If you have money saved you may be thinking of making an investment. Perhaps starting a business, buying a home and renting it, or investing in the stock market, an option that can be very profitable in the long term.
But are you ready to invest? In order to do this you need to know how the stock market works and have expert advice.
For our part, we are going to help you with some concepts that you should know and that will help you make the most appropriate investment decision.
What does investing in the stock market consist of?
Investing in the stock market involves the purchase of fixed-income securities (such as bonds, bonds or bills) or of variable-income securities (shares) through authorized intermediaries.
The value of those securities fluctuates as the market does, which can either increase or decrease the initial investment made.
How do you invest in the stock market?
As an individual you cannot invest in the stock market directly, since you are not authorized to do so. You will necessarily have to have an intermediary, which can be a securities agency or a credit institution.
It is especially important that you make sure that the chosen intermediary is authorized to operate on the stock market, thus avoiding fraud. The CnMV database can help you in these cases, indicating if the entity that has offered to operate as an intermediary is really authorized.
How much money to invest?
When it comes to learning how to invest in the stock market, one of the most common doubts is the amount of money that must be put at stake.
What we advise you is to invest an amount that you know you will not need in the short term. This will reduce the risk of being forced to sell due to a specific need for money and end up obtaining a lower return than expected or even losing all or part of the invested capital.
There is no specific amount, but keep in mind that not always investing more money implies obtaining a higher return. A small but well-made investment may be more beneficial to you than a large investment in an asset that is not profitable enough.
When deciding the amount you are going to invest you have to value:
- That you can obtain a profitability that is acceptable to you.
- That what you earn compensates the entry and exit costs (do not forget that your intermediary will charge you a series of commissions, investing is not free ).
- Distribute the capital to invest in different sectors, countries and markets ( never put all your eggs in the same basket ). This way you reduce the risk.
- Currency hedging. Currency change can affect what you actually earn.
- How does the stock market work, how do you make profits?
- Buying shares of a company and selling them when their value has risen. This is what is known as capital gains.
- Through dividends, which are the benefits that companies distribute among their shareholders. Beware of this, companies are not required to pay dividends and if they do, they can choose whether to pay the dividend in cash or with more shares.
- Taxation of investments in the stock market
- Taxation of dividends
- We are facing a case of movable capital returns that are part of the tax base of savings, although you can deduct the administration and deposit costs of the shares.
Taxation of the sale of shares
They are computed with capital gains and losses and are generally taxed, that is:
- Up to € 6,000 are taxed at 19%.
- From € 6,001 to € 50,000 are taxed at 21%.
- More than € 50,001 are taxed at 23%.
What are the risks of investing in the stock market?
We have already seen on more than one occasion that every investment involves risk. If you decide to put your money in the bag, you must first assume that you may lose money. There is no guarantee that you will earn money or that you will get back what you have invested. The stock market is a risky investment.
The markets are quite volatile and can be affected by many factors, such as political and economic decisions. Hence, investing in the stock market requires on your part:
- Do not delegate investment decisions entirely to third parties.
- Track your actions.
- Be disciplined with investment.
- Clearly set the goals you want to achieve.
What expenses does investing in the stock market entail?
even in those cases in which your investment turns out to be a success, not everything you earn will be for you. Intermediary entities usually apply a series of commissions that are intended to pay for their services.
The most common fees for investing in the stock market are:
- Maintenance fee.
- Custody fee.
- Commission for intermediation.
- Dividend commission.
- Brokerage fee.
The amount of the same will depend on the amount of the transaction and whether it is national or international.
These expenses can significantly affect what you will end up earning with your investment, so before making the decision to put your money in the stock market you should carefully analyze the expenses that such investment entails.
Are there alternatives to stock market investment?
There are other ways to see your savings grow to achieve financial freedom. The most popular today are those that involve investing indirectly, which is what happens if you put your money in investment funds.
These funds are managed by professionals who are responsible for diversifying and buying assets from different sectors and countries. Making you do not have to worry about anything.
Is the bag the best option to increase my savings?
Investing in the stock market as an isolated action is not what we would call a balanced financial plan that can provide you with economic security in the short, medium and long term. This requires diversifying your savings and looking for different investment formulas.
Being such a complex issue, we recommend that you rely on an advisor to help you draw up a financial plan that takes into account your objectives, your need for liquidity and the necessary protection. Complying with the basic pillars of all investments to minimize risk.