There are still not many Brazilians who seek to know how to become a stock investor . Investing in stocks on the Stock Exchange is not something that is part of the country’s financial culture, however, this is starting to change. The number of people who invest has been growing over the years, proof of this is that, in 2002, there were approximately 85 thousand BM&F Bovespa investors. Almost fifteen years later, in 2016, that number rose to 560,000 investors and, in May 2019, the Exchange reached 1 million registered investors.
With the low Selic rate causing fixed income to present increasingly lower results, more people are looking for investment alternatives that are more profitable, within this current scenario. Thus, Brazilians have been discovering that the Stock Exchange offers good income options and can be an alternative to continue profiting and get closer to realizing their dreams.
How to become a stock investor?
Many times when we start to act in the stock market we end up acting as speculators, instead of investors. There is a big difference between being an investor and being a stock speculator. Speculators are like gamblers, they buy stocks that they believe will make a profit, but they don’t do so based on concrete studies or analysis. This is one of the biggest mistakes of beginners, because the stock market is not luck. It takes a lot of knowledge, analysis of the market and companies, a good reading of the country and world scenario, to be able to predict the movements and define which are the best buy and sell options.
Persistence, theory and practice must always go together on the path of becoming a stock investor. To further assist you in this mission, here are five other essential tips.
1 – Check the dividend yield
Some shares of more stable companies, which do not have much variation in their purchase and sale price, have as a differential, to attract and keep investors, the payment of dividends.
Dividends are portions of a company’s profit that are distributed among its shareholders. Some companies pay dividends monthly, while others release it once a quarter, every six months, or once a year.
Stocks that pay good dividends are favorites of conservative investors. Since they don’t have to worry about price variations and they start to have passive income, that is, money that enters your account in a way that you have to do almost nothing for it.
The logic for investing in dividends is a little different from stocks. The dividend investment portfolio looks very long-term, because you will seek to gain from the profit that the company distributes and not necessarily from the appreciation of the share price. Given this, the ideal is to choose solid companies and maintain the investment for a long time. In general, the best dividend payers are the companies that show consistent and more predictable earnings. Even with these, it is essential to carefully assess the current scenario of the institution to hit the strategy and even after already owning the share to continue checking the profitability of dividends.
One of the most used indicators to determine if a company is a good dividend payer is the Dividend Yield. The DY represents a relationship between the share price and the dividends distributed. It is through it that you compare the profitability of dividends between companies.
Remember: Dividends paid per share / Current share price = Dividend Yield
2 – See the share value growth potential
To discover the growth potential of a stock and know the right time to buy and sell, it is necessary to understand how to do stock analysis and this is an essential point of how to become a stock investor.
There are two main methods of analysis:
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Fundamental Analysis
This method assesses whether the company is good in its field of activity and whether it has the necessary conditions to continue growing and remaining solid. It is primarily used to identify long-term opportunities and evaluate companies by looking at their financial health, management, and growth and profit prospects.
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Technical Analysis of Stocks
Unlike Fundamentalist, this technique is mainly used for short and medium term opportunities. Your goal is to understand, as quickly as possible, which will be the most favorable paths to follow in the next minutes, hours, days, weeks or months. To do so, it identifies patterns of behavior and is essentially based on the law of supply and demand, but paying attention to certain points such as: where stocks tend to stop falling and rise again, price levels where the stock generally fluctuates and what the main trend of the action.
3 – Evaluate constantly
Stocks are a variable income investment, which means they can fluctuate up or down, implying risk. Often, this information scares and alienates investors. It is essential to understand that exposing yourself to risk is not a bad thing, as it comes with greater profitability.
The main risks of investing in equities are liquidity risk and asset devaluation risk:
- An asset’s devaluation is when the company you invested in begins to perform poorly causing its stock price to fall.
- Liquidity risk, on the other hand, is the danger of low demand, to the point that you cannot sell a stock, due to the lack of other investors interested in it.
Once you know the risks and understand how the stock market works, it becomes easier to minimize them, especially when assisted by qualified professionals.
The crucial thing is to constantly evaluate this balance of risk and profitability, it is not enough to evaluate the scenario only at the time of purchase, it is necessary to constantly monitor market movements to know the right moments to buy and sell.
4 – Don’t spend all your money
Stocks are investments that have risks. That said, set aside for this type of investment a percentage of money that can be lost. Your emergency safety reserve shouldn’t be in stocks, let alone all your money.
5 – Brokerage, accounts and monthly income
The first step on how to become a stock investor is to open an account with a brokerage firm and right here you need to be aware of the choice, as the main costs of investing in stocks are brokerage fees, custody fees, of fees and income tax. But Onze Investimentos helps you choose the most suitable option for your investor profile, with the best cost benefit.
Among the other advantages of investing in stocks, we can mention the fact that you don’t need a lot of money to start investing, there is no grace period to redeem the money invested, there is a wide variety of stocks that act in a different way, the which means that there are investment opportunities with good potential returns both in the short and long term.