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Stock market for beginners: everything you need to know to start investing

The “investment culture” is already a reality among Brazilians, who still maintain the historical link with savings, but no longer as their only financial investment. 

Anyone who is taking their first steps as an investor will, over time, tend to diversify their portfolio and will certainly think about also investing in shares on the Stock Exchange. 

For many, this is a goal, the motivation to become an investor, but also a challenge due to their lack of in-depth knowledge of the functioning and routine of the Stock Exchange. 

So, it’s time to learn more about the subject, do you agree? So, let’s talk about the Stock Exchange for beginners.

Stock exchange for beginners: What is it and how does it work?

To begin with, the beginning investor needs to know that the Stock Exchange is “ a type of market in which investors can trade securities and shares of public or private publicly traded companies ”, offered with the aim of raising capital. 

The company decides to make its IPO (Initial Public Offering), which means opening its capital to other shareholders. It is the so-called primary market, with the transfer of shares, previously exclusive, to stock exchange investors. The so-called secondary market occurs following the trading of shares between the investors themselves.

In other words, it is on the Stock Exchange that investors buy shares that represent a slice of a company’s corporate pie. And you make a profit on your investment when positive results or dividends are shared, for example. 

Therefore, speaking of the Stock Exchange for beginners, the institution has the function of organizing the trading routine, with the security, transparency and credibility necessary so that investors can buy and sell shares through the intermediation of so-called stock brokers.

Stock market for beginners

In Brazil, operations via the Stock Exchange date back to the 1960s and there were times when the country had nine exchanges in different regions. But in 2017, B3 emerged , the Brazilian Stock Exchange, headquartered in São Paulo, the result of the merger of BM&F Bovespa with Cetip ( Central de Custódia e de Liquidação Financeira de Securities) and which was created to encompass operations relating to all fixed and variable income real estate values.

Companhia Brasileira de Liquidação e Custódia

B3’s work is carried out in partnership with two other important bodies for operations on the Stock Exchange: the CBLC (Companhia Brasileira de Liquidação e Custódia), which guarantees the security of all operations, and the CVM (Securities Commission), which regulates and monitors the market with the aim of preventing fraud and ensuring the integrity of transactions.

At first glance, the Stock Exchange for beginners may appear to be a distant reality due to the supposed complexity of operations. 

Stock Exchange became much more dynamic

But in fact, the functioning of the Stock Exchange became much more dynamic and easier to understand when buying and selling operations became 100% online, via a platform called Home Broker, through the hiring of stock brokerage services, and following the opening and closing times of the trading session . 

In other words, forget those images from the news or movie scenes with operators shouting at the Stock Exchange headquarters wanting to sell and buy shares. That’s in the past.

What does not change is the certainty that investing in the Stock Exchange is not a privilege for large investors or for those who are already experienced in the stock market and investments. On the contrary. 

Firstly, because there is no minimum amount to invest in the stock market. With R$100.00, for example, it is now possible to invest. And secondly, a variety of options are offered that open up the possibility for investors with different profiles (both in terms of how they invest and purchasing power) to also buy shares.

Stock Exchange shares tips for beginners

When deciding to invest in the Stock Market, the novice investor should learn a little more about the procedures before making the purchase decision. For example, shares traded on the Stock Exchange are of two types:

Ordinary shares – When choosing to purchase shares of this type, the investor has the right to vote in the election of members of the Board of Directors of the issuing company. This is important because it can influence management and, ultimately, the company’s financial results. 

On the other hand, in the event of bankruptcy or liquidation, those who purchase common shares must wait to receive the money invested. This only occurs after payment to investors who hold preferred shares and creditors.

Preferred Shares – Investors in this type of share generally do not have voting rights, but as the name suggests, they have priority in receiving dividends from a company. 

In most cases, the value is fixed, unlike common shares where dividends are not guaranteed but are variable.

Shares are traded in lots. Each lot is equivalent to 100 shares. But the investor can purchase fractional lots. Despite lower liquidity and smaller difference between purchase value and sale value – spread –, it is an option that makes the Stock Exchange easier for beginners and small investors.

thermometer for negotiations

The value of shares for purchase and sale may vary depending on the performance of indicators, made up of different assets and used as a thermometer for negotiations. The best-known indicator used as a reference at B3 is the Ibovespa. It works as a general performance indicator, based on the most traded assets in the Brazilian stock market.    

Therefore, when you hear that the Stock Exchange opened, is or closed high or low, this means that the indicator is determining the stock market’s rise, therefore, it occurs when the Ibovespa index reaches a higher level in relation to the last closing. And this points to a tendency for shares to appreciate.

Why invest in the stock market?

Now that you know a little more about the subject, the question to be answered is why invest in the Stock Market? Because investing in shares has a high return potential, being more profitable than other investments.

As with any other investment, there are risks for investors in the Stock Exchange. But depending on the level of market monitoring and the way the investor makes their choices, it is possible to obtain returns compatible with the investment. A path for beginners may be to opt for more recognized companies, with an established presence in the market and on the Stock Exchange. And with the objective of portfolio diversification and long-term profit.

How to start investing in shares?

And the most awaited moment has arrived when we talk about the Stock Market for beginners. To start investing in shares, the main tip for investors, especially beginners, is the same as for any other type of investment. Carry out your financial planning, define the objectives you want to achieve and evaluate your profile as an investor. And use a specific reserve to invest in the stock market and not the money already used in everyday accounts.

Also check the fees involved in the investment. There are four:

Brokerage Fee : It is charged for each transaction brokered by stock brokers.

Fee Fee: It is a percentage fee on the price negotiated for purchases and sales of shares and is charged by B3.

Custody Fee : This is the amount charged monthly by brokers and refers to the operational costs of maintaining the investor’s account.

Taxes : In stock trading on the Stock Exchange, Income Tax is levied by the government only on profits and losses can be deducted.

define what amount you intend to invest

Another measure to be taken is to define what amount you intend to invest and what strategy you wish to apply in your foray into the Stock Exchange:

Day Trade : These are purchase and sale transactions that occur on the same day, with investments lasting minutes and a maximum of a few hours.

Swing Trade : These are short-term investments, with buying and selling over a few days or weeks.

Position Trade : These are long-term investments, with monthly and even annual transactions.

After that, after checking the rates and defining the value and strategy, it is time to start investing in shares on the Stock Exchange.

Open a stock brokerage account

Choosing a stockbroker – mandatory, it is worth mentioning again – is the first step to be taken by the investor. There are many options on the market and one of the criteria for deciding, in addition to know-how, are the fees charged. Once the choice is made, the next step is to open the account and transfer the amount you want to invest.

Access and explore Home Broker

Once the account creation has been resolved, the broker grants the investor access to the Home Broker. And the tip is to navigate and explore all the platform’s features, understand the logic of use and check the information that is available, in addition to the areas that show quotes and market graphs. It is through Home Broker that the investor carries out the purchase and sale operations of their shares.

Choice and purchase of shares

More familiar with Home Broker, the step now is to choose the shares in which you intend to invest. But before choosing and sending the purchase order, remember to research more about the issuing company. 

Check the financial results and what the market (including investors) are saying about these stocks. 

1-And when the moment of purchase arrives, greater attention should be paid to the share offering price. 

The goal is to buy at the lowest price possible, even if the transaction isn’t completed until the next day.

Follow the market

Finally, the process of investing in Stock Exchange shares requires constant monitoring of the market. It is necessary to always be up to date with the performance of the stock market as a whole, the main indicators, and the shares. Check out the news and the opinion of experts on the subject. This will help you make important decisions about when to buy and when to sell, always to make a profit and avoid losses.

Onze is an investment house that aims to manage investors‘ long-term financial assets. To this end, it offers private pension plans that invest in different assets from the Brazilian economy. We also offer a personalized and simple digital experience, so that investors have access to exclusive financial products at fair rates.

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