10 Tips for Buying Stocks for Beginners - Stock or Casino?

“No master has fallen from heaven yet”. 10 tips on what equity investors should look out for.

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Shares for Beginners - "No Master Has Fallen From Heaven"

No matter how you try to make your money - whether in real estate, insurance, gold, mutual funds, ETFs, warrants, or stocks - you need to study it and understand it. Buying an apartment as an investment property without understanding how the real estate market works is highly speculative! It's the same with stocks. Then take your money and go to the casino. Then at least you have an entertaining evening.

If you still decide to invest in stocks, we have 10 tips in this article that you should pay attention to as a beginner.

1) Understand how stocks and the stock market work

Before you begin, you should deal intensively with the topic of "stocks". It is also important to know how the stock market works. There are countless articles and videos on this topic on the Internet. Here are just two examples:

2) Create a sample depot

Many online banks offer free sample deposits to get used to the topic of stocks without risk. Simulate buying and selling stocks and get a feel for how it works.

3) Only buy what you understand

Only buy stocks in companies that understand what the company does and how the company makes money. Get your own picture of the company. Read the annual report or analysis about the company.

4) Be aware of the fees

Pay attention to the fees involved in buying and selling stocks. As a rule, the fees at online banks are cheaper than at your house bank. Also pay attention to the custody account fees, which can be high at some banks. In addition to the fees, you have to pay tax on your winnings. Here is an example where you can learn more about the fees: Exchange Fees: What Does Stock Trading Cost?

5) Don't put everything on one card

Buy several different stocks. In the technical language one speaks of diversification. You will never be able to find the exact one stock that generates an outstanding return. By buying multiple stocks, you spread the risk. There will always be stocks that will make you lose money. It is important that you achieve a positive return on average. I personally recommend taking at least 5 - 10 shares into your portfolio.

6) Never speculate on credit

Only invest money in stocks that you “have left over”. Stock trades offer a high chance of profit, but the risk of losses is just as great. Never forget: “There is no such thing as a high return without increased risk” and never take out a loan for your speculations!

7) Invest your money long term

Allow time for your investment. You won't get rich overnight! That only happens in films or in extremely rare cases. Congratulations if you are one of these people! The Deutsches Aktien Institut has one study publishes that over the past 50 years the DAX has achieved an average return of 8.9% per year for any investment period of 20 years.

Don't panicif there are temporary price drops. If the economic success of the company is not endangered, they should simply “sit out” the price slump.

8) minimize losses

In order to limit losses, it is advisable to place a "stop-loss order" after buying a share. Stop-loss means that the stock will automatically be sold if it falls below a certain level. There is no such thing as the perfect rule of thumb for the stop-loss rate. Many recommend a stop-loss rate 10 percent below the current rate. For stocks that are subject to higher fluctuations, a higher distance of approx. 20% should also be selected.

Why is that so important? If you make a loss of 50% on a stock, the stock must then rise by 100% to get the original stake back. Here is an example: The share of the company "BlumenSocks" has a share price of 80 euros. It drops by 50% to 40 euros. In order for you to get your money back, the share must rise again from 40 to 80 euros. That is an increase of 100%. Of course, the fees are not yet taken into account here.

If you had placed a stop loss at 72 euros when buying the share at a price of 80 euros (that is 10% below the purchase price), the share would have been automatically sold as soon as the price had fallen below 72 euros. Your goal should be to minimize your losses. "An end with horror is better than a horror without end".

The stop-loss order - know how (boerse.ARD.de)

9) Don't trust a stock market expert

Every day, recommendations from stock market experts are published in the media: “Today you absolutely have to buy XYZ. It will definitely increase. ”The reasons for the recommendation are often not transparent and understandable. Form your own opinion.

Important questions are: Is the company making a profit? Does the company have a lot of equity or a lot of debt? Is the stock performing better than the average of all stocks in an index? Objective key figures are a means of forming your own opinion.

One tool for this is the application www.transparentshare.com. Here, stocks are objectively rated with 12 key figures.

TransparentShare: The Easiest Way to Find the Right Share. Stocks for beginners. — TransparentShare: The Easiest Way to Find the Right Share.

Try TransparentShare free for 14 days. Without specifying a credit card.

Try it for free

10) Dare to go ahead and learn

Trading stocks is fun. However, will everyonewho invests in stocks also suffer losses over time. Learn from it. Losses are part of it. It is important that you make more wins than losses on average. It will take years to fully understand the stock market. Read books, listen to audiobooks, and gain experience.

Do you still want to invest in stocks now? Then you have to ask yourself whether you are ready to devote the appropriate time to it. Well worth the time.

I wish you every success and fun investing in stocks.

Best wishes