Until recently, only specific categories of subjects (and only if they had a good nest egg available) could invest in the stock market; fortunately, in recent years, things have changed, and practically, anyone can operate in the financial markets. However, this miniature guide is dedicated to beginners, even with little capital. With a small budget, we will see some tips for investing in the stock market.
Preparation and approach: advice for the beginner who wants to invest in the stock market
Before starting to invest in the stock market, the beginner must understand that it is not a simple activity that leads to easy profits quickly: this applies both to those who have a lot of money to invest and want to make this their primary job and to those who have a small budget and want to get some satisfaction. However, good results can be achieved. It takes time, you need to have a good education, curiosity and a lot of passion for finance, and then you need to accumulate experience.
So the first thing to do is try to understand what kind of investor you are: naturally, if the available budget is meagre, we must not delude ourselves of being able to become rich; those who are good will still be able to create an extra income which indeed doesn’t suck. But it is a path only for some: you need to know how to put yourself on the line, have the desire to improve, study, test, fall and get back up.
To invest in the stock market, it is optional to have a degree in Economics: of course, following such a course of study can come in handy, but even those who have achieved the coveted piece of paper need further preparation, something more specific. Luckily there are many courses, both in the classroom and online, which allow anyone to receive the correct notions to face an adventure of this type, but also, by surfing the web, it is possible to find a lot of helpful material.
The approach is fundamental: anyone who thinks they can earn easy money in an instant is entirely off track, and their small budget is destined to evaporate in a short time; on the other hand, those who approach the world of finance with a desire to learn, commitment and a professional attitude certainly have a better chance of getting some satisfaction.
Can those with little budget play on the stock market?
Someone can also be misled by the phrase often heard: playing the stock market. Well, it must be clear to beginners that this is not a game. Of course, a bit like gambling, the goal is to predict future results to make a profit, but there is a huge difference: in gambling, the outcome is determined entirely random, with variables over which the player has no control, while in stock market investments decisions are made based on the study and analysis of the information available to the investor. It is necessary to reiterate that you will go nowhere without study, dedication and discipline.
Among the essential tips for investing in the stock market for a beginner are those concerning the definition of the budget to be dedicated to this activity. It is necessary to understand what one’s assets are before establishing the quota that can be invested: one must take into account the monthly income, accumulated savings, current expenses, and debt level. There is no absolute minimum capital to get started, but it is expected that those taking their first steps in this sector do not want to go too far.
Even a few hundred euros may be enough to make the first operations: you won’t get mind-boggling returns, but they will be enough to gain some experience and, why not, to earn a little bit. And those with a small budget shouldn’t let themselves be enticed by the excessive use of financial leverage: it is true that in the event of success, returns are multiplied, but if things go badly, the tiny capital available will evaporate in a flash.
Advice on online trading: choice of broker, financial instruments and demo account
A clear distinction must also be made between classic stock market investments and online trading. Classic investments (purchase of shares ordered in the bank) are decidedly cumbersome and are more suitable for those with a lot of money to invest and work in the medium and long term. On the other hand, online trading that can be done directly from home can be the fastest and easiest way to access financial markets.
Now when we talk about investments for beginners, we talk almost exclusively about online trading since it is possible to open an account and start operating even with minimum deposits. Moreover, it is possible to access various markets through derivative financial instruments (securities whose value follows that of an underlying asset, which can be a share, a commodity, a currency pair, an index, and so on).
Then there is the advice concerning the choice of the broker or the intermediary through whose online platform it is possible to operate on the various financial markets. Unfortunately, until recently, we heard very often about scams and fake brokers: fortunately, this phenomenon seems to have subsided a bit, above all because there is greater awareness even among aspiring traders, who by now have understood that they must rely only on intermediaries regulated and authorized by to operate in our country.
Welcome bonuses are tempting and can be important for those with little budget for their investments. Still, they should be something other than the factor to give more weight when choosing an online broker: first, you need to consider additional aspects, such as the quality of the platform, the services and tools included, the markets that can be accessed and the costs.
One last tip: before investing in the stock market with real money, beginners could practice with so-called demo accounts, which essentially allow you to make investments with virtual funds in a real scenario. In this way, it is possible to accumulate experience and become familiar with the platform, the instruments and the mechanisms of the markets without risking anything; the demo account can also be helpful when you are a little more experienced in testing new strategies.
