How could I invest in stocks?
Buying stocks: How can I invest in stocks and which ones are good for beginners?
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How can I buy stocks?
The basic requirement for entry into stock trading is a stock portfolio. It serves as a kind of checking account in which you do not keep money, but securities, i.e. stocks. You can use this depository to buy and sell shares, including online. To do this, give the stock broker with whom you hold the securities account the corresponding order, also known as the order.
Invest in stocks step by step
You always buy securities - regardless of whether they are individual stocks, equity funds or ETFs - the same way. In the following, we will explain the procedure step by step.
1. Open a share portfolio!
You can open the share deposit with a branch bank, a direct bank or a specialized online broker. Branch banks prove to be more expensive than average because they often charge administration fees. Such fees reduce the return.
To get started with stock trading, first compare several securities account providers and use our securities account comparison. You can also use the comparison to apply for the deposit to be opened directly. The prerequisites are low. You just have to
- be of legal age and
- keep a reference account (giro bank).
2. Find the security you want
Enter the identification number of the security you want in the search field of your securities account. This can be a so-called ISIN number or a WKN number with which shares are identified.
- 3. Select the trading venue in which you want to operate
You can choose between several exchanges and direct traders. Direct trading is often called "OTC trading", English for "over the counter".
The difference between stock exchange trading and direct trading is that in stock exchange trading, stockbrokers - or in the case of the Xetra electronic stock exchange, an online system - coordinate pricing according to supply and demand. With direct trading, you buy securities from banks or financial institutions that have them in their portfolio and determine the price themselves. Direct dealers often have lower prices due to special conditions!
4. Find the provider with the lowest price
From the listed providers of your security, choose the one with the lowest purchase price. In the case of direct traders, to be on the safe side, check whether the price corresponds to the current market price. He shouldn't be above it. Either your bank shows the current price on their website anyway or you can check the website of the Frankfurt Stock Exchange, for example.
- 5. Set a limit (optional)
If you want, you can set a limit in your portfolio up to what price you want to buy or sell a security. If your folder cannot be executed immediately for various reasons, this will prevent you from buying securities at a much higher price or being sold too cheaply at a later date.
Example: At the time of your order, a share costs € 59.46 according to the quoted market price. You can then set the limit a few cents higher in the input mask, around € 59.60.
A few days after the order is placed, a securities settlement takes place in the order book of your securities account. All the securities you own are listed again in the order book.
Would you like to trade stocks or ETFs and are still looking for the right securities account provider? Compare with our depot comparison and find the best depots.to the depot comparison
What are the costs of investing in stocks?
Trading stocks costs money before there is a return. You have to expect the following expenses:
- Custody account fees: Like a checking account, a stock custody account can cost basic fees, even if you do not trade in securities at all. It gets particularly expensive with branch banks, which often charge administration fees on top of that. Such fees reduce the return!
- Transaction costs: Order fees apply every time you buy and sell stocks - separately for each order, not for each order as a whole. The transaction costs usually consist of a basic fee per order and a certain percentage of the order volume. In some cases, there is also an exchange fee, which, depending on the exchange, is between 1 and 3 €.
- possible additional costs: Some brokers charge additional fees, such as partial execution costs if an order can only be executed in two transactions or fees for receiving foreign dividends. Telephone order fees or extra costs for changing limits are also not uncommon.
Tip: Your depository provider is obliged to itemize all costs associated with the purchase of a security, its annual holding period and a possible sale. You will find this cost statement shortly before completing your order in a separate link. By checking these costs again, you can finally be sure that you have not accidentally selected a provider that is too expensive!
Which equity investment strategy suits me best?
Before you start trading stocks, you should ask yourself about your personal goals: Do you want to make quick profits by buying stocks? Or are you looking for a long to medium-term investment to build up wealth or for ETF retirement provision? Are you ready to take high risks for high returns? Or is security more important to you? And: what investment horizon do you expect, how long can you tie up your money?
Depending on the situation, there are different investment strategies that you can use to build your portfolio, in which stocks sometimes play a larger, sometimes a smaller role:
- Conservative strategy: If you are primarily concerned with security, you could build up your investment portfolio to 75% with fixed-term deposits and overnight deposits and 25% with stocks.
- Balanced strategy: If you are concerned about security, but also about returns, you could equip your portfolio 50% with stocks and 50% with fixed-term deposits and overnight deposits.
- Dynamic strategy: If you are a little braver and can cope with financial losses, your portfolio could consist of 75% or more stocks.
Tip: Stock trading involves a lot of training for beginners. We therefore advise against investing too much in the stock market without prior knowledge. Better to invest less, but in the long term. In this way, you can compensate for any exchange rate losses over the course of time.
Buying stocks - how do I find the right securities for me?
The custody account is open, now it's a question of which stocks to buy. Good stocks are stocks that you can buy cheaply and sell more expensively after an optimal price development. The difficulty is that price developments are very difficult to predict. Many unpredictable factors play a role, entrepreneurial, macroeconomic, political and psychological. Even stock market experts are regularly wrong in their predictions about which stocks you should buy now. Successful valuation of stocks requires not only a feeling for markets and economic contexts but also a bit of luck.
Nevertheless, we have a few tips for you below on how you can proceed in order to invest in the right stocks.
- Don't bet on the fastest horse: It is not a good idea to only invest in stocks that are already very high because these stocks are also expensive. The price often falls afterwards. Then you made a loss.
- Own research: If you want to analyze stocks on your own initiative, you should research as much as possible about the company (e.g. annual reports) and the respective industry (trends, innovations, specialist magazines). Also keep up to date with interest rate and currency developments, the oil price and political events in the region.
- Assessments from professionals: Do not trust so-called stock experts blindly, but keep yourself up to date on the stock recommendations of the experts via finance portals, newsletters on the topic, stock market pages in daily newspapers and specialized YouTube or TV programs.
- Underrated titles: Analysts are specifically looking for stocks whose potential they estimate is higher than the current price reflects. There are some key figures for this, which are mathematically quite complicated to use. You can find out more about these indicators in our article Shares.
Which stocks are good stocks for beginners to invest in?
In stock trading, too, beginnings are difficult. However, you can make it easier for yourself by mainly buying stocks that are suitable for beginners. There are three ways to do this:
- the investment in easily accessible DAX stocks
- in an equity fund or
- into a passive stock index, a so-called ETF.
In the following we will explain the differences to you.
Invest in DAX 30 stocks
The shares of the 30 largest German listed companies are good stocks for beginners. These are so-called “blue chip” shares. These are the shares of solid, financially stable, leading stock exchange companies that are described in English as too big to fail - i.e. too big and important to fail completely.
DAX stocks also have the advantage for beginners that they are basically familiar with the German market, the state of the German economy and current political developments. In principle, however, you can also buy “blue chip” shares from other countries, such as the USA.
Buy into an active equity fund
If you don't trust yourself to trade stocks with individual stocks, you have the option of investing your money in a fund and having it managed for you by a fund manager.
A fund is a bundle of stocks from different companies from different industries. This spreads the risk of a total loss because you always have several apples in the basket. With an active equity fund, you buy into the fund of a fund manager who will see to it that by the end of the trading day you have made a better deal than the average of the stocks on the stock market. However, its services are not free. You should carefully weigh up whether this model is worthwhile for you after all the additional costs.
Invest in a passive index fund (ETF)
In the “Exchange Tradet Funds” (ETF) model, you buy a bundle of shares from a fund company that replicates a share index such as the DAX, hence an index fund. The shares of the thirty strongest German DAX companies will then be found in your portfolio. Your return develops in parallel with the DAX, does not exceed it, but does not fall below it either. Such ETFs are called passive funds because they let the portfolio dormant for the long term and not actively manage it.
The current best index funds can be found in our ETF comparison.
What role does timing play in stock trading?
When it comes to buying and selling stocks, a lot can depend on when you strike. A stock that is cheap today can generate high profits the day after tomorrow. When you want to sell stocks, it's about when the price peaks. Those who sell too early are giving away returns. Who sells too late, too.
Unfortunately, nobody can predict when the best time will come. Stock market speculators turn it into a profession. But they too fail dramatically again and again. Too many unknown variables are involved. It's relatively easier to tell when the wrong time has come to buy or sell stocks. In fact:
- Never buy in a bull market, that is, when a stock price has only continued to rise to dizzying heights for a long time. Because every bull market is usually followed by a bear market, a price fall. Then write loss.
- Never sell in a bear market. Even then, you write a loss if you paid more for the stock than you are getting now. You should therefore wait for the share price to decline!
Tip: Choosing the right time does not have to play an essential role for you as a beginner. We advise you to invest in stocks for the long term. If you invest your money in stocks over a period of 5 to 30 years, the time of buying and selling only plays a role when the portfolio is filled and when the portfolio is closed. The rest is patience.
How Many Shares Should I Buy?
How many stocks to buy to get started depends on your budget first. If you start with € 5,000, you shouldn't spread this rather small budget over several dozen companies. However, you should not only choose 1 or 2 stocks, but spread the risk of loss across several shoulders by means of a broader list.
A solid start would be 5-7 titles from different industries. A manageable number that enables you to keep an eye on the development of the individual companies.
Alternatively, you can buy an index fund (ETF). This means you can bet on the entire stock market and have sufficient risk diversification.
Fund managers, analysts, professional traders - which experts are the right contacts in stock trading?
In stock trading, numerous experts offer services to optimize your portfolio. We explain who does what and how the professionals differ:
- Fund manager: You can buy into a fund manager's fund. He will try for you to trade the stocks contained in the fund on the stock exchange in such a way that the return is higher than the development of the market. Caution: Studies have shown that over 80% of actively managed equity funds fail to achieve this goal. One reason is the high costs for this service, which reduce the return on investment.
- Analysts: You observe markets, industries and companies and try to predict the price developments of stocks with various analytical instruments. As stock market experts, they often pass on their knowledge in the media. Here, too, caution is advised: In the past, analysts were wrong in numerous cases.
- Professional trader: First and foremost, traders are people who actively trade on the stock market. In contrast to investors who want to invest long-term, traders are about speculating, about short-term profits through price changes and the quick buying and selling of securities. A professional trader does this for a fee on behalf of banks, funds, insurance companies, companies or private individuals.
As you can see, there are many people in the stock market who promise you profits. You can only play it safe by teaching yourself the necessary know-how and reducing your risk with the right investment strategy.
Buying stocks for beginners: 6 tips to make your investment a success
- Start with a strategy: A well-planned approach is the be-all and end-all. For beginners, the long-term investment strategy that compensates for fluctuations in the price of stocks over periods of 5 to 20 years is best. In addition, do not invest all your money in stocks, but split up with bonds and overnight money.
- Invest only the "remaining" money: The money you invest in stocks must not ruin you if you lose it. You shouldn't need it for at least 5 years. Therefore....
- First nest egg, then stock market: In an emergency, put three months' salary back into a daily deposit account or a fixed deposit account. You should only invest in stocks when this position is in place.
- Start small: Don't make the mistake of relying on supposed “insider tips” right from the start and / or buying too many stocks. Take it slow and make your own experiences. 5 - 7 stocks in the portfolio are enough.
- Diversify: Spread the given risk of loss over several shoulders. Do not invest all your money in a single title, but rather in several from different companies and industries.
- Don't act too much: The more you work on your portfolio, the more transaction costs you will incur. The US billionaire Warren Buffet is known to only touch his portfolio once a year!
If you want to practice stock trading dryly, many banks offer demo accounts and sample portfolios for beginners. As in practice, you can use it to buy and sell shares and monitor price developments without actually investing any money. There are also sample portfolios from experienced professionals for inspection, which you can use to find inspiration for your own investment strategy!
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