Do you remember the emotion you felt the first time you rode a bike or when you had your first kiss? What about the first time you invested in the stock market and received your first dividends? Indescribable.
We are starting the year and thus also a range of alternatives to start making our money be more productive. When we decide to invest, a frequently asked question is where do I start? So here we will tell you what you need to know to start this exciting path as a shareholder of the largest companies globally.
Planning
Establish a budget where you review your income and expenses, to determine your investment capacity, this can be weekly, fortnightly (once every 15 days) or monthly. Remember that when it comes to investments, returns are a good ally, but perseverance is the true wealth builder. And the best? You don’t need to be Bill Gates or Warren Buffet to start, since at this time you can start investing in stocks with just $100. That’s actually the amount at which I started in 2020.
Know Yourself
Define the objectives of your investment (Your WHY?) and your profile as an investor; know what you want to achieve, this can be buying a car or a house, traveling or studying abroad. The objectives can be very varied, but the important thing is that they are clear to you; since in this way you will be able to know the investment horizon, that is, when you plan to fulfill it. In the same way, it will help you establish the risk and return you want for your investment.
Due Dilligence (Research)
When we talk about taking care of our wealth, it is important to analyze the institutions that will guard it and fundamentally confirm that they are regulated; therefore, when we want to invest in shares we must look for a brokerage firm, according to the National Banking and Securities Commission, there are 4,058 Business Brokers. This is up 0.2% from 2021. So we have different options that we can access. Among the characteristics that we must assess when choosing a brokerage house are the costs for services, operating platforms, minimum opening amount, if it has an sector focus and the added value it provides to clients, some offer e-books and webinars that help to understand much more the way investments work.
Random: Did you know that althought being relatively new in the market, Robinhood (In the US) holds the third place for most customers who own brokerage accounts? First place is held by Fidelity and second by Charles Schwab.
Prepare
Once you have decided on the brokerage house that will be your ‘teammate’ on this journey, you must open a brokerage account with it, which is formalized through a contract where you agree on the services and their characteristics with the institution. Our recommendation is that you give the contract a good read, since here you can find out about all the benefits and services that you can access apart from buying and selling shares.
Once you have signed the brokerage contract, the Brokerage House will provide you with the deposit accounts to be able to send your money, most of them will provide you with a personalized reference to make your deposits.
Familiarize Yourself
Once you have defined your objectives and sent resources to your investment account, you are ready to start building your portfolio. If you will do it on your own, our suggestion is that you familiarize yourself with the trading platform, to find out where you can review the information about prices, news and how to generate purchases and sales. Start reading about the companies and sectors in which you are interested in investing; the great investors like Warren Buffet usually look for sectors and companies that may have a high future value, with solid fundamentals and recurring demand for their products and services. If you are not sure about specific companies, there is always the option of relying on ETFs, which are instruments that are traded the same as a share but that can help you replicate stock indices, for example, VTI helps you replicate the CRSP US Total Market Index, which gives you exposure to the 4139 companies most representative of the market in the country. Today there are ETFs that can help you replicate the S&P 500, the NASDAQ and even specific sectors of the economy such as technology, pharmaceuticals or finance.
Buy In
Once you have chosen your ´players´ in the portfolio, the next thing will be to buy them, remember that stocks move based on supply and demand, so, like any market, you must keep in mind the price you are willing to pay for these stocks. In this case, there are different types of orders to choose from, among them, the most popular are:
Limit: In this type of order, the maximum purchase price or minimum sale price at which you are willing to trade a stock is limited. For what you will pay what you consider fair for said action, the disadvantage in this type of orders is that you need a person to be willing to buy or sell at that limit or better for your order to be executed.
Market: Here the order is sent to buy or sell at the prices available in the market, so it is usually executed quickly, the disadvantage is that if the market prices are very high you could be paying a little more for those actions. That is why it is important to define what you prefer, fast execution or at the defined price.
Follow Up
A portfolio is as dynamic as you want it to be and here your personal strategy will come into play to see it grow. Although it is not necessary to check on it every 2 minutes (it can be weekly, monthly or quarterly), it is important to follow up and monitor your portfolio’s movements in order to take profits or rebalance the shares if you see fit. Remember that the markets are in constant movement and a company that could have a lot of value a year ago, may not be the most ‘trendy’ today. It is totally acceptable to add or remove stocks from your portfolio, as well as monitor your performance and make changes if your financial needs do too.
Now that you know the way, you can officially make your debut as an investor and put your money to work for you.
We wish you a year full of success and achievements as a shareholder of the largest global firms. And if you need a hand… Remember that you can reach out to be put in touch with advisors, who will guide you step by step to be able to put together your investment portfolio.
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