What is it and how the stock market works?

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In a previous article we talked about investing in the stock market as an alternative to achieve financial success, however, several people wrote asking us more information about it.

Here we explain some basic concepts of interest for those who are planning to start investing in the stock market.

What is the Stock Exchange?

Securities Bosla

The stock exchange is a private organization that provides the necessary conditions for companies that need capital (demanding money), and individuals and companies that have capital (suppliers of money), transacting purchase and sale of securities, such as stock companies or limited companies, public and private bonds, certificates, diplomas of participation and a wide variety of investment instruments.

When a person or company buys a security, acquires an equity private law. In the case of shares, they represent a certain percentage of ownership of the issuing company. In a purchase, you become a partner or shareholder of the issuing company, and as such, receive part of the profits that correspond to you.

Thank stock market, issuers are able to get funding for their development and expansion plans.

How does the stock market works?

The stock market operates under a dynamic market, where the interaction between supply and demand influences the behavior of prices. For example, when an action is highly demanded, its price tends to rise; as it as in other markets.

To understand the functioning of the stock market, it is important to understand the role of each of its actors:

How to invest in the stock market?

Trading of securities between the seller (plaintiff money) and the buyer (offeror money), can only be realized through an intermediary company is known as "broker". That is, the seller and the buyer of securities can not negotiate directly.

To start investing in the stock market, the first thing to do is choose a "corridor" to be responsible to conduct purchase transactions. Similarly, the seller chooses a "corridor" to take charge of offering the securities in the bag. Today we have a lot of brokers who do trade stocks, one of them is Avatrade.es, which is the most important market shares.

It is important to mention that the broker you choose charges you a commission for each transaction you make. This fee can be between 0.5% and 1% by negotiating with your broker.

After choosing the "corridor" of your choice, you must define the composition of your portfolio, so that the broker, based on the amount, make the purchase in exchange of assets you selected.

Thus, the titles you decide to buy, is recognized in the respective securities deposit, on behalf of the holder person, in this case you.

You, as owner of the portfolio, must take care to manage it, buying and selling securities through the broker you have chosen.

You can choose to build an individual portfolio or invest in collective portfolios. It all depends on the amount of capital you have and your goals as an investor.

There is no minimum value to invest in the stock market, this can vary with the price of the securities you want to purchase and the broker you choose.

How do you make money in the stock market?

Business exitososExisten basically 2 ways monetize your investments in the stock market.

The first one is to buy securities at a price and wait for that price increases, getting as profit the difference between the selling price and the price paid to buy it. In this case, as it comes to buy to sell, the key is to find companies with growth potential and recovery, so in the short term could obtain wide margins of profitability.

The second way to make money in the stock market is through the utilities that you represent certain securities, such as stocks. In this case, as it comes to buying to conserve, the strategy is to identify solid companies and have a sustainable financial history.

In any case, you may have an investment portfolio in which you combine both types of strategies.

Keys to start investing in the Stock Market

If you decided to start investing in the stock market, these keys will help you successfully enter the fascinating world of stock investments:

Do not start investing enrich the waiting overnight. Stock investments are patience and strategy.

Learn everything you can about financial issues. It is true that you can advise with brokerage firms, but if you really want to be a great investor you need to educate yourself and understand the functioning of the market.

Invest money that you do not need in the short term.

Find out about the companies they want to invest. Know your numbers, trends, competition and any other element that allows you to predict the performance of their actions.

Establish your investment objectives and defines whether you should pursue strategies more short, medium or long term.

Learn to manage information and make informed decisions. You will find information on market trends in news through brokers, Internet and many other means, but the end is you who decides how to manage your portfolio.