How do actions work?
The company issues shares to raise capital to finance operating activities and further development. One way to raise funds is to issue (or issue) shares.
Shares may only be issued by joint-stock companies and express ownership of the company's assets. See more: How actions work.
Why is it worth investing in stocks?
Investments in stocks are considered relatively safe and low risk compared to investments in other assets.
The advantage of equity investments is often the high liquidity of the markets, which allows you to buy or sell stocks at virtually any time. Low fees and the ability to personally manage your portfolio are other advantages of equity investments.
The disadvantages include the practical inability to influence the business, low awareness of retail investors and, of course, the possibility of bankruptcy in extreme cases.
Long-term stock valuation
The long-term increase in profitability is the main factor that makes equity investments so popular. The key to successful investments is that ROI must beat inflation.
Currently it is around 2.5% per annum, the minimum indexation through equity investments must be greater than 2.5%.
The maximum annual indexation is unknown, but the best investors have reached the threshold of around 20% per annum with long-term investment and a lot of capital.
Right to dividends
Annual percentage valuation of a stock is one of the opportunities that can be obtained from equity investments. The second option is to pay dividends on a regular basis. Of course, not every company pays dividends, and not all dividends are equal.
The dividend amount is expressed as a fixed amount per share (for example, $ 10 per share) and is one factor that affects the share price. Its size usually depends on the company's profits, but there are companies that have no profits and do not pay dividends.
The regular dividend payout is a very desirable factor for retail and institutional investors who in many cases can decide whether or not to buy shares.
Diversification of personal finances
For some, equity investments can be the main source of income, for others it can only be a form of financial portfolio diversification.
Investing in stocks is not complicated and has many advantages over investing in real estate or works of art (ease of access, low fees, high liquidity, etc.).
In addition, you can benefit not only from the rising price of the stock, but also from regular dividends. It's no surprise that stock buying is gaining ground when an increasing proportion of the public is willing to invest their money.
4. What is a dividend?
The dividend is part of the profit that the company pays to shareholders.
Anyone who owns shares in the paying company is entitled to the payment of that dividend.
The company's general meeting decides on the date and amount of dividend payment.
5. How to trade stocks?
Investments in equities are traded on stock exchanges around the world. Currently, stock trading relies heavily on an online environment, which allows you to buy or sell the required titles from home via your computer or smartphone.
How to start trading forex
Long ago, traders screamed in stock exchanges and used buying and selling gestures to give instructions to the brokers who provided them with stocks.
Today everything is done electronically with just a few mouse clicks and you can own Apple, Google, Microsoft or other well-known companies.
All you need to do is have an open brokerage account (analogous to a classic bank account) and internet access.
6. What is the stock exchange?
The stock exchange is a place where investment instruments are traded in accordance with previously agreed rules. An example is the Polish Stock Exchange. It is an institution that organizes and supervises the smooth conduct of transactions and their proper settlement.
The stock exchange distinguishes between two sides - investors and issuers:
Investors can purchase equity instruments (shares) with the possibility of obtaining future profits.
Issuers have the opportunity to raise capital for further activities and development.
7. What is a broker?
Forex inwestujfinanse.pl is an intermediary between the investor and the stock exchange. Without a broker, you cannot buy any stocks, unless you are an investor and have a place to pay directly on the stock exchange. A broker is a brokerage company that you, as an entrepreneur, want to work with. The broker charges clients for transactions.
The broker will allow you to open an investment account under your own name. You send him money to buy stocks with. The broker also provides access to a trading platform that allows you to enter orders, provides market data to see current prices.
The broker should be your partner in investing and trading on the stock market, and such a partner must be well-chosen.
8. How to buy an accessory them?
A novice investor takes the first steps in a brokerage house to conclude an investment account agreement. It is used to hold and trade securities and other financial instruments.
The brokerage account agreement can be signed directly at the customer service point or the application can be submitted online - the courier will deliver the agreement to be signed. All you need is an ID card or passport.
The agreement with the Brokerage House itself is not very complicated and is a bit like a bank account agreement. You must be at least 18 years old to open an investment account and start buying and selling stocks.
Before signing the contract, we will still have to complete the EU MIFID form to check if we are suitable for stock investors. In addition, from December 2016, the package will include a US FACTA form to be signed in which we must declare whether we are tax resident in the US.
In Poland, there are almost 50 brokerage houses licensed by the Polish Financial Supervision Authority, but not all of them provide services to individual clients. In February 2017, DM accounted for almost 1.4 million accounts, of which the 10 largest brokers accounted for almost 87% of clients.
The DM offer is quite similar: keeping an account is free or costs PLN 60 per year. In addition, the investor pays a commission for each executed order - the standard rate is 0.39% of the transaction value.
The contract with the Brokerage House may be terminated at any time, subject to the notice period specified in the contract. There is no limit to the number of accounts held with different brokers.
Therefore, depending on your needs, you can use the services of several or even a dozen DMs at the same time.
How to buy stocks online? Guide
A bit further in the article, you will read about the exact process of buying stocks. Here, however, we will focus on online trading.
You need an online broker or brokerage house for this. We are leaning towards the first option, because buying stocks of companies is much more convenient and easier.
We will show you this process using the example of eToro, the best broker for trading on the stock exchange.
Step 1: Registration
eToro registration form Enter the broker's website and express your desire to register. You will be taken to the registration form where you provide the following information:
This is enough to set up a demo account. However, its full activation will require more detailed data. Complete your profile with:
first name and last name,
place of residence,
date of birth,
Step 2: Demo account
Before continuing, try out how buying stocks of companies with a demo account works. You have all the functions of the platform and 100,000. fictitious USD. The platform accurately reflects the state of the stock exchange, so the share price is up-to-date.
eToro how trading looks like In the case of a demo account, you don't risk anything, so you can test the functions of the broker at will.
Step 3: Verification
Once you've completed your profile with detailed information, verify it.
For this purpose, the broker will ask you for documents that will prove your identity and place of residence.
You need to scan, for example, your ID card and bank statement, and then send the documents electronically.
Step 4: Deposit
Before you buy shares in a given company, top up your brokerage account with your first capital.
eToro deposit payment form Its amount depends on you, but some brokers (also brokerage houses) have a lower limit for the transfer. For example, in the case of eToro, the first minimum deposit is EUR 200.
Step 5: Buying Stocks
When the money is credited to your brokerage account, you can move on to buying shares. To do this, select the shares of the company you are interested in from the broker's offer and click on them.
You will go to a new tab. There you will find detailed information about the assets you want to buy. Here you can check historical share price, the latest company news and opinions of other investors.
How to sell and buy currencies on eToro Once you are familiar with them, click the "Act" button.
Determine the details of the transaction in the new window. Enter the amount you want to invest, select the type of position (long or short), and set the amount of leverage and stop loss / take profit levels.
Finally confirm the purchase of the company's shares.
Create a free account
CFDs are complex financial instruments. The use of leverage carries a high degree of risk.
67% of retail investors lose money when trading CFDs with this provider.
9. How to create an equity investment strategy?
Knowing how to effectively buy and sell stocks requires some effort and a willingness to learn something new. Nobody is born as an investor and has no investment education.
Depending on the time horizon, we can divide capital investments into two types - long-term and short-term.
Long-term investments and active trading el
Long-term investments rely heavily on basic stock analysis. Long-term investors usually monitor and analyze companies' financial statements, the proportions of individual ratios (e.g. P / E ratio, etc.).
In this way, they try to understand the sector in which the company operates, the company's products and services, and the specificity of its management. On this basis, they choose stocks of companies that are currently relatively cheap but with long-term growth potential.
Long-term investors are the biggest names like Benjamin Graham, Warren Buffett, Peter Lynch, etc. They choose stocks of companies that are relatively cheap now, but with long-term growth potential.
These investors do not consider weeks, months or years, but long-term periods and are generally oriented towards long-term investments.
Short-term investments are more active trading, often referred to as swing trading or intraday trading. Short-term traders rely more on technical analysis, follow price charts and use various indicators (MACD, RSI).
Fundamental analysis may or may not be that important, but of course it's always good to know as much information as possible about an instrument. Short-term investors are also more likely to trade short-term, meaning they are speculating on downturns.
How to buy stocks on the stock exchange? Step by step
In this text, we will only deal with technical issues. Let's start with the basic definitions. The stock market is a place where people and institutions want to buy or sell stocks, bonds, certificates and other securities.
Investors are buyers and sellers of securities. An investor invests money in financial instruments in the expectation of earning in the form of interest, dividends or an increase in the price of the purchased asset.
In order to buy shares on the stock exchange, you must open an investment account with a brokerage house licensed by the Polish Financial Supervision Authority.
A brokerage house is an indispensable intermediary between investors (you cannot buy shares directly on the WSE). The Brokerage House buys and sells shares on the stock exchange at the request of its clients, recording the number of shares purchased on an individual brokerage account.
Step 1. Deposit money into your brokerage account
After preparing the account, you would have to pay money to it. The amount we will refund is an individual decision. It is recommended that you do not have too much money in the first period of investing.
Of course, for everyone, "a small amount" means something different. However, it is better to treat the first payment as money to lose and it will not have a significant impact on our finances and well-being.
Usually, payments to the investment account are made by bank transfer to the account number specified by the brokerage house. Only certain brokers allow cash. You can also bring cash to the bank and order a transfer.
In addition, some banks integrate an investment account with a checking account, so you can buy stocks using cash directly from your bank account.
Step 2. Place orders or how to buy and sell stocks
You must place an order to buy shares. It consisted in arriving at the brokerage house's customer service point (POK) and submitting oral or written instructions to the broker.
He issued an appropriate receipt and sent our order to the WSE transaction system. Now, most orders are placed via the internet and brokerage house applications. The order is still sent first to the DM system, from which it goes to the exchange.
Thanks to this, it is cheaper (the commission for online orders is much lower than by phone or in person), faster and more convenient.
Types of brokerage orders are the subject of a separate guide. For starters, you just need to know that there are two main types of orders: buy and sell orders.
Under the former, we offer cash against stocks, and on sale orders we offer stocks against cash. The second important criterion is the question of our priorities.
To buy or sell shares, we can use a limit order or an "Any Price" (PKC) order. In the case of limit orders, we declare the number of shares bought / sold and the unit price at which we agree to buy / sell.
If we place an order, e.g. 100 KGHM shares with a limit of PLN 125 per share, we can be sure that we will pay no more than PLN 12,500. PLN plus commission (may be lower if market prices are lower than PLN 125).
PKC orders take precedence over limit orders execution, but they are not sure how much we will actually spend to buy shares or how much we will receive for selling them.
He trades dematerialized shares on the Warsaw Stock Exchange. These are accounting entries kept by the National Depository for Securities.
So let's forget the scenes in the old American movies where brokers crammed into a trading room screamed and exchanged folders of paper representing any number of shares. Now everything is done electronically and is stored in computers' memory.
You can trade not only on the WSE. There are also subscription rights, stock rights, ETFs, certificates, structured products (ETPs) on the spot market and bonds on the Catalyst market.
In addition, the WSE offers a fairly wide range of derivatives (futures market): futures and options - but this is already a driving school and the topic of a separate guide.
Always remember that you invest in the stock market independently and at your own risk. No recommendations, advice or analyzes can absolve you from the consequences of your decisions.
The brokerage house is only an intermediary and is not responsible for whether the transaction brings profit. Importantly, the DM is not the other party to the transaction - you buy and sell shares from other investors.
Step 3. Fees and Commissions, ie. How much does it cost to buy and sell shares?
Individual investments in stocks of listed companies are not a particularly costly activity. Basic versions of investment accounts are often offered and maintained free of charge or for several dozen zlotys per year.
More has to be paid for additional options: e.g. access to information services or a deeper view of the order book. By default, we only see one best buy / sell offer and we have immediate access to the offers. And so the simplest package in 95% of cases should be enough for novice investors.
The brokerage house earns on commissions charged to us for each completed purchase and sale transaction. For several years, the standard on the Polish stock market has been a commission of 0.39% on online instructions.
But some brokers may drop to around 0.20%. There is also a minimum commission - usually PLN 3-5 per completed order.
Step 4. Calculate profits and realize losses
From the moment the order is placed, the investor gives the market an influence on his money. It depends on the decision of all market participants whether the prices of the purchased shares go up or down.
Why the prices of some stocks rise and others fall is a topic for another occasion - this is the essence of the art of investing.
However, the principle of calculating gains and losses remains unchanged. If we have sold stocks more expensive than we bought them (including the commissions paid!), Then we are "made". If we sold stocks cheaper than we bought them, we suffered a loss.
If we have stocks whose current market price is much lower than their purchase price, we are simply "long-term invested". 19% of tax is due on capital gains generated in the calendar year.
Step 5. Cash withdrawal
You can withdraw funds from your cash account at the brokerage house. Usually, payment is made by bank transfer to a bank account previously defined by the investor. You place a transfer order and you should have the money in your account the next day.
Some brokerage houses also allow cash withdrawals at their own branches. However, this operation may require an additional commission and must be notified in advance for larger amounts.
Step 6. Trade not only on the Stock Exchange
Investing in shares listed on the Warsaw Stock Exchange is usually the first step on the investment path. It's a decent school before going into overseas markets, futures markets, or the foreign exchange market.
From the individual investor's point of view, the main disadvantage of the WSE is the lack of adequate portfolio diversification. The problem is both the concentration of risk on one country (ie Poland) and on one currency (Polish zloty).
The WSE also lacks diversity: there are few technology companies, no global corporations, and some industries are represented by one or two companies.
How to choose a broker / brokerage house?
There are tons of brokers and brokerage houses on the market, each offering slightly different terms and conditions in which you will invest. Therefore, before you start buying stocks of companies through a given company, check what the broker / brokerage house has up its sleeve.
Below you will find the most important points that you need to pay attention to.
Regulations. Always put security first, and the broker / brokerage house is safe when it is regulated by relevant state institutions.
Deposits and withdrawals. It is important that brokerage houses and brokers offer a wide range of transfer options, because thanks to this you will have access to those that suit you best. In addition, you need to check that the broker does not charge any additional fees for the transfer of funds.
Fees and Commissions. Needless to say, the less you cost, the more you can earn. It concerns not only fees for investments in company shares, but also non-commercial fees (e.g. for keeping an account).
Offer width. How many stocks of companies can you invest in and on what terms? Are they only available as CFDs or can you also buy real shares of the company?
Customer service. When will it appear if you have a problem, employees of the broker or brokerage house should help you solve it. Check if you can count on them and what forms of contact are available.
Accessibility. Some broker and brokerage platforms are more intuitive, others less so. If you're just starting out, you'll feel a lot better about buying stocks conveniently. Therefore, choose the broker that suits you best.
CFDs are complex financial instruments. The use of leverage carries a high degree of risk.
67% of retail investors lose money when trading CFDs with this provider.
How to buy company shares?
First, make sure that the company in question exists on the stock exchange. If the company has not issued its shares, you will not invest in it. If it is on the stock exchange, you need to open an account with a broker or brokerage house to make a purchase.
How to buy stocks of US companies?
You need a broker that offers access to the US stock exchange. Therefore, check brokerage houses and brokers in this regard. Trading in the US stock market is very popular, so you will be able to access it on multiple platforms.