial investment of only 100 euros. They offer a wide range of assets on their platform, from stocks to ETFs, which can be traded securely online.
How to invest in the stock market step by step
Once you have decided to invest in the stock market, there are several steps you should try to follow before you start investing.
Choosing a professional broker: the first step is to choose a broker. This person is the intermediary that will allow you to trade on the financial markets. To open an account with a broker, you must be at least 18 years old and reside in the countries where the broker operates.
We were investing only as much money as we could afford: which meant getting our finances in order. This fact is a basic issue. It starts with establishing a good relationship between our expenses and income and a sufficiently solid financial position.
Define your risk profile: defining the type of investor you will mean, being able to deal with investments undoubtedly at all times. With a defined risk profile, you will know how you will deal with an investment or if that type of investment is the right one for you.
Setting a time horizon for our investment means establishing when we want to monetise our investment. There are many options: there are traders who trade on the day (DayTrading), so they aim to monetise at the end of 24 hours. Others aim for a longer horizon, intending to close the month positively.
Practice on a demo: Investing with virtual money is a popular practice among people who want to learn how to play the stock market. Almost all brokers offer new members the opportunity to try out their tools in demo mode.
Why invest in the stock market?
Many investors approach the stock market world to make the best use of their capital. This opportunity throughout history remains profitable, especially if we know how and where to invest.
We count at least five reasons to do so. Here they are:
- Diversification: focusing on the best stock market assets means diversifying our capital, reducing risk, and maximizing returns.
- Low costs: to date, entry costs are really limited. As we have seen, 100 euros are enough to start investing in safe and regulated brokers.
- Passive income: if we choose to build a portfolio with the best dividend stocks, we will have the possibility to obtain a fixed income on an annual or semi-annual basis—an excellent way to invest.
- Inflation: investing money in equities, even with a low and stable yield, is still a way to revalue our capital and protect it from inflation.
- Limited risks: today, investing in the stock market presents very low stakes, thanks to extremely safe brokers and capital protection tools such as stopping losses that help us manage our investments better.
What are the most common mistakes when investing in the stock market?
Beginners, in particular, tend to fall into typical and avoidable mistakes.
Investing without education: even if we rely on Robo Advisors or a passive form of investment (such as ETFs), we must always have a clear idea of the situation. That is why studying the markets and constantly keeping up to date is a must for everyone approaching the world of the stock market.
Forgetting to diversify: another typical mistake: falling in love with one stock and betting all (or almost all) on it. Nothing could be more wrong. To invest profitably in the stock market, we must plan our strategy well and base it on diversification. A good portfolio can consist of stocks, indices, ETFs, and even some cryptocurrencies.
Using low-quality brokers: Often, the problem is not only the quality of the broker but also its level of security. Perhaps tempted by low spreads or other offers, novice traders let themselves be drawn by the first broker they find. Often, they do not even check licences and regulations, resulting in them encountering scams.