Wednesday, December 1, 2021

Buying stocks for beginners

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Equity investors would like to be able to make their own choices in the construction of the portfolio and buy and sell shares themselves. Equity investors like to delve into companies to discover interesting investment opportunities. Investing or investing in shares is therefore a time-consuming activity.

Buying stocks for beginners is more than just selecting the right stocks. As an equity investor, you are also entirely responsible for putting together a broadly diversified portfolio. For more diversification, you can opt for a combination with other types of investments. This can be done by investing in bonds, index trackers, or investment funds.

Invest in mutual funds and index trackers

Trade like you mean it. Instead of investing directly or investing in stocks, fund investors opt for mutual funds or index trackers (so-called ETFs). If you choose to invest yourself, investment funds and index funds can be a good way to gain experience. You can invest both passively and actively with this. With investment funds or index funds, you buy a basket of shares in one go. For example, with the help of investment funds and index funds with a relatively small investment, you can still achieve a good spread.

When investing or investing in funds, you choose which funds to invest in, but the fund manager is responsible for managing the fund. This makes this form of investment similar to asset management, but there is an important difference. As a fund investor, you are entirely responsible for choosing the right funds and putting together a suitable portfolio. You also get no help in choosing the right risk. The freedom is greater, but this also means that the chance of errors is greater than with asset management.

Investing in index trackers has grown in popularity in recent years. Via an index tracker or ETF, you invest in an index of shares (or other types of products) in one go. With index investing you can achieve good diversification at low costs. But here too you are responsible for the choices. A common mistake is to focus too much on costs and return, but forget the risk involved. As a result, some investors take too much risk and are confronted with huge fluctuations in bad times.

Other forms of investing

Finally, there are other forms of investing, for example in options. This form is only suitable for experienced investors. In addition, you can gamble with CFDs. Due to the high risks, these products are less suitable for building wealth in the long term. About 80% of people lose money with CFDs. We advise against investing in options and CFDs for beginners, but experienced investors should also approach these products with caution.

Investment mistakes

Good learning investment is a matter of minimizing mistakes. When investing, every mistake can cost you money. We, therefore, list a number of costly beginner mistakes for you:

  • Investing without a plan
  • Investing for too short a term
  • Deposit your entire amount in one go
  • Investing with borrowed money
  • Investing in products you don't understand
  • Investing in products with too high a risk
  • Investing in CFDs
  • Invest without comparing first
  • Emotional decisions
  • Trading too much
  • Spread too little

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