As of: March 15, 2024, 4:57 p.m
By: Laura Hindelang
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If you want to start trading stocks on the stock market, you should do so carefully and at the right time.
These tips will help.
According to the
German Stock Institute,
4.1 million people under the age of 39 invested in the stock market in 2023.
Putting money into stocks is a growing trend, especially among young people.
“Many young investors discovered the topic for themselves during the Corona period,” said Henning Zülch, holder of the chair for accounting, auditing and controlling at the HHL Leipzig Graduate School of Management in the course of a
study on financial influencers
.
Even if you suddenly have a lot of friends in your area who are investing in the stock market and the number of financial experts on social media seems to be growing every day - the topic should not be taken lightly.
What you should consider before entering the stock market
If you're seriously thinking about investing, there are a few basics you should keep in mind.
In addition to general handling of finances, a fundamental knowledge of the stock market is essential.
Until you have considered the following rules, you should not invest.
1. Create reserves
First, get an overview of your monthly income.
What part of it do you need for fixed costs, what part do you want to save for short-term purchases and what do you want to invest in the long term?
The 50-30-20 rule provides guidance.
It is best to park the portion that you want to save as a short-term reserve in your own account, advises the
VZ
VermögensZentrum
.
Before you own individual stocks, you should get a general overview of your finances.
© Zoonar/Imago
Only when you have set aside three to six net incomes for unforeseen expenses should you think about investing.
If you don't have a financial cushion, you shouldn't invest.
Investments in securities are subject to fluctuations and risks of loss.
If you're unlucky, you'll have to sell at low prices just when you need the money, explains the
VZ
VermögensZentrum
.
2. Pay off debts
“Paying off loans and loans is usually the best investment you can make,” emphasizes the
consumer advice center
: because loans and advances generally cost more interest than you can earn with an investment of the same amount.
This means that you should first pay off your debts before investing the money elsewhere.
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You should also refrain from buying securities on credit - i.e. taking on (new) debt for the shares.
Because if you lose the money you invested, you still have liabilities that you have to repay, even though the entire investment is worthless, explains the
Finanz.net
portal .
If you then lack reserves, in the worst case scenario it could end in personal bankruptcy, warns the
VZ VermögensZentrum
.
3. Not investing money that you need in a timely manner
Only invest the money that you can do without, advises the
Finanztip
portal .
This is the only way you can ride out the fluctuations on the Böse.
For example, if the price of a stock falls and you need to sell it because you need money, you may have made a loss.
You should therefore not invest the money that you need for short-term purchases or emergencies.
It should be clear that the budget you need for rent, cell phone contracts or other daily necessities has no place on the stock market.
4. Acquire knowledge
As a beginner, you should get comprehensive information before you buy stocks.
You should acquire sufficient knowledge about the evil, the financial markets and the business models of the individual companies, emphasizes the
Finanz.net
portal .
Only if an investor understands how the stock market works and how a company makes profits can they judge in the long term whether the respective share is a sensible investment.
If you don't know enough about the world of finance, you should hold off on investing until you've really learned the ropes.
5. Stay away from hype and trends
If you understand the mechanics of the stock market, this point should be unnecessary.
But beginners in particular are prone to falling for the idea of quick money, which is also spread by numerous questionable financial influencers.
The fear of missing out drove quite a few investors to invest in a “hot” stock tip or a short-term trend.
You should stay away from both, warns the
Finanz.net
portal .
As an example, the
Finanztip
portal cites the crypto hype that is spreading on social media: Bitcoins are highly speculative and there is no guarantee that you will be able to sell them for a profit in the future.
In order to arrive at well-founded assessments, it is even more important to obtain sufficient information.