Where can I find advice on stocks
Stocks can be a long-term source of returns. However, a few basic rules should be observed for the success of an investment. It is also important to obtain comprehensive information.
Actually, in times of historically low interest rates, it is incomprehensible: Germans are grumpy about stocks. In 2019, only 9.7 million people invested in stocks or equity funds. That was 660,000 fewer investors than a year earlier. That is what the Deutsche Aktieninstitut determined. Of these almost 10 million investors, only 2.6 million exclusively held shares. If one subtracts the 800,000 shareholders who only own shares in one company - namely those of their employer - only 1.8 million investors actively use the opportunities of the stock market. And they can be quite high: Anyone who has held the shares of the companies represented in the DAX for 30 years in the past 50 years has been able to achieve a positive return every year, as a look at the DAX return triangle of the Deutsches Aktieninstitut (DAI) shows . However, it is advisable to observe a few rules and to obtain comprehensive information. Because not past price developments, but information is the basis for finding suitable dividend stocks.
- Think long term: Experts recommend an investment horizon of at least ten or 15 years for stocks or funds. So phases with low share prices can usually be sat out. Conversely, this also means that the investor should not be dependent on this money during this period. In principle, it is therefore advisable to build up reserves for unforeseen events so that the share portfolio does not have to be liquidated after a price crash, of all things.
- Only buy what you understand: Buying shares without information is like driving a car with your eyes closed - at some point there will be a crash. It is therefore advisable to acquire a solid basic knowledge of securities and the capital market and to deal intensively with the selected companies and industries.
- Forego timing: Many private investors wonder when is the right time to invest in the stock market or sell the securities. There is no such point in time. Much more important are patience, perseverance and information.
- Be critical of gurus and experts: The internet is full of self-proclaimed investment professionals. Private investors are therefore well advised to take a very critical look at their advice. This also applies to the often short-term hypes on the stock exchanges.
- Keeping costs under control: If you want to buy shares, you need a securities account. Each transaction usually generates costs. It pays off in the truest sense of the word to choose the cheapest possible providers for securities transactions.
- Don't buy on credit: Greed eats the brain - this is one of the best-known stock market wisdoms, but one that is often forgotten in boom times. Even those who have the supposedly surefire stock tip should shy away from buying securities on credit. The latter has to be used regularly, which can be difficult after a stock market crash.
- Limit losses, take profits: Excessive losses on the stock market can be prevented if, when buying a unit, it is determined immediately that the paper is automatically sold as soon as the value falls below a certain value (stop loss). Conversely, there is the possibility of setting limits at which additional purchases are made - for example if stocks fall below a certain value and are then cheap (start buy). Selling limits in the event of price increases can also be helpful - after all, no investor is impoverished by price gains that have been taken with them.
On the way to choosing the “right” stocks, prospective investors come across very different schools with clever recommendations. For example, advocates of chart analysis look for clues about the right time to buy a share in previous price developments. Others delve into the various key figures. Basic knowledge definitely includes technical terms such as P / E ratio, price-to-book value or dividend yield:
- Price-earnings ratio (P / E): To determine the P / E ratio, the price of a share is divided by the profit per share. An example: If the XYZ share is at 100 euros and earnings per share are 10 euros, the P / E ratio is 10. Basically, a P / E ratio that is high compared to the average value speaks for an expensive security, a low one for a cheap one.
- Price-to-book value ratio (P / B): This value shows the multiplier with which the real value of a company is valued. If the P / B is below 1, the total assets of a company are higher than the market value and the share is cheap.
- Dividend yield: If you want to calculate this key figure, you have to divide the dividend by the share price and multiply by 100. The calculated number indicates the dividend yield in percent. A high value is seen as a sign that a stock is undervalued. Caution: A falling share price also increases this return.
Everyone has to decide for themselves what the decision to buy a share is ultimately based on. This also means dealing intensively with investment decisions. A single key figure or piece of information should never serve as the sole basis for investments.
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