There are many ways to take advantage of our savings, but there are investment formulas that always seem more complicated to us, such as investing in the stock market. However, with good advice you can do it without problem. In today’s article we will see when to invest in the stock market, what advantages and disadvantages it has and how this system works.
What is the stock exchange and how does it work?
The stock market is a market, with the particularity that what is sold in it are parts of companies called stocks.
Corporations divide their capital stock into shares, but it is normal that over time they need financing. One of the ways they have to get money is to sell those shares on the stock market.
You as an investor can buy shares of one or several companies and in exchange for them you will get a certain return. In addition, you can buy or sell them according to your interest, which helps you get more money in exchange for the amount you have invested or reduce the risk of losing your investment.
Although there are still stock exchange buildings in large cities, today everything works electronically and you can operate in the stock market from the tranquility of your home.
How to buy and sell stocks?
We have already seen that stocks are actually “portions” of a company. They represent a specific percentage of its share capital and have a value in euros (price) that varies from day to day depending on the products or services offered by that company that are more or less demanded in the market.
Although we are trying to explain the investment in the stock market in a very simple way, the truth is that to know what to buy, when to buy and when to sell it, you have to know the market very well. So it is best to always do it through a broker.
A broker is a specialist in the stock market that operates as an intermediary, managing your portfolio of shares. It does not necessarily have to be a natural person, nowadays there are platforms that operate as brokers and allow you to easily work with your securities account. even banks operate as brokers.
If you buy and sell your shares through an intermediary of this type, you manage to reduce the risk of the investment and you will be well advised on when it is better to carry out each purchase or sale operation.
How does the share price work?
Stock prices fluctuate from day to day and understanding the operation of the listing system is really complex. In order not to get too complicated, it is enough for you to know that it is the supply and demand that most influences the price.
If there are more people who want to buy than there are shares in the market, the price goes up. Conversely, if many people want to sell their shares but few want to buy them, the price drops.
Advantages and disadvantages of investing in the stock market
One of the great advantages is that there are many different types of stocks, allowing you to diversify your investment and thus reduce risk. In addition, the barriers to entry have fallen a lot in recent years, you can invest without having to have a large amount of money.
Another advantage is that it is an investment with great liquidity. If you ever need the money, all you have to do is sell your shares. The profitability is usually good and also the information on the stock market is nowadays very accessible thanks to the Internet.
But there are also a number of disadvantages. Among them we will highlight that it is an investment with risk and whose profitability is never assured, you could win, but you could also lose all or part of your money. It is important to have a well-defined strategy, and that implies having a good knowledge on the subject.
Best investments in 2020
When analyzing when to invest in the stock market, we cannot forget to review some of the most recommended investments for this year. If you do not want to risk much, you can always put your money in safe securities such as Iberdrola, endesa or enagás and combine these shares with others that fluctuate more but which usually give profitability, such as those of Ferrovial, Acciona, Indra and ACS.
In any case, the best way to get it right is to know your investor profile well and put yourself in the hands of a specialist who can advise you on the best actions in your specific case.
The stock market and the coronavirus, is it a good time to invest?
It might seem that with the difficult moment we are experiencing worldwide, now is the wrong time to invest in the stock market, but the truth is that it is not. Many investors who, far from getting rid of their investment portfolios are growing them taking advantage of the prices of many stocks are down.
All the experts seem to agree that the crysis will be somewhat punctual and in a few months we will see recovery. This means that stocks that are down today will pay off after a while. Therefore, now is a good time to buy shares of consolidated companies.
Now you know the basic characteristics of the stock market and the best investments for this year 2020. You have also been able to verify that the decline in shares is a circumstantial situation due to the COVID-19 crysis, making it an appropriate time to invest in bag or make extraordinary contributions to your investments.
However, if you do not know this market in depth, our recommendation is that you contact an expert to help you obtain the best possible return on your investments.