But after all, how does investing in shares work?
Do you want to know how investing in stocks works? Then you're in the right place!
Announcements
The stock market is in the spotlight and, as a result, more and more Brazilians are interested in it.
The problem is that for many people, the stock market seems like something inaccessible, made only for people with a lot of financial capital. Well, that's not true!
To help you understand how investing in stocks works, we have prepared this article. Continue reading to find out more.
What is the stock market?
The stock market is the environment in which publicly traded organizations trade fractions of their equity.
Think about common everyday buying and selling relationships, where you pay to obtain products and services.
You need to go to a physical location, or access an online store's website, to choose what you want and make the purchase, right?
The stock market also follows this logic.
However, in this case, the products sold are shares in publicly traded companies, that is, shares, also called papers.
There are many ups and downs in the stock market. However, with planning and knowledge, it is possible to achieve good profitability and minimize risks.
What are the ways to invest in stocks?
Now that you know what this market is, it's time to learn about the main ways to invest in shares:
1. Equity fund
The main objective of equity funds is to invest the money from shares in Stock exchange.
In other words, equity funds are considered one of the gateways to the market.
This form of investment allows you to invest your capital in several companies.
Basically, the process works as follows:
The shareholders are, in fact, the investors, who pool their financial resources and delegate the administration of the investments to a specialized professional, the manager.
The money from all shareholders is added together, forming the fund's assets.
With this amount in hand, managers invest in various shares available on the Stock Exchange, choosing those that present the best opportunities for profit.
Investors who invest in these funds have the main objective of diversifying their investment portfolio.
2. ETFs
The ETF, or Exchange Traded Fund, known in Brazil as “Index Fund”, was created in the early 90s.
Despite being relatively new, the ETF is considered a great success in the investment world.
Through ETFs, interested parties can acquire a large quantity of shares at once, because when acquiring a share, it is as if the investor were buying a fraction of an index that comprises several shares.
In Brazil, ETFs are restricted to the stock market. However, in other countries, ETFs can be invested in fixed income and commodities.
This type of investment is recommended for those who are starting out in the market and do not yet have sufficient knowledge about the stock market.
3. Investing directly in shares
This is the best known option of all!
Direct investment consists of the direct purchase of shares by the investor (individual).
The investor chooses their shares based on their own analysis or with the help of professional managers (recommended option).
Operations are carried out by the home broker of the brokerage firm or bank where you opened an account.
How investing in stocks works: step by step
Understanding how the stock market works and the main ways to invest is essential to becoming a successful investor.
To help you, we'll show you the main steps you should follow. Take a look:
1. Know your investor profile
The main ones types of investor they are:
• Conservative: Investors who value security. They are not very tolerant of risks.
• Moderate: They are willing to take certain risks in exchange for high profitability. Even so, they do not give up security.
• Bold: riskier profile. They are willing to take risks in exchange for high profitability.
2. Outline your goals and strategies
Do you already know what your investor profile is? Great!
Now it's time to outline your goals.
What do you want to achieve with your investments? Do you want to invest in the short or long term?
Establish a strategy that is aligned with your ultimate goal.
3. Open an account with a brokerage firm
To invest in shares you need to have an account with a securities brokerage firm registered with the CVM.
It is the brokerage firm that will mediate your operations on the stock exchange.
4. Set aside your capital for investment
Define how much you want to invest. Take into account your essential expenses and how much you can set aside for investments.
As there are risks involved in the market, we recommend that you never compromise your money which is necessary for survival.
5. Follow the market
A successful investor is always keeping an eye on market trends.
However, he also doesn't let himself be shaken by momentary impacts, as he knows that the gains will pay off in the long term.
What helps to understand market movements is Technical Analysis, also called Graphical Analysis, which represents the behavior of investors in each asset.
6. Buy your shares
Now you are very close to entering the world of investments.
After doing in-depth research or asking for help from a professional manager, define the shares you will buy.
It is also important to establish your objectives for this action, which could be:
• The amount you are willing to pay for the shares
• The number of shares you wish to purchase
• The maximum amount you are willing to lose (if the best-case scenario does not happen)
Conclusion
Now you know how investing in stocks works and what every successful investor does to create a solid and consistent strategy.
To increase your earnings and minimize your risks, study the financial market and never act rashly!
If you liked this article, also see “How to start investing in stocks: step by step”.
