For the savings account they are poison, for the stock market they are a blessing: Low interest rates lead to all-time highs on the German stock market. If you have no experience with shares and want to make money with shares, you should consider a few things.
Better to earn money with shares now?
Next to the good old savings book, home ownership or life insurance have traditionally been more popular among Germans than stocks. Because real estate has become so expensive at the moment and savings books and life insurance policies are not yielding any interest, experts are already talking about a German investment emergency. Stock trading offers the best possible answer to this dilemma. While share prices rose sharply in 2012, financial experts are currently outdoing each other in their optimism about equities. The riskier form of investment currently represents the almost inevitable alternative to traditional investments. Because you can earn money with shares or at least
The positive economic trend in Germany is also boosting the appeal of equity investments. The German DAX share index in particular is benefiting from this development. It is hovering above the 9,000 mark.
Financial strategists expect most stock indices to rise by between 5 and 10 percent in 2013. Therefore, the question arises: Is it possible to make money with stocks, will they become a no-brainer? Responsible analysts cite the fact that stock prices react with declines in the event of sudden crises. Serious forecasts cannot take these unexpected effects into account.
Nevertheless, anyone who wants to build up wealth in the long term cannot avoid buying stocks, especially since stock bubbles are not expected at present. German companies are generally correctly valued.
In Germany, habits are changing: The number of stock owners is steadily increasing. This development was particularly impressive in the first half of 2012, boosted by low interest rates and the public debate about currency security and inflation risks. In the second half of the year, the influencing factors became relative and many investors sold their shares again. They wanted to earn money with shares in the short term. According to statistics from the Deutsches Aktieninstitut, around 13.7 percent of Germans currently own shares – very few compared with the USA or the UK.
New private investors should exercise prudence so that they can make money with shares: Those who want to buy shares should have the money to spare and think in the longer term. The rule of thumb is to invest at least 10,000 euros over a minimum of 3 to 5 years or more, precisely because short-term fluctuations cannot be predicted, even if share prices are steadily climbing. Nobody should put all his savings into shares, but always only 50 to 60 percent. Securities of different companies from several sectors should be purchased in order to spread the possible risks. Large companies in the chemical, food or technology sectors are suitable if they pay regular dividends.
Funds or individual shares?
If you want to invest peu à peu, it is best to choose a fund savings plan, because the constant purchase of individual shares also generates constant transaction costs. Index funds, known as EFTs, cost the least because they are based on an index, for example the DAX, and therefore do not require a fund manager. The feared total crash of individual securities is countered with a so-called stop-loss order. The shares are then sold automatically when they fall below a certain threshold. An ideal instrument for the cautious stock investor.
Online stock trading: What should be considered?
Especially in times of low interest rates, one naturally asks oneself how a return can be achieved with one’s own capital. Very popular are the shares, which can be bought already for some time very comfortably and simply over Internet. Beginners as well as advanced now ask themselves the question, which options offer themselves in this framework, and on what must be paid attention. Thus, the foundation for financial success can already be laid.
Finding a provider for online stock trading
Already at the beginning it is of great importance to find the right provider for you and your own preferences. Therefore, it is necessary to find the right provider for yourself directly, so that you can then buy shares with it. Particularly helpful in the search can be the comparison sites on the Internet, which were created specifically for this purpose. This makes it possible to quickly get a picture of the situation and find the provider that comes closest to one’s own needs.
Now it is a matter of creating a deposit for this purpose.
This is a very important point when the first offer has been found. Then directly also the fees become apparent, which the offerer suspends on the purchases of the shares. Since the securities account can also be opened quickly via the Internet, this process also takes quite little time.
Some brokers require a verification of their own data, which can be done quickly and easily, for example, with the Post-Ident procedure.
Selecting a strategy for stock trading on the Internet
Now it would be time to find a strategy for yourself. This is especially important because it can improve the chances of success with shares even more. Basically, the long and the short horizon of the investment are directly opposed to each other, and it is impossible to say which of these ways is the better one in practice. Nevertheless it remains that one should form thereby a personal opinion, and so the correct factors into the eye to take.
However, before buying shares in a company, it is important to obtain information on this very subject. This is especially important because it allows you to form your own opinion, and thus make a better decision. A good indicator here is, for example, the ratio of price to profit, which can be found in the company’s annual figures and balance sheets.
Define goals for the purchase of shares
With the investment, the goals of it must also be defined quite clearly. First of all, this concerns the capital that should be available. Now one should ask oneself the question whether one would like to sell the share at a low price, or use the low price in order to get further favorable shares of the enterprise. If you have clearly formulated your goals here, you need not fear a fluctuating price at all.
Set the purchase date
When buying, it is very important to specify the exact date of the trade. This is especially important because the price can fluctuate in this window. For example, you can specify a period of up to three days, and the purchase will be completed by the computer at the time when the price is at the lowest level. Of course, those who wish to initiate an immediate purchase can do so as well.
Selecting the stock exchange for online trading in shares
Before buying shares, it is equally important to choose the right stock exchange through which the trade will be concluded. Very popular is of course the electronic stock exchange in Frankfurt, which is listed by brokers as “Xetra”. Here, the order fees are quite low, which is why these conditions can contribute a lot to financial success.
Very important are the fees that the broker charges for the purchase of the shares. In most cases, it is based on the amount of capital invested, but there is often a minimum amount, which is five to ten euros. It is therefore important to pay attention to this if the shares are later to be sold again at a profit.
Security standards when buying shares
With a broker, which can be used over the Internet, many investors worry simply about the security there. In this regard, it should be said that SSL encryption technology is used, which is considered the best that is currently available on the market. Thus, the data of the customers are absolutely safe and protected.
Online management possible?
It can be very convenient to have a quick look at the current balance and performance of the shares on the Internet. Very many brokers offer exactly this option, making it possible to always keep an eye on the price, so as not to miss the right moment to sell.
Making profits when trading shares
Of course, in such a case, the goal is to be able to sell the shares at the end with a profit. For this purpose, the price should be significantly higher than the purchase price, in order to also be able to cover the fees incurred by the order. If the price now seems to have reached a peak, you can think about selling the shares.
Expect and minimize losses
Of course, it is not always possible to sell each of the shares at a profit. Therefore, it is important to also deal with the issue of loss from the very beginning. Even then, there is either the option of accepting the losses and selling the shares, or buying new shares at a low price, and hoping for the trend to turn around.
Risk or return in online stock trading
Of course, it is not always advisable to accept a high risk with the investment.
If an investment seems lost, it may be advisable to simply part with the securities.
However, it must be decided on a case-by-case basis which options are still available.
The latest information on a political and economic level can make at least a short-term forecast on the prices of one’s own shares possible. Therefore, it is of great importance to be able to keep yourself up to date as best as possible.
Getting rich with stocks?
The actually very simple formula for getting rich with stocks is to correctly predict the future of stock prices. But it is also the most difficult task.
In principle, it does not matter whether the price will rise or fall, because the stock market also offers the possibility of betting on falling prices. But as a rule, getting rich with shares is about investing in a company with the hope of rising prices and the dividends that the corporation pays out from the profits.
In order to estimate the probability of a price increase, different possibilities are offered. The chart analysis starts from the previous price trend of the company, from the chart, and calculates various future models based on technical price signals. Fundamental analysis, on the other hand, starts from the substance and from the profit expectations of the stock companies.
Unfortunately, the results of the professional analysts do not offer any guarantee to get rich with shares, because in many cases the hit rate only fluctuates around the 50% mark. Unpredictable events can shake all forecasts. In case of doubt, investors should rather bet on the future of a stock index like the Dax, instead of on individual stocks. The risk of price losses is then lower, but so is the chance of profit.
Long-term or short-term investment?
Basically, becoming rich with shares requires staying power, i.e. a long-term investment. Short-term buying and selling usually leads to becoming poor with shares, true to the stock market wisdom: ‘back and forth makes pockets empty’. Even the idea of buying shares that have fallen and then hoping for a countermovement in prices offers no guarantee of future price gains, because shares have no guarantee of value. They are shares in the success of the company, and therefore also in its failure.
Leverage products and equity funds
To get rich with shares, banks offer the purchase of warrants and certificates in addition to the direct purchase of shares. They have mostly a lever and rise thus with price increases of the basic value around a multiple. This variant has on the one hand a substantially higher profit chance, but on the other hand also a higher risk, which can lead up to the total loss. In addition, the buyer of these products does not participate in the dividend payments of the stock corporations.
The purchase of equity funds, on the other hand, is much safer. They are managed by a professional management of the respective fund company. Depending on the type of the fund, it distributes or accumulates the dividend profits. Quick profits are not to be expected from a fund, but long-term success is. The disadvantage of this type of investment lies in the fees charged for managing the fund. The success can be seen in a fund ranking. But even here it is only the past that can be evaluated. A reliable guarantee for becoming rich with shares can therefore unfortunately also no share fund offer.
Conclusion about online stock trading
In the end, it becomes very clear that very different factors must be taken into account.
Often it is only possible to be successful on the stock market and make a profit.
Alternatively, one can also do it like the famous Andre Kostolany, and simply sleep after the purchase.
Investing in stocks is risky but at the same time lucrative.