Last Updated on August 10, 2024 by Ali Hamza
Before venturing into the ever-complicated world of stock investing, check out our experts’ recommendations. Check the level of risk and the term of your investment that best suits your investor profile.
If you are one of those investors who are venturing to take their first steps in the stock market, read the following recommendations carefully.
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Can you afford to invest directly in stocks?
To find out if you are interested in direct investment in individual stocks, ask yourself the following questions:
1. What level of risk are you willing to take?
Of all investment products, stocks are the most exposed to significant fluctuations in their prices. When in financial terms we refer to the volatility of a share we refer precisely to those lurching up or down. Are you willing to expose yourself to these ups and downs or even to the risk of ending up losing your investment, yes, in order to obtain a higher return? If your answer is yes, investing in stocks might interest you. On the other hand, if you are completely allergic to risk, forget about investing in the best stocks.
Being aware of the risks that are assumed, you can adopt certain measures with which to try to limit these eventual losses as much as possible. To achieve “good returns” investing in stocks, you must first diversify. And how is this done? Well, betting on shares of several companies that develop their activity in different sectors. If they are also from different countries, all the better.
Thus, if the price of a share or a sector falls, you can offset the loss with the rise of other shares. However, with a single share you risk losing money if the price goes down. To diversify correctly it is reasonable to buy around 10 securities of different Spanish and foreign companies.
Of course, you should know that having a balanced portfolio of stocks requires individual monitoring of stocks but also global monitoring of sectors and currencies. If you do not have time for it, we propose a portfolio of shares in which we will select the best combination at all times and we will keep you informed of any relevant event for your investments. And always keep in mind that the part dedicated to the actions must represent only a part of your investments within an overall strategy for the long term.
If in any case you start investing now and you do not have enough capital to buy those 10 shares, mutual funds can be a good instrument to access the stock market from small amounts and in a diversified way.
2. What is your investment time horizon?
By investing long-term in a well-diversified portfolio of stocks, your investment returns will be higher than that of any short-term, risk-free investment, and all at moderate risk. But in the stock market the long term is not a few months. The time horizon must be distant: at least 5 years and better if they exceed 10 years.
3. Do you already have a diversified global portfolio?
A well-diversified global portfolio is the cornerstone of any investment strategy. Before thinking about which stocks to buy, you should determine, based on your profile, how much weight you should give them within your global portfolio. When building such a portfolio, it may be easier to do so through mutual funds than by investing yourself in individual stocks. A portfolio of funds in which there should be room for equity funds (from different countries and sectors) and bonds (in different currencies and from solvent issuers -public or private-), and in which it should also make room for other investment products. fixed income such as time deposits or Treasury obligations. We propose you our global model portfolios, mathematically designed so that in the long term, and no matter how much the investments that make them suffer, you never lose money with them in real terms, that is, obtain at least inflation. We have set that long term at about 5 years for those with a defensive profile, at 10 for those with a neutral profile and 20 years for the most dynamic. No one can guarantee that they will not suffer ups and downs, or even that their final goal will be achieved with total guarantee, but so far, in their more than 20 years of history they have beaten it by far.
4. To what extent can you get personally involved?
Investing in stocks requires your time. It is not a question of spending 24 hours a day in front of the computer, but of keeping up to date on those news or events that may affect those that you have in your portfolio or others that you have had your eye on and could be susceptible to future purchases. .
How to choose the best stocks?
To begin, you must identify those actions that are interesting and in which it is therefore worth investing in them. To identify them, a series of criteria must be taken into account that take into account the valuation of the stock market where they are listed and some variables of the company in question (such as profit, cash-flow or expected dividend). With them, the investor will be able to target those companies that offer sufficient profitability to remunerate the risk that is being assumed and to offer juicy returns if the expected prospects are confirmed. Hence, they are the factors that we take into account when issuing our “buy”, “sell” or “hold” advice. Do not forget these instructions. The important thing is not whether a stock has risen or fallen a lot, but whether it is cheap or expensive.To help you find fast growing stocks, dividend stocks, and cheap stocks, check out ranking tools offered by Kailash Concepts.
So keep in mind that cheap stocks with good fundamentals (such as earnings forecast or price over book value) are much more interesting than expensive stocks with bad “fundamentals”.
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