Tip 1: Inform yourself thoroughly in advance

It sounds trite, but you should understand what you are putting your money into. If you are interested in a specific stock and don’t want to rely solely on your gut feeling, you should, for example, take a look at the AG’s annual report, the latest quarterly figures, analyses and economic forecasts.

Or you can use the expertise of professionals and prefer to invest in a stock fund. The advantage: The fund managers of your savings bank or bank will take care of the analyses. Here, too, you should inform yourself: How is the company rated in the annual Capital ranking, for example? And does the fund’s orientation match your personal risk-reward profile?

Tip 2: Don’t put all your eggs in one basket

Have you read up on the stock market and have a specific stock in mind? That’s a good start for beginners. But maybe you’re thinking about several stocks and can’t make up your mind. You don’t necessarily have to. Because once you start with an equity fund, your money will be spread across hundreds of different stocks. As an investor, you minimize the risk if a company posts bad figures or even goes bankrupt.

If you want to get into stocks, but want to take a little less risk, so-called mixed funds are also interesting. These invest the money not only in stocks, but also in interest-bearing securities. Depending on how the fund managers assess the markets, the proportion of shares can also be reduced from time to time.

In this way, you have spread your money twice: You distribute your money between equities AND bonds – and within these two asset classes, once again between many different individual securities.

Tip 3: Only invest available capital

You should only invest capital on the capital market that you do not have otherwise earmarked. If you know that you will need the money in the next five years for living expenses, to repay your personal loan or for other purchases, the following applies: Hands off. Because you should avoid a fixed time of sale, which could be particularly unfavorable at that time.

For example, you need to buy a car in two years. Until then, you invest the money in shares. But exactly at the moment when you need the car, the stock market has a weak phase. As a result, you have to sell at a loss.

Tip 4: Be patient with your investment

You need a new kitchen, but you are a few thousand euros short. So invest the money on the stock market and get the missing funds so quickly? Please don’t! When investing money on the stock market, you need more patience – it’s better not to bet on the quick euro. A good idea, on the other hand, is regular saving with a fund savings plan.

If you depend on speedy profits, you will inevitably have to bet on a high-risk investment. This can work out well, but far too often beginners in particular fall into a trap here. Because with an unbalanced portfolio, you could end up with nothing.

If, on the other hand, you show patience and invest with foresight, you have a much better chance of making the best possible investment. Over time, the risk of losing money with stocks decreases significantly.

Tip 5: Don’t let losses make you nervous

Of course, you go into the stock race with the expectation of achieving the best possible return. But the stock market is always on the move and your portfolio can also show losses at a certain point in time.

Price fluctuations are quite normal and happen again and again. This is not bad luck, but on the contrary a sign that the securities markets work and supply and demand change. Prepare yourself for the fact that corrections may occur and do not fall into panic and actionism. React with a cool head.

In the case of stocks, you can set yourself a “stop-loss” limit to be on the safe side, i.e. a value above which you definitely want to dump your investment. On the other hand, price corrections can also be just the right time to buy at a favorable price.

Tip 6: Remain skeptical about stock tips

You hear or read a surefire tip from a supposed stock market guru? With which more than 10 or 20 or more percent return is safe? Then we also have a tip for you: Be careful!

There are a lot of so-called experts in the field of financial investments who make promises to you. But you should always ask yourself what interest the person has in telling you this information.

It is therefore better to approach all too tempting tips and advice with a healthy skepticism.

Tip 7: Do not speculate, invest

Buy, sell, buy, sell: That’s how some people imagine investing in securities. Normally, this does not have much to do with reality. The fact that you buy a share and then immediately sell it again after days or weeks is hopefully the exception.

Because if you trade a lot and quickly, you produce one thing first and foremost: costs. When buying and selling, fees are incurred that must first be recouped by the performance of the stock or a fund.

If you invest in a structured and broad way, you don’t have to keep going in and out of stocks.

Tip 8: Use the compound interest effect

Let your money work for you. This sentence best describes what compound interest means for your investment. It is the lever that allows you to exploit its full potential.

The idea behind it is relatively simple: You reinvest your profits or interest to generate further income. In other words, you add your profits to the capital you have invested in order to have the chance of greater returns. With funds, reinvestment usually happens automatically, so you don’t have to take any action yourself.

Compound interest is one of the most important mechanisms of wealth creation. Albert Einstein answered the question what the strongest force in the universe was: “That is compound interest!” It pays off for you, especially in the long run. So use this effect to be able to increase your assets decisively.

Tip 9: Check your investment regularly

You should manage your investment with a steady hand. However, this does not mean that you should neglect your portfolio. Even if you have the financial market reasonably in view, signs can change. You should not sleep through such developments.

It is better to talk about your portfolio together with your investment advisor on a regular basis – preferably at least once a year – and make adjustments if necessary.

Tip 10: Don’t wait any longer

Do you feel there is still so much to learn and therefore don’t venture into stocks? Take heart, because every day without an investment is a day without the chance of a return.

You don’t have to be a stock market specialist to enter the capital market. That’s exactly why there are funds and professionals who take care of the management. And once you’re in – with a fund savings plan, for example – investing in the capital market is just normal for you.

With a dividend, a stock corporation gives its investors a share in its profits. This is done with an annual distribution, also called a dividend. By buying shares, you can participate in the dividend payments.

Dividends are particularly interesting for savers who want to build up their assets sustainably over the long term. In the long term, shares have a higher yield compared to bonds. This is particularly noticeable with a long-term investment horizon.

Dividends therefore play a significant role in your wealth accumulation. In addition to a long investment horizon, investors should also have a higher level of risk awareness. The effect of a higher yield due to long-term planning is considerable.

What is a dividend yield and why does a company pay it?

Dividends are a form of profit sharing. Every company strives to make a profit. It usually uses part of the profit to invest in its own business. The rest is distributed to the company’s shareholders – for each share they receive a dividend.

And what is the dividend yield? Some people compare it to interest rates. It tells you how much money the investor will receive in the end.

Holders of funds participate in the dividend payments of many companies. This has two main advantages for investors: First, dividends function as a risk buffer. In the event of price declines, the loss in value can be absorbed or minimized with their help. Secondly, the dividends paid by the companies generate current income.

Dividend payments are regarded worldwide as a hallmark of healthy companies. After already very successful dividend years, experts expect dividend payments worldwide to continue to develop positively.

However, investors should note that dividend payments in the past are not a reliable indicator of future dividend development. A decline in dividend yields cannot be ruled out.

Do all stock corporations pay dividends?

Not all companies pay a dividend. This is because profits do not have to be distributed. Around 40 percent of international companies and even 60 percent of U.S. companies pay no dividend at all.

This includes many tech companies such as Google or Amazon. They reinvest all their cash back into the business. There may be strategic reasons for this: Companies prefer to invest the money in themselves in order to grow faster.

What should you look out for?

Dividend shares are considered to be a conservative investment, but the highest dividend payout is of little use if the share price falls at the same time.

The dividend yield, as published in stock exchange databases, for example, usually refers to the most recently paid dividends. These do not always reflect the reality of the company’s current business situation. Investors should therefore be aware of the company’s current figures.

A normal investor can hardly do this. This makes professional advice all the more important. Those who invest in actively managed dividend funds minimize the risk of individual shares.

Experienced fund managers know the company’s key figures and know where the risks lie. Your securities advisor at the savings banks can help you with up-to-date information.

How is your dividend yield calculated?

The amount of the dividend initially depends on how much money the company has in its coffers. On this basis, the management board of the stock corporation makes a dividend proposal. At the Annual General Meeting, the shareholders then vote by simple majority on whether or not to accept this dividend proposal.

The dividend yield is calculated using the share price. This means it is calculated by dividing the agreed dividend by the current share price. The result is then multiplied by a factor of 100.

Conclusion

The yields on dividends are often very pleasing compared with the interest rates on federal or corporate bonds. But it is not easy for ordinary investors to decide which companies offer the best dividend prospects in the long term.
The decisive factor is quality. All the better if an experienced fund management team takes a thorough look at the companies. In dividend funds, professional fund managers select the most promising stocks. By spreading the investment over a large number of companies, the risk is also reduced.

Investors should therefore not be guided solely by the dividend amount. Broadly diversified funds that allow you to participate sustainably in the dynamics of the capital market are particularly suitable for your asset accumulation. A good dividend strategy complements your portfolio.

Trader. Profit, risk, stress.

A trader earns by trading securities. Trader’s profit comes from the price differences of the securities. In most cases, the price difference occurs when the quotes rise or fall over time, and the essence of the trader’s work comes down to speculation with securities. It allows achieving more profit than just investing, and may well be the only source of income. On the other hand, a trader (often they are just called speculators) takes more risks. One wrong decision and his losses will be enormous.

The trader often trades relying on the technical analysis of the market. With its help trader determines where share prices may move and at what moment to make a deal. However, fundamental factors are not alien to him. From time to time he takes into account the situation in the economy, corporate news and many other things.

A speculator opens positions, i.e. buys or sells stocks for a short period of time, from several seconds to several weeks. Such trading requires very quick decisions and is associated with high stress.

One of the world’s most famous traders is named Lewis Borselino. He devoted 18 years of his life to the Chicago Stock Exchange. All this time Lewis worked on the trading floor, where others did not last even two years. In his first eight years on the exchange, Borselino had already earned his first million. He was only 30 years old at the time. Now Lewis Borselino is a world-class expert in stock trading and is on CNBC’s list of leading traders.

Most traders are salaried employees and trade on their employers’ funds. These are professional market participants working for banks, investment companies, pension funds, etc., who receive a percentage of profit from transactions as remuneration. In this case all the risks are borne not by trader but by employer. The trader risks only with his reputation. Such work requires a special license

To trade on your own funds, as a rule, you do not need a license. In this case, the trader acts at his own risk, that is, he is responsible for both profit and loss.

Investor. Less aggression, more calculation

An investor invests money in securities. The investor’s profits come from price increases and dividends received over the course of the investment. An investor usually invests money in stocks for a long-term period of one year or more. The profitability of such investments is lower in comparison with trading. This is due to the fact that the investor makes much less transactions than the trader. However, the risk of investing is considerably lower: as a rule the long-term stock trend is always directed upward, so the investor, if he is patient, has no fear of losing money.

More often than not, an investor relies on fundamental factors in his calculations. They help him evaluate the long-term attractiveness of the chosen company. But, as in case of a trader, technical analysis can be a useful adjunct.

To make a final decision to buy a stock, an investor needs to consider two main parameters:

The relative value of the securities. By examining multiples, it is possible to understand whether a company’s stock is worth the money the market is asking for it;
a company’s prospects. It is important for an investor to get an idea of a company’s future success by looking at its financial strength and future cash flows.
Financial statements can help answer these questions.

With the right approach, investing can provide a comfortable retirement and a good passive income. But to really achieve this, you need an investment plan and regular investments. In this case, even the smallest money will very quickly turn into a large capital.