Shares are one of the best investment options, along with cash, bonds, and property. Anyone can invest in the share market and although shares are a high-risk investment, they can grow your wealth better compared to any other investment.
As a beginner, buying and selling shares may seem daunting partly because you have no idea how the share market works. Here is our comprehensive guide to getting started in the share market and become a smart and successful investor.
Starting Your Share Portfolio
1. Have enough money to invest
To invest in share market, you need some spare money. The good news is that you don’t need a lot of money to get started. However, there is a minimum amount you can invest, so it’s best to confirm with your broker.
As a general rule, only invest what you can afford to lose. The price of a share will go up or down especially if people change their minds about how well a company is performing or depending on the economic conditions it’s operating in.
If a share loses value, so does your investment. This shouldn’t be a cause for concern though. Shares have for decades provided better returns over the long run compared to other investments. You just need to be patient and invest wisely.
2. Find a reputable broker
You cannot buy or sell shares from the share market directly. Buying and selling of shares is usually done through brokers. You have to use a traditional broker or an online broker.
A traditional broker can be an individual, company, or agency registered and authorized to trade on the share market. The broker will take your order and enter it in the market. The broker can also provide advice, research, and financial planning to assist with your investments.
You can also use an online broker where you open an online brokerage account, deposit some money, and start trading. The broker will charge a brokerage fee in return.
3. Decide whether you want to be a short-term or long-term investor
Now that you’ve found the right broker, you need to decide whether you want to become a short-term or long-term investor. Being a long-term investor means you’re buying shares and holding them with the hope that they will gain value over time. As a long-term buyer of shares, you are in a safer position and are more likely to succeed.
Being a short-term investor (trader) means that you’re buying and selling shares on a daily basis. To become a trader, you need to fully understand the market to avoid making losses as the share market can be extremely volatile.
4. Research the companies whose shares you’re planning to buy
Becoming a shares investor requires lots of research, especially when it comes to companies whose shares you’re planning to buy. Not all companies have the potential to double or triple your investment. Buying shares from the wrong company can be detrimental to your investment.
Therefore, do some research before putting your money into a company.
Buying and Selling Shares
To buy or sell shares from the share market, you need to inform your broker about the quantity you wish bought or sold with the specific price at which you wish to carry out the transaction. When buying or selling shares, there are a few things you need to do.
• Enter the market at the right time. Entering the market at the right time means buying low and selling high. You will get better returns.
• While trading, be sure to communicate all your requirements with your broker to avoid errors that could cost you your investment.
• Take profit when necessary- If some of your shares have risen so far that a fall in price is imminent, consider taking a profit. Doing this will eliminate the need to sell all of your holdings.
• Don’t panic when the market falls. The share market falls all the time. If you are a long-term investor looking to build wealth over time, short-term fluctuations in the share market shouldn’t worry you.
• Spread your risk. Don’t keep all your eggs in one basket. You need to spread your risk by buying shares from different companies.
Investing in Shares Through a Fund
This is where you and several other people put their money into a fund and the fund is invested in shares. You can invest in funds through a bank, a traditional or online broker, a fund manager, or a financial adviser.
Investing in shares requires a lot of research and patience. Don’t just get in blindly with plans to get rich quickly. There is no shortcut to shares investing, so don’t fall for scams trying to sell you a foolproof investment formula.
Investing in shares is a long-term commitment that can be very profitable over time. So now is the right time to buy shares and watch your investment grow.