These days, investing in the stock market is one of the multitude of ways to increase your capital. However, there is a procedure to follow, that is to say a set of boxes to fill in to hope to succeed in this area. So, if you have made the decision to invest in the stock market in order to diversify your savings and you don’t know where to start? Or what are the steps to follow? So this article will guide you to take your first steps correctly in the world of the stock market
The first steps
To buy a share, all you have to do is contact a financial intermediary (online broker, bank, investment fund, etc.) authorized to sell these shares. Once you have chosen your financial intermediary, you can proceed to the next step.
Moreover, when you dive into the world of the stock market, several abstract terms should appeal to you. But for the purposes of this article, we are going to focus on two: “Distribution” and “Diversification”. Because they are essential for any new trader.
Indeed, buying shares involves diversifiable risks. To help you better understand, this means that the equity investor has the possibility to choose the company of his choice among so many others from different sectors. In addition, when looking for the stocks that are right for you, it is imperative to find those that correspond to your investor profile as well as your investment horizon.
Now, to assess a potential high return, it is important to understand the risks associated with your investments, which can help you make informed decisions. Here are some risks to take into account when investing:
- Volatility: The unpredictable rises and falls of the stock market can have major repercussions on your investments.
- Concentration: Investing in a small number of stocks is a risk in case the rest of companies will experience difficulties.
- Liquidity: It determines the level of ease of buying or selling an investment. If a stock does not experience much demand, its price will fall. It is the law of supply and demand.
- Interest rate risk: Rising interest rates may lead to higher borrowing costs for companies, which may be negative for the return on invested capital.