How to invest in the stock market starting from scratch

That moment you have been waiting for has arrived. Finally, after a lot of effort, you have a small cushion of savings that will save you in case of financial difficulties and, if it continues to grow, it can help you enjoy the retirement you deserve. What do you need now? Know how to invest in the stock market !

Do not worry, it is normal to be scared the first time you are going to invest, it is that you are going to risk nothing more and nothing less than your savings. But I assure you that if you do it right, the results can be very positive.

Nor am I going to deceive you by telling you that you are always going to make money, because it really is not like that. But if you dedicate time to learning how to invest in the stock market, you will ensure that that cushion of savings that you have worked so hard to achieve continues to grow little by little. Are you determined or determined? Well let's go for it!

To know how to invest in the stock market, be aware of the advantages and disadvantages it has

Surely over the years you have heard hundreds of things for and against this way of obtaining profitability for your savings. There are people who are fans of the stock market and consider it the best form of investment that exists. But we also find ourselves with those who are in absolute panic and would never play their money in this way.

I personally fall somewhere in between. I think that investing money in the stock market is a very good option, but it must be combined with other investment alternatives . In addition, you must always keep the risks in mind and act with caution so that, in the event of suffering losses, these are as few as possible.

If you are reading this article it is because, at least, you are interested in knowing how to invest in the stock market. So I am going to tell you about the advantages and disadvantages of this method. I consider it essential that you know them, because only then will you be able to know if it really is a viable option for your investor profile.

The good thing about investing in the stock market is that…

Diversify your assets and thus reduce risk

No matter what you invest in, you always have a certain risk of losing money. It is true that there are very very safe investment products, such as Government Bonds . But it is precisely this excess of security that means that in the end you earn practically nothing.

You find that you have your money withheld, and in the end what they give you for it is not worth it. Hence, more and more small investors like you and I are looking for alternatives and we want to play in the "big leagues" of investment but always with a head.

Do you know the saying “never put all your eggs in one basket”?

Well, when investing you have to do the same. In the stock market you have many assets to choose from. You can buy shares of oil companies, new technologies, telecommunications, public works, etc.

Without having to look for another form of investment, you can allocate your money to different products, and this is always an advantage. Thus, if some of your actions do not give the expected returns or even make you lose money, what you earn with others will compensate for what you lost.

Performance is higher in the long run

A good savings and investment strategy involves combining investments that yield short and long-term returns. In general, when we are investing, time always plays in our favor, since the longer we have invested a certain amount of money, the more performance it will give us.

Although there are those who specialize in playing on the stock market in the short term (this is what we know as Forex) , the truth is that the true profitability is achieved by keeping your assets for a long time. In other words, you do not need to be aware of how the prices are going all day, especially if you have invested in solid values.

you don't need a lot of money

Not all of us have the same savings capacity. Some people can save 10% or 20% of their income every month and there are people for whom this is totally impossible.

The good thing about the stock market is that it does not have the same entry barriers as other investment formulas. As soon as you have a little money saved, if you know how to invest in the stock market, you can start moving it so that it generates returns. In fact, it is best not to wait too long. You already know that Warren Buffett is one of the staunch defenders of the fact that you are never too young to start investing.

If you need liquidity, you have it

A real estate investment , a fixed term and a pension plan, what do they have in common? That once you put your money in them, it is blocked to a certain extent, since if you need to recover it, it will take a medium to long time to get it.

This does not happen with stock market investments.

If something happens that makes you need to get your money back, you can sell your shares immediately. An emergency sale may make you lose some profitability if the time you have chosen to sell is not the best, but in return you have your money back in your account in just a few hours, ready to deal with the emergency.

It is a regulated and transparent market

Without a doubt, one of the great advantages of this system is that it is very safe due to the regulation of the stock market. Companies that want to sell their shares must go through an exhaustive analysis to demonstrate that they are really viable.

In addition, the information on the profitability of the companies is public. So, before we put our money into their shares, we can find out in detail about their trajectory so far. This does not ensure the profit, but it allows us to go a little safer.

Track and analyze financial information. It is key to making money in the stock market.

The bad thing about investing in the stock market is that...

Profitability is not guaranteed

Although this is a disadvantage, it must be recognized that we are going to find this drawback in practically any investment product.

There is always a certain risk index. However, we have seen before that we can find the balance within the risk we want to take if we diversify.

You need to have some basic knowledge

There is a lot of ignorance about how to invest in the stock market and many myths and legends regarding this system, which means that many people do not see it as a viable option for them.

What we cannot deny is that we cannot start playing our money without having any idea how this system works.

Investing in the stock market requires a little effort on our part. First of all, we must learn some basic notions about its operation. And it doesn't hurt to take some time to find out about how the stock market is doing.

Markets are volatile

Many people who do not know how to invest in the stock market believe that with it you can get great benefits in a short time. But this is very complicated, and operating in this way requires in-depth knowledge, both of the stock market itself and of the companies that operate on it, and of what is happening in the market.

In the short term, markets are quite volatile: what is worth a lot today may be worth nothing tomorrow.

And if we are not aware of this and if we become obsessed with achieving high profitability in a short time, in the end all we achieve is losing money.

To make investments we must have a very well defined strategy.

Avoid common mistakes

Now you know that when you invest in the stock market it is not all rosy, but also that it is not something that is totally out of your reach. Now, if you really want to know how to make money in the stock market, you cannot ignore the common mistakes.

I've seen it time and time again: people who get carried away by siren songs thinking they're going to get a lot for their money, only to find out that they haven't. What lies behind all these cases are frequent errors into which it is not uncommon to fall, if you do not know much about investments or the stock market.

My objective with this article is that you know how to invest in the stock market safely, and in a way adapted to your needs and resources. Therefore, I do not want you to lose a single one of your valuable euros because of a mistake. So take good note of all of them so as not to commit them.

Not accepting losses, a big mistake if you don't know how to invest in the stock market

I put it first because I believe that when it comes to investing our money, the first thing we have to do is assume that, at some point, we are going to lose. This should not scare us, but it should make us act cautiously.

Investing history is full of people who have gone bankrupt because they were afraid to sell stocks when they were depreciating in order not to lose money. In the end, they waited too long and found that those shares were worthless and worthless.

Think that having your money captive in an investment that is not giving you profitability is of no use to you. Take it out of it even if you lose something and put it in another asset that does generate profit.

not diversify

I have referred to this before, but it still amazes me that there are so many people who end up losing a lot of money by putting all their savings in the same investment product.

It does not matter if you are going to invest in the stock market, in a pension plan or any other product, never put your money in a single investment product! Doing so is the easiest way to be left with nothing in case something goes wrong.

In the specific case of investing in the stock market, it is not only a mistake to always buy shares of the same companies. It is also not advisable to focus only on one sector.

Imagine that in your portfolio you only have bank shares. You may have diversified if you have several entities. But if a financial crisis hits, all the shares you have will lose value. Therefore, never focus on a single investment sector.

act hastily

When we see images of brokers in the movies, they are always stressed and making decisions at lightning speeds. However, investing in the stock market is not incompatible with taking things easy. In fact, acting hastily only leads us to make incorrect decisions for not having evaluated all the options well.

It is clear that it is not good to hold stocks that are losing value, as I have already mentioned before. But you don't have to sell them at the first chance either. The market is so volatile that a company can start the day with a loss and end with a profit.

Before deciding, you have to evaluate different possibilities. For that we must have good knowledge about how the stock market works and what exactly is happening in the market at that moment.

Investing in the stock market does not mean running against the clock.

Thinking that big companies always recover quickly

In the portfolio of all investors there are usually what are considered "safe values". They are shares of companies with great stability. Many times they are not very profitable actions precisely because of that stability, but they provide some security knowing that the company to which they belong is a solvent entity.

But the market spares no one, and even the world's most popular company can see its shares fall. Take for example Apple. It is one of the most valued companies, but its shares are not always up.

It is true that a large company always has an easier time recovering from losses. If you hold the shares, surely in the end you will obtain profitability. However, thinking that just because it is a great company, it is going to improve is also a mistake.

It is not that you will go bankrupt if you do not get your money, since it is very rare that a large company goes bankrupt. But sometimes recovery takes much longer than expected.

It happened to Telefónica a few years ago. His shares were trading at 7.60 euros and fell, then began to recover. But two years later they were still priced at around 6 euros.

Not reviewing the stock portfolio

Allow me some essential advice when it comes to how to invest in the stock market: as a small investor, you cannot and should not be obsessed with your stock portfolio, but it is a mistake to completely ignore it.

If something has been clear to us so far, it is that the markets are very dynamic and things can change in a matter of minutes. So a portfolio made in January of this year may not be as profitable in January of next year.

My advice in this regard is to periodically review your stock portfolio and see if you are really interested in what it has, or if the time has come to make an adjustment.

Not having a goal

Earning money is the objective of all those who invest in the stock market, that is clear. But not everyone has the same goals when it comes to earnings. Those who want to earn a lot of money in a short time should opt for risky assets, while those who are in no hurry to grow their savings can adopt a much more conservative profile.

The goals you have in terms of your money will determine what products you should invest in and how you should act towards them. Hence, it is a big mistake to start investing without knowing where you want to go. Set yourself a realistic goal and look for ways to achieve it.

Invest money you need for something else

Beware of this error because it is extremely dangerous. It is one of the most you should avoid.

To invest, you first have to have savings . What are savings? It is that part of your personal capital that you do not need to cover any of your needs or your pending obligations. We can say that savings are what we have left over after having paid everything we owe and having filled our fridge. This is what explains why not everyone can save, and why the level of savings is very different from one person to another.

You should never invest money that you need for something else , that is, that does not constitute savings. It is true that shares become liquid money in a very short time. But if you sell in a hurry because of an emergency, you could end up losing money. And if you're investing money that you really should have spent elsewhere, there's a good chance you'll end up underselling the shares.

Not taking into account the associated costs

There are many who think that investing in the stock market is winning or losing, and little else. But do not forget that this activity has a cost. And it is a cost that we must assess to see if the profitability that an investment offers us really interests us or not.

Do not lose sight of the commissions , since these can often make an investment that is profitable a priori not as interesting for you as you thought.

If you operate through a broker, you will have to pay for each purchase and sale operation, as well as a maintenance commission, for the collection of dividends, for increasing the invested capital and for transferring shares from one broker to another.

The good thing is that there are so many brokers on the market that if you do your research, you can find one that charges lower commissions.

To learn how to invest in the stock market, implement these good practices

Now that we know what we should not do, it is time to analyze what we should do if we want to achieve success with our investment .

I warn you in advance that this involves spending some time to make sure that you are doing the right thing. In no case can you enter the stock market “like crazy”.

Take it easy and follow the tips below. You will be much closer to achieving your goal.

In the bag as in the garden, it is important to follow good practices.

Train yourself, learn how to invest in the stock market

If you are reading this article, it is clear that you have already taken the first step. But my goal is to give you some basic notions so that you can know if this type of investment is for you. In the event that you reach the end of the article and are encouraged by the stock market, it is best that you train and inform yourself through specialized media.

I am going to take up the words of Warren Buffett again, and that is that there will be few people in the world who know as much about finance and investments as he does. He started investing his money at the age of 11 and has come to point out that he should have done it sooner.

He is a genius, but he is also a very educated person. One of the best advice he has given investors is to invest in yourself first, because they are his best asset.

Do you want to earn money with your savings? Do you want to achieve financial freedom ? So do not hesitate to invest in training. The more you know, the better decisions you can make and the better results you will get.

Remember when you got your driver's license. Before you got behind the wheel of the car, you had to learn the theory. Well this is exactly the same. First train yourself, and then you get to work with your investments.

Nowadays we have it very easy to learn about practically everything. Not only are there specific courses, you can also read reference blogs and specialized finance media .

If you admit me an extra piece of advice, never stop training. The more up to date your knowledge is, the better. And this is something that does not only apply to training in finance and investments.

Determine how much money you are going to invest in the stock market

When you already have some savings , it is time to start looking for investment alternatives. Value what you have and what it has cost you to get it, and do not risk everything in the stock market.

The smartest thing in these cases is to start with small contributions. This way you minimize the risk while you learn.

The rest of the money that you have invested, put it in other products that also give you profitability. And keep saving on your own.

Between the money you save to invest and the profitability that what you have invested is already giving you, your savings continue to grow. At the same time, you are gaining experience on how the stock market works, so you can progressively increase the money you dedicate to this investment.

Define your investor profile

Before you start playing your money, you must determine what your risk tolerance is. Even if you are investing money that, a priori, you do not have to dedicate to something else, you can be more or less tolerant of the loss of capital.

There is a direct relationship between risk and return.

Normally, the more risk an investment involves, the higher return it can offer. But putting money in assets of this type is only advisable for those people who have a high tolerance for risk, who are generally those who have significant assets and who do not find it too much of a problem to lose a few thousand euros.

Surely this is not your case, and it is not mine either. So you will surely have to place yourself in an investor profile between medium and low, depending on the risk of loss that you are willing to assume.

Ask yourself a question: “what percentage of your capital could you accept to lose?” If it's too little, you're clearly a low-risk investor, so the stock market might not even be a good fit for you.

If it is a somewhat higher figure, you can qualify as a medium profile investor. This will allow you to start looking for assets with a somewhat more moderate return but with less risk.

In other words, depending on your investor profile, you will know how to invest in the stock market and how your investment portfolio should be.

Build a diversified portfolio

In your investment portfolio there should be a bit of everything. You cannot miss those safe values ​​that we talked about before, since they always generate some profitability. On the other hand, the ideal is to combine more stable actions with others that have a risk that you are willing to accept.

Don't limit yourself to only well-known companies. There are many listed companies that may not be known to the general public today, but that may be interesting for you.

As I have already told you before, make sure that there are shares from different sectors in your portfolio. And check back from time to time to see if it's helping you meet your goals or if you need to make any adjustments.

Decide your investment attitude

This decision can be fundamental in the success of your investments. It is about choosing if you want to adopt a more active role and manage your investments yourself, or if you prefer a more passive role and are going to leave this task in the hands of a specialist.

We have already seen before that having the services of a broker always implies a cost. But if you don't have a lot of experience, it pays more to pay a specialist and obtain profitability (even if you have to deduct the costs of having a broker from what you earn), rather than saving costs but not getting the profitability you wanted due to lack of knowledge about the broker. market functioning.

Have a long-term mindset

Take the investment in the stock market with patience. The first time you do an intraday operation (buy and sell on the same day) it may work out for you, but this does not mean that it will always be like that, it may be a mere matter of luck.

A good stock investor puts his money in it with an eye on the long term. You're going to make a profit, but it won't be tomorrow.

Maintaining your investments over time (as long as this is advisable) will help you learn little by little and make your decisions in a thoughtful way and once all the options have been thoroughly analyzed.

Choose a good broker

Your broker is going to have a transcendental importance in the success or failure of your investments. My advice is that you choose someone who offers you confidence and who does not charge you too much. But in no case choose your broker solely for its fee. The fact that it charges very little does not mean that it is the worst, but an excessive rate does not mean that it is the best in its sector and that it will make you earn a lot of money.

Try to find a professional who offers you a price for his services that adjusts to the market and do not hesitate to inform yourself about his reputation. This is the best way to know if you can trust him or not.

Are you ready to invest?

All the way we have traveled so far should help you clarify your doubts regarding whether putting your money in the stock market is for you or not. If you think not, don't worry: there are other forms of investment that can also give you returns and will prevent inflation from wreaking havoc on your savings in the long term.

If you have decided that you are ready to take the plunge and invest in the stock market, congratulations! The world belongs to the brave and you are one of them. Remember these tips that will help you embark on your path successfully:
  • Educate yourself on finances and always stay up to date with respect to stock market information.
  • Never invest money that you know you will need for something else.
  • Start by investing small amounts.
  • Diversify your investments both inside and outside the stock market.
Now that you know how to invest in the stock market, the time has come to take action. The only thing left for me to tell you is what the National Securities Market Commission (CNMV) advises us: invest with common sense, responsibly and always carefully analyzing all the information you find within your reach .

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