Investing in the stock market is one of the ways to multiply your wealth. On the one hand, it allows you to make considerable profits, but on the other hand, it involves the risk of losing your savings. However, the more you know about the stock market and investing, the safer you can trade your own money. So let’s check how to invest in the stock market.
What is investing in stocks?
Shares are securities that confirm shares in joint-stock companies. In the context of the stock market and how to invest, they are used to make profits. So, how can you make money on stocks? Simply put, you make money on stocks when you buy them cheaper and sell them more expensive. Besides, when you start investing in shares, you can also count on a profit in the form of dividends, which is part of the company’s annual profit.
In this case, we are dealing with registered and bearer shares. The former are not available for trading, and their owners are usually the founders of the companies. On the other hand, by playing on the stock exchange, you can buy shares of a given company on a bearer basis.
Let us add that the shares acquired before the marriage belong to one of the spouses, but the profit from their sale, which took place after the marriage, will be the subject of the community of property.
Importantly, there is a Warsaw Stock Exchange in Poland, but if you want, you can also invest outside our country.
Not sure how to start investing in stocks? For this, you need to learn how to start operating on the stock market. So let’s check what you need to know about the stock market and what are the rules of the game on the stock exchange.
How to start investing in the stock market?
How to start investing in the stock market? The beginnings of playing on the stock market are primarily about gaining knowledge about how the market works or how much it costs to invest in the stock market. All this to minimize investment risk and focus on safe investing on the stock exchange.
You may still wonder how old you have to be to invest in the stock market. The answer is simple. Any adult can invest in the stock market.
- Nevertheless, if you want to start playing on the stock market, you need to:
- open an investment account,
- deposit funds into an investment account,
- place an order to buy securities,
- pay commissions on transactions,
- calculate profits,
- withdraw cash.
Now let’s take a look at how to start trading the stock market step by step.
How to invest in the stock market step by step?
- Step 1 – Opening an account for investing on the stock exchange.
If you want to invest in the stock market, you need to open an investment account. Such an account is run by brokerage houses and offices, and the process of opening an account itself resembles opening a regular bank account. However, there is a difference. If you open a brokerage account at the beginning of investing on the stock exchange, you will have to fill out a special form that is used to check your knowledge of how to invest on the WSE.
Why do you need such an account at all? If you want to buy and sell shares, you can’t do it directly on the stock exchange. You need an intermediary in the form of a stockbroker who works for a given brokerage house. On the other hand, through your investment account, you will be able to instruct a broker which shares to buy or sell at a given time. In this regard, an investment account acts as a platform for buying stocks. But not only. Thanks to such an account, you will also check what shares you currently own, how much they are worth, etc.
And where is the best place to open such an account and play on the stock exchange? Before opening an account, check the offers of various brokerage houses, using, for m.in, the ranking of brokerage houses. If your bank also maintains brokerage accounts, you can open such an account as a sub-account with the bank.
- Step 2 – Deposit funds into your investment account
Investing in securities requires money. If you know how to save money, you probably have a smaller or larger sum at your disposal that you can spend on investing in securities. As soon as you open an investment account, you can deposit funds into it, which you will use to invest in the stock market.
In addition to how to start playing, you may also wonder how much you need to invest in the stock market to make sense. First of all, there is no clear answer to this question, because for some a certain amount will seem small, while for others it will be very large. In any case, one of the most important rules of investing in the stock market is not to spend all your savings on it at the very beginning of your adventure with the stock market. It is better to assume that the first investments will involve a loss. For this reason, it is worth looking for information on how to effectively invest small amounts on the stock market.
Anyway, it is worth understanding what the stock exchange is all about as soon as possible. The point, of course, is that it is a relatively risky way to multiply capital. And this means that you have to take into account possible losses. However, in the end, the most important thing is that such a profit and start account is beneficial for you.
- Step 3 – Buying stocks – a guide
If you know what is the best place to invest in the stock market, you can get started. How? How to buy shares on the stock exchange? Today, everything is done electronically. Simply place the appropriate instructions through the application of your brokerage house. They can involve buying shares or selling them.
Besides, when you buy securities on the exchange, you have a choice of limit orders and orders at any price. In the first case, you declare the unit price at which you are willing to buy or sell a given share. Thanks to this, you know in advance how much you will spend maximum or how much you will minimally gain from such a transaction. On the other hand, when you decide to order at any price, you buy shares regardless of how much they cost. In such a situation, you do not know in advance how much you will spend. At the same time, these types of orders have priority on the stock exchange.
Of course, if you want, you can submit instructions related to how and what you want to invest in the stock market in person or by phone. However, such an operation will be more expensive than an electronic order, and thus will translate into lower profits.
Remember that when you invest in securities, you always do it at your own risk. Therefore, find out in advance which companies to invest in on the stock exchange and what exactly is worth buying on the WSE.
- Step 4 – Fees and charges
Did you know that whether it is profitable to invest in the stock market depends, m.in other things, on the amount of fees and commissions charged by the brokerage house? Therefore, when choosing your broker, pay attention not only to the costs of maintaining the account, but also to the commission on individual transactions.
And what amounts are we talking about in such a case? Currently, if you want to invest in shares, the commission will be about 0.3-0.4% of the order placed online. However, you can find brokers with a commission of 0.2%. Remember, however, that in most cases you have to take into account the so-called minimum commission on each transaction. It usually amounts to about PLN 3-5 per order.
- Step 5 – Count your profits
As soon as you start investing in the stock market, you need to count your profits and losses. The principle of buying and selling shares is simple in this regard. When you buy shares cheaper and sell more expensive – you make money. When you sell shares cheaper than you bought them – you lose. However, sometimes it is important to lose as little as possible.
However, this is not all. You have to pay commissions on your trades, which will reduce your profits to a greater or lesser extent. On top of that, there are taxes. And what exactly does the issue of investing in the stock market and taxes look like?
You have to pay tax on capital gains, which is the profit from the sale of shares on the stock exchange. This is the so-called Belka tax, which amounts to 19%. It is paid on capital gains on an annual basis. Therefore, if you are wondering whether it is worth investing in stocks, you need to take into account that some of the profits must be used for taxes.
- Step 6 – Withdraw profits
Once you sell the stock at a satisfactory price, you can withdraw money from your brokerage account to your regular bank account. In the case of some brokerage houses, you can also ask for a cash withdrawal, but for larger sums, you must report such an order in advance.