How to buy shares – a quick guide for beginners

Buying shares in companies is easy. You will need three things – money, a broker and an idea of which stocks to invest in. Read this quick guide!

Buying shares is easy. You only need three things:

  1. Benefits
  2. Broker
  3. Ideas

The third is the most difficult, and I cannot tell you which stocks to buy, but I can point you in the right direction.

#1 Nauda

How much do I need to invest? Not too much! In fact, if you are just about to start trading shares, the less money you have, the better.

If you haven’t watched your shares fall by 50% for no good reason, then you haven’t built the psychological resilience you need to be successful in the stock market. Investing money in shares is about staying calm during market downturns.

Warning: the stock market will fall by 50% at some point. It’s not your fault. If this happens, you are not a bad investor. You are not stupid. Sometimes the share price falls by 50% and that’s normal. But read on, it’s not all bad!

51% of retail investor accounts lose money when trading CFD products on the eToro platform. You should consider whether you can afford to take the risk of losing a lot of money.

Losing 50% of 500Є is no big deal. Losing 50% of 100 000Є can be very sad.

When it comes to investing, you should mostly forget about the amount you earn and focus on the percentage return.

Giving back is everything. With a stable rate of return, 1000Є can turn into 5000Є quite quickly. 5000Є turns into 25 000Є.

25 000Є turns into 125 000Є.

So you don’t need large sums of money to get started. You just need to choose the right shares to invest your money in. A great investment that pays back several hundred percent!

#2 Broker

Since you have some money, you will also need a broker. A broker is a company that holds your shares in a special account. There are different types of accounts. Regular investment accounts, pension accounts, tax-advantaged accounts, etc. This varies from country to country.

It can be scary to open your first account with a broker. But they have representatives to help you. Just say you want a basic account. At this point you do not need to margin, option or short sell.

Opening an investment account on the eToro trading platform is very easy . This is a safe and reliable investment platform available to traders from Latvia. You can buy shares, cryptocurrencies and indices on this platform, as well as copy other traders. The minimum investment on this platform is just $50! You can try out all the features of this platform with a free $100,000 DEMO account.

51% of retail investor accounts lose money when trading CFD products on the eToro platform. You should consider whether you can afford to take the risk of losing a lot of money.

You will focus on buying shares in great companies and hold them for a long time. It is the easiest and least stressful way to invest in shares.

There are many different brokers to choose from. Your banks even offer you the possibility to invest in shares. Most banks will offer you a brokerage account, although the fees will be higher than for a dedicated or digital broker.

Don’t worry about fees. It is not what will sink you.

Commissions only matter if you buy small amounts of shares or make large transactions in foreign currency (e.g. millions).

A bad deal is if your broker charges 8Є to buy 100Є shares in a company. If you buy only 100Є shares and the commission is 8%. That’s an insane amount. It can take a whole year to recover the 8%. Often, the fee for buying shares will be fixed.

But if you buy the same share for 1000Є, the commission will be only 0.8%. The percentage fee continues to decrease the more shares you buy.

 

Don’t be afraid of fees. They only start to get big if you make a lot of trades. You should not make many transactions at the beginning. There have been a few studies on this and the result is always the same: the more people trade, the less they earn.

Buying and holding shares is therefore the best strategy.

Not forever!

Your job is to buy shares at a low price and sell them at a higher price. Don’t worry about the perfect moment to buy. It is almost impossible to buy a share at its lowest point. Buying a share at 9Є and watching it fall to 7Є is annoying, but it is part of the game of investing.

#3 Promotions

While it is true that you will buy shares, your job is not to focus on great shares, but on great companies. There is a big difference. Sometimes a share can go up by 100% just because of a rumour. Or manipulation. Or fake news. Sure, it’s great to get a 100% return on a share, but it can be a bad company.

In the long term, large and successful companies will have excellent share prices.

It is also true that in the long run, bad companies will have bad share prices.

So how do we rate companies?

It’s complicated and there is no perfect answer, because every company is different. The metrics that matter for a fleet of natural gas tankers are different from those of an emerging technology company.

Businesses are like people. They start as babies, go through a growth phase, become adults and then retire.

Baby -> Teenager -> Adult -> Pensioner

The biggest stock market gains come from buying a company as a baby and selling it as a teenager or adult.

It is hard to make money buying adults and selling them as pensioners.

Adult and retirement businesses are usually huge. Stocks like IBM, Apple, Wal-Mart, McDonalds.

They are giants. They have huge market constraints.

Whenever you hear people say, ‘Tesla is a $750 billion company’, they are talking about a foreclosure. It’s a simple calculation. You simply multiply the number of shares outstanding by the current share price.

Example: if Widget Corp has 1000 shares outstanding and each share is 1Є. Then Widget Corp’s market cap is 1000Є.

Don’t worry about calculating it. If you visit a stock finance website, it will be in the statistics section.

Like this:

tesla share price

You can find this information at finance.yahoo.com

You will also see other statistics. Most of them are irrelevant to the long-term success of the company. These are only figures based on current financial information or current demand for shares.

These figures reflect the current status of the company, not where it will be in 2-5 years.

Imagine, someone said: “Ilse is 167cm tall, so she will go bankrupt at 32.”

It would make no sense.

Same with “Ilze weighs 72 kilograms, so she will be very successful in life.”

You cannot draw conclusions about a company based on a series of (mostly meaningless) numbers.

Stocks like Wal-Mart are for adults. Such shares are safe. They will not lose their value so drastically in a market crash.

Wal-Mart currently has a market value of €418 billion. They have around 4730 stores. Their revenues are around USD 559 billion.

Now let’s say you like Wal-Mart and want to buy shares. The symbol for this promotion is WMT. You visit your online broker and purchase 1000Є worth of WMT, which is approximately 7 shares at 137Є/each.

So you wait. Six months pass and the shares are now 138.50Є.

Now you are bored and a little disappointed.

“I thought you said I could turn 1000Є into 5000Є pretty quickly!”

Right. But not by investing in Wal-Mart.

You will never make a dizzying profit buying shares like Wal-Mart. People who made huge incomes invested in Wal-Mart when it was a baby (in the 1980s).

Wal-Mart would need to open a ton more stores next year to double its revenues. Since it took them almost 60 years to reach 4700 stores, this is unlikely.

People who invest in adult businesses are people who never want to lose their money. They are content with not getting much return on their investment. In return, they don’t see much loss either.

51% of retail investor accounts lose money when trading CFD products on the eToro platform. You should consider whether you can afford to take the risk of losing a lot of money.

The probability of Wal-Mart going bankrupt in the next five years is close to zero.

The likelihood of a new EV company failing in the next five years is much higher.

Let’s say you buy bananas that you want to eat today. If it is brown, it is overripe. If it is green, it is not ripe enough. Either way, you don’t want to eat it.

bananas

A baby company.

Most of our choices as consumers are. We buy things in the morning that we want to use in the afternoon. To be a successful investor, you need to break this habit. Buy green bananas in the morning and eat them five years later.

So if you want big returns, you need to find baby stocks. Then you need to buy them and keep them for a long time. Long enough for them to turn into teenagers and adults.

You can then sell them and reinvest the money in new baby shares.

Repeat this until you have enough money to do whatever you want.

Finding stock – juveniles – is not too difficult. Just look for exciting new companies with a market value of less than 5 billion. The lower the market cap, the greater the upside potential.

A company worth 250 million is just one major contract away from doubling or tripling its value. This Agreement may be concluded at any time. Next year, they could conclude two such agreements. Next year, four.

It is easier for a small company to turn into a medium-sized company than for a giant company to turn into a behemoth.

Not that it can’t be done, but it’s rare. Apple did. Ditto Amazon. They just keep growing. But eventually this growth will stop, and they will turn from adults into pensioners.

It is a fundamental law of physics that all systems eventually collapse. Businesses are not immune. At one point, Sears was a major retailer and a fixture in many shopping centres. Now the company is dead. Turned to dust.

uznemuma sears shares
Sears share price over the years

Blockbuster Video was popular in America. They used to be everywhere.

But they stopped innovating and began to decline. People started watching movies on Netflix. They started downloading them illegally on torrents. It was easier. Faster. Cheaper.

Blockbuster didn’t stand a chance. They have never retired. They died as a grown-up company.

This is more likely when investing in adult or retirement companies. These companies may be outdated. These shares appear safe because the share price has been stable for years. But stability is not good. Stability is not growth. Stability is when you are on a desert tropical island and not trying to escape. Growth will come if you start building a raft and sail out to sea. Yes, you can die. But the benefits can be huge.

It’s a great thing when investing in baby businesses. You can launch many rafts. Yes, some of them will sink. It’s nothing. But those that don’t will pay back the losses of those that sink and still make a profit.

1000Є invested in Amazon in 2010. In 2010, today it is worth 24 000Є. If you had invested 1000Є in Amazon and four other companies that went bankrupt, you would still get 19 000Є.

If you like video games like World of Warcraft, here’s another similarity.

Buying a company like Wal-Mart is an investment 57. in the level image, and the level cap is 60. To reach 58. level, you need to collect a lot more experience points to get to the next level than to go from 5. level 10. level. It also takes less time.

Transition from 5. 10. level means an increase of 100%

Moving from 57. to 58, an increase of 2%.

If you want to get high returns, invest in low-level images. Small businesses with few market constraints and high potential.

Fortunately, today it is possible to invest in thousands of these unknown, low-level fledgling companies. In fact, there are many more small businesses than adults.

Investing in companies with a small market cap can be a bit scary. These companies are tiny and relatively unknown. They can be niche or with a small product line. But remember that all businesses start like this.

When McDonald’s started, they only sold hamburgers, fries, milkshakes and fizzy drinks. They now have around 150 items on their menu.

mcdonalds edition card
Growth can take time.

If you are a new investor, it is advisable to diversify your portfolio. Great investment opportunities are not that common. Sometimes you will see stories of people who put all their money into one stock and make millions. This is not a typical result and is closer to buying lottery tickets than investing.

Instead of buying one company, buy five, 10 or 20. The more companies you buy, the more you research. Research makes you smarter. It’s also easier to sleep if you own shares in more companies.

51% of retail investor accounts lose money when trading CFD products on the eToro platform. You should consider whether you can afford to take the risk of losing a lot of money.

People who own the same business will check this stock every day. Their sentiment will change with the share price. It’s not healthy.

On the other hand, it is almost impossible to track the daily movements of a large basket of stocks. But even if you can manage it, it’s still a bad idea. Do you check your green bananas every 30 minutes to see if they are ripe? Of course not. You just leave them on the windowsill and ignore them. Eventually, you notice that they are yellow and ready to eat.

It’s a relaxing way to invest.

Key things to remember:

1. Buy cheap shares in start-ups with high potential.

2. Hold these shares for a long time.

3. Ignore daily price changes.

4. Make a lot of money (Hopefully).

5. If you want to continue, sell your Pups that have turned into adult and retiree businesses and buy new Pups.

That’s all. Good luck investing!


eToro is a multi-asset platform that offers investments in shares, cryptocurrencies and CFD trading.

Please note that CFDs are complex instruments and there is a high risk of losing money quickly when using leverage. 51% of retail investor accounts lose money when trading CFDs on the eToro platform. You should consider whether you understand how CFD products work and whether you can afford to take a big risk of losing your money.

Past performance is not an accurate indicator of future results.

Cryptocurrencies are volatile financial instruments that can fluctuate widely in a very short period of time and are therefore not suitable for all investors. Cryptocurrency trading is unregulated, with the exception of CFDs, and therefore not subject to any EU legal framework.

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