STOCK TRADING

STOCK TRADING: HOW TO BUY AND SELL SHARES?

Stock Trading

Stocks are becoming increasingly popular in the face of low-interest rates. You can find out how to buy and sell shares and everything you need to know about direct trading in shares and your share portfolio here in our article for beginners.

Buy and sell shares in five steps

1. Open a share account: It is best to do this with a direct bank or a neo-broker on the Internet who does not charge any account fees. So you can buy stocks and ETFs cheaply and conveniently from home.

2. Select Stocks: Find out about shares that interest you. Make sure you spread it as widely as possible.

Tip for beginners: Index funds, ETFs for short, offer a broad stock portfolio at a low cost and are perfect for getting started with stock trading.

3. Search stocks: You can use the search mask in your portfolio to find the previously selected stocks or ETFs. All you need is the securities identification number (WKN) of the respective share or ETF. You can find these on the web by searching for the relevant stock’s name.

4. Buy shares: In the next step, you can buy the shares by entering the order in your securities account. Now you can choose whether you buy on a stock exchange or from a direct dealer, who often has cheaper offers.

5. Waiting and then selling: Once you have bought the shares, you need patience. Because the success of shares usually only sets in after some time. So don’t panic if the price of your shares or ETFs falls in the meantime. Because short-term price fluctuations balance out in the long term. Watch out for the best return and then sell your shares.

If you invest your money in stocks, you can easily build up a small fortune. The most important prerequisites for this are a broadly diversified stock portfolio and a long investment period.

Because on the stock market, short-term fluctuations balance out over the long term. In the long run, equities promise higher returns than fixed-term deposit accounts or bonds.

For the broadest possible diversification on the stock market, we recommend funds that contain securities from several companies at the same time. Index funds, also known as ETFs, which track a specific stock index, are particularly suitable for those new to stocks.

ETFs can be bought particularly cheaply from direct dealers on the Internet. Alternatively, you can also purchase shares and ETFs on various trading venues on global stock exchanges.

Which stocks should I buy and sell?

That depends heavily on your risk tolerance – and on the price of the respective securities. It also plays a role in how much you deal with individual companies, markets, and the stock exchange in everyday life and how you can assess possible trends in the future.

In this context, experienced stockbrokers distinguish between so-called “ value stocks “ and growth stocks. Value stocks are stocks of established companies that tend to fluctuate little, but also generate lower returns. Growth stocks are shares in innovative companies that are often valued higher on the stock exchange – but also involve greater risks. Which stocks are better suited for whom depends primarily on personal risk tolerance.

Why do I need a separate stock account?

A conventional checking account is not enough to buy stocks and ETFs. You need a separate securities account in which to keep your securities. In principle, you can open a securities account at any branch bank. In most cases, however, this involves annual fees that you have to deduct from your return.

It is therefore recommended that you open your custody account with a so-called direct bank on the Internet. There are usually no trading fees here and most online depots are free. When trading shares, you only incur transaction costs.

As an alternative to direct banks, which usually also offer other financial services such as current or time deposit accounts, you can also buy shares and ETF shares from purely online brokers, also known as neo brokers. What is meant by this is special financial service providers who have specialized in stock trading and also offer securities accounts.

The advantage of these providers is: They only charge very low order fees, some even offer monthly flat rates for stock trading, so that the individual purchase of a security is free.

Where can I buy and sell stocks and ETFs?

Stocks and funds are traded on the stock exchange. To buy company shares or ETFs on the stock exchange, you can search for the desired securities in your securities account and purchase them after selecting a trading venue (e.g. the London Stock Exchange). The price per share or ETF can vary depending on the trading venue.

Alternatively, you can also buy stocks and ETFs from a direct dealer. The main difference between stock exchange and direct trading can be defined as the stock exchange is a kind of marketplace where buyers and sellers of shares meet and negotiate a price.

A direct trader, on the other hand, calls up fixed prices when buying shares and is both a buyer and seller of shares. In addition, stock exchanges are subject to strict supervision by the relevant finance ministries. Direct trade, on the other hand, is not particularly monitored.

When should I buy and sell stocks and ETFs?

That cannot be answered unequivocally. Finding the perfect time to buy and sell is difficult. The reason: the future is uncertain. Even stock market experts and analysts cannot make an exact forecast of market developments.

If you are unsure or want to wait for falling prices and the associated lower share prices, buying in stages is advisable. By splitting up your investment and investing piece by piece, you reduce the risk of entering the stock market when the price is too high. As a result, the importance of the time of entry decreases.

If you want to invest a certain monthly sum in an ETF using the same principle over the long term, you can also take out an inexpensive share or ETF savings plan with many direct banks. With some brokers, you can invest in ETFs from a monthly savings amount of just 1 dollar.

Important when entering the stock market: only invest money in stocks that you will not need in the medium term. In the short term, prices on the stock exchange can also fall, so you may make losses. In the long term, however, the price fluctuations balance out again. Therefore, stocks are particularly suitable for wealth accumulation for more than 15 years.

As a beginner, what should I watch out for when buying stocks and ETFs?

As with any product, when trading shares, you should primarily keep an eye on the price. The value of individual shares can be measured using various parameters:

⦁ The price development in the past is just one of many factors that is never a guarantee for the future price.

⦁ Another important factor is whether a company last gave its shareholders a share of its annual profits by paying a dividend – and how much that payout was. This can be an indication that you, the investor, will continue to benefit from dividends in the future.

ETFs can also be evaluated using key figures. Investors should find out more about the amount of ongoing fund fees here than with individual shares. The so-called total expense ratio, abbreviated TER provides information about this.

The total expense ratio includes all fees that accrue annually as long as you hold the ETF share. These include administrative costs and VAT, which the fund provider has to pay. If you invest a total of 100 dollars in an ETF with a total expense ratio of 0.25 percent, the costs amount to 25 cents per year. These will be deducted from your potential winnings, you don’t have to pay extra.

The cheapest ETFs sometimes have a total expense ratio of just 0.12 percent per year.

Conclusion

We hope that after reading the complete article, you have now all the answers to your questions related to Buying and selling of shares and now you can start trading but remember before starting make sure to research thoroughly about the companies of which shares you are going to buy.


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