Buying and selling shares 2021 - guide for beginners and professionals
In times of low interest rates, shares promise high returns. Find out how to buy shares and everything you need to know about direct trading in shares and your share portfolio here in our overview for beginners.
Buying shares in five steps
1. open a share deposit account: The best place to do this is with a direct bank on the Internet that does not charge custody account fees. This allows you to buy shares and ETFs cheaply and conveniently from home.
Select shares: Find out about the securities you are interested in. Make sure that you are as broadly diversified as possible. Tip for beginners: index fods, or ETFs, offer a broad portfolio of stocks at low cost and are perfect for getting started in stock trading.
2. search for shares: You can use the search screen in your securities account to find the previously selected stocks or ETFs. All you need is the security identification number (WKN) of the respective share or ETF. You can find this on the Internet by searching for the name of the corresponding stock.
3. buy shares: In the next step, you can buy the shares via the order entry of your securities account. Now you can choose whether you buy at an exchange or at a direct trader, which often has cheaper offers.
4. wait: If you have purchased the shares, you need patience. Because the success of shares is usually only after some time. Therefore, do not panic if the price of your shares or ETFs falls in the meantime. After all, short-term price fluctuations will even themselves out in the long term.
If you invest your money in shares, 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 in the stock market, short-term fluctuations balance each other out in the long term. In the long run, stocks promise much higher returns than, for example, time deposits or bonds. It is not without reason that stocks are a popular form of investment recommended by experts.
- Rebalancing: Why it pays to take a critical look at your portfolio
- Volatility: Why it's good that share prices fluctuate
To achieve the broadest possible diversification on the stock market, it is advisable to invest in funds containing securities from several companies. For newcomers to the stock market, index funds, also known as ETFs, which track a specific stock index such as the Dow Jones, are particularly suitable.
ETFs can be bought particularly cheaply from direct traders on the Internet. Alternatively, you can also buy stocks and ETFs at various trading venues on the world's stock exchanges.
Which stocks and ETFs should I buy?
That depends largely on your individual risk tolerance - and on the price of the respective securities. It also depends on how much you deal with individual companies, markets and the stock market in your everyday life and how well you can assess possible trends in the future.
In this context, experienced stock market experts distinguish between so-called "value stocks" and growth stocks. Value stocks are shares in established companies that generally fluctuate little but generate lower earnings. Growth stocks are shares in innovative companies, which the stock market often values more highly - but which also carry greater risks. Which shares are more suitable for whom thus depends above all on personal risk appetites.
Beginners often start with shares of well-known brands
For many stock market beginners, however, these categories do not play a major role. Among them, shares in companies whose brands they know from their everyday lives are particularly popular.
As a general rule, you should never put all your eggs in one basket. Beginners in particular are better off with a broadly diversified portfolio of shares than with a small selection of individual stocks, as this reduces the risk of making losses. Index funds, or ETFs for short, are therefore particularly recommended for beginners.
Unlike conventional equity funds, which are "actively" managed by an investment manager, these "passive" funds use computers to track entire stock indices.
The trick: since no manager is paid for his or her work, ETFs have significantly lower fees than conventional funds.
ETFs are thus inexpensive on the one hand and offer a broad diversification of your money across numerous companies on the other. In addition to Dax ETFs, there are also index funds such as the MSCI All Country World, which contains company shares of the 2,500 largest listed companies in the world and thus covers virtually the entire global economy.
Why do I need a separate stock portfolio?
To buy stocks and ETFs, a conventional checking account is not enough. You need a separate share deposit account in which you store your securities. In principle, you can open a share deposit account at any branch bank. However, this usually involves annual fees that you have to deduct from your return.
It is therefore recommended that you open your securities account at a so-called direct bank on the Internet. Here, there are usually no custody account fees, and most online custody accounts are free of charge. This means that you only incur transaction costs when trading shares.
As an alternative to direct banks, which usually also offer other financial services such as checking or time deposit accounts, you can also buy shares and ETF shares from pure online brokers, also called neobrokers. This refers to special financial service providers that specialize in stock trading, and also offer securities accounts.
Where can I buy shares and ETFs?
Basically, shares 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 via your securities account and purchase them after selecting a trading venue (e.g. the stock exchange in New York). The price per share or ETF may vary depending on the trading venue.
Alternatively, you can buy stocks and ETFs from a direct trader who holds stocks and fund shares in stock. The key difference between stock exchange and direct trading: 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 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 ministries of finance. Direct trading, on the other hand, is not subject to special supervision.
Exchange trading and direct trading have different advantages and disadvantages. The most important ones at a glance:
Advantages of stock exchange trading:
- Trading is regulated by the state.
- The price is very transparent, as it is derived from the current prices on the stock exchange.
Disadvantages of stock exchange trading:
- Limited trading hours depending on how long the stock exchange is open.
- Shares often cost more than in direct trading, as additional exchange fees are incurred.
Advantages of direct trading:
- Stocks often cost less than on the stock exchange.
- Trading hours are longer, you can usually buy shares from a direct trader even late at night when the stock exchange has been closed for a long time.
Disadvantages of direct trading:
- Trading is not subject to government regulation.
- How exactly the price of the stock is composed is often not transparent for investors.
How do I buy shares and ETFs online?
Whether stock exchange or direct trading: If you have opened an online securities account for your shares, the next steps in buying shares are very easy.
1. you can easily find the desired shares and fund units via the search mask of your securities account. All you need is the securities identification number (WKN) or the international identification number (ISIN) of the security.
Once you have selected the stock or fund you want, you can enter the order to buy it: only now do you decide whether to buy the securities on a stock exchange or from a direct trader with whom your direct bank may cooperate.
The most important criterion when buying is the price: even if it differs only to the decimal place for each exchange or direct trader, you should always choose the most favorable offer.
When should I buy shares and ETFs?
There is no clear answer to this question. Choosing the perfect time to buy is difficult. The reason: the future is uncertain. Even stock market experts and analysts cannot make an exact forecast about the development on the markets.
If you are uncertain, possibly wanting to wait for falling prices and the associated lower stock prices, buying in stages is advisable. By splitting your investment amount and investing piecemeal one after the other, you reduce the risk of entering the stock market when the price is too high. This reduces the importance of the time of entry. If you want to invest a certain monthly sum in an ETF over the long term according to the same principle, you can also take out a low-cost share savings plan with many direct banks.