Step-by-step instructions and precautions

Step-by-step instructions and precautions


If you want to buy a pair of shoes, you go to a shoe store, right? And go to the butcher if you want to buy a kilo of meat. What will you do, then, if you want to start investingbuying financial assets, how actions? In this case, it does not go directly to the stock exchange. Need a financial intermediary, such as a bank, brokerage or digital platform to have access to the different “products” in which you can invest your money.

If you are thinking of taking this step, know that, despite being complex, the financial markets are not a seven-headed beast and never, as it is today, has it been so simple to invest, with solutions for all portfolioseasily accessible via any computer or smartphone.

If the advantages are numerous, so are the risks, so you must comply with a set of steps before “entering the capital market headfirst”. See in this article the step by step to start in the world of investments and what care you should have.

set goals

The first and most important step is to set goals. Why am I investing my money? What are my goals? Only with a clear idea of ​​purpose will you be able to establish a plan suited to your needs. Do you want to invest to have more financial slack when you reach retirement age? Or do you want to pay for your son’s university in a few years? Or even buy a bigger house soon?

For each case there is a better – and worse – way to invest – so setting goals is a priority. If each objective has a different realization period, the investments to be made must be in accordance with this time horizon. Spend some time on this task because time will never be wasted.

Also read: Saving or investing: what should I do?

Select the assets to invest

Having established the objectives, it is time to “measure” your risk tolerance level to adapt your choices not only to the time horizon, but also to your investor profile – that is, how much you are willing to risk in exchange for a higher return.

Fitting into a moderate or aggressive profile, you can have a considerable part of your portfolio invested in stocks, for example. They are assets that let you subject to capital lossesbut which, on the other hand, can guarantee the best long-term return. On the contrary, if you have a conservative profile, with low risk tolerance, this asset class is not the most recommended for you.

Find out about them types of products, their performance history, and the relationship between risk and potential return. And, very importantly: never invest in products you don’t know or understand. Some financial instruments are highly complex and can generate capital losses greater than the amount invested (in cases where leveraged positions are allowed). always remember that investing “blindly” is the first bad decision you can make in relation to your money.

Also read: What is your investor profile?

photographic production illustrates the theme inflation, investments, savings with a blue background and three small piles of coins, in crescendo, with a magnifying glass leaning against it

Choose a financial intermediary

the next step is choose the financial intermediary which will be the bridge between you and the markets. It is through him – be a broker or a bank – who will make their investments, in exchange, of course, for a price for the service.

First, you must analyze the product offering, customer follow-up level and pricing. Compare the costs of trading, holding securities, account maintenance, foreign exchange and commissions related to receiving dividends. Please note that “zero commissions” does not mean free management of your portfolio. Some intermediaries may exempt from commissions the purchase and sale of securities, but charge, for example, exchange costs or commissions on the payment of dividends, so that the operations are not, for the client, at “zero cost”.

Likewise, assess the service level you want from your financial intermediary. While in an investment bank you may be able to ask for information or clarify doubts with your manager, by phone or in person, in an online brokerage the personalized service will have more limitations.

Also read: What is the role and importance of the CMVM in Portugal

Test the trading platform

After choosing the financial intermediary, you must complete the necessary steps for the account opening. You will then have access to a online trading platformwhere you can give your buy and sell orders and manage your portfolio independently.

Most intermediaries offer the possibility to create a demo account to test the platform. Take advantage of this simulation account to familiarize yourself with the functioning of the markets and the software itself to reduce the possibility of making mistakes when trading on your real account. There, the money is fictitious and does not run any risk.

Also read: 12 golden rules for investing in stocks

start investing

When you feel confident, finally go ahead with your investments, making sure you have all the information you need about the platform, instruments and prices. You should only invest money you don’t need for your expenses and don’t think you might need for any emergency expenses. Hence the importance of setting up, first, an emergency fund, without risk and easily accessible, to be able to face an unexpected expense without compromising your budget. Only the rest will have to be applied in the markets, and divided by products with different levels of risk.

Part of the portfolio must be invested in less risky products and, therefore, with a lower return, and the other part – depending on your profile – in instruments that can generate a greater return, also subjecting you to a greater level of risk. The more diversified the portfolio (in terms of assets, sectors and geographies) the more protected it will be.

Equally important is start slow. If you have no experience in the investment world, start by applying small amounts, and reinforce over time. It is essential that you regularly monitor the evolution of your portfolio, keep yourself informed about developments in the economy and financial markets and, if necessary, adjust your portfolio.

Also read: Growth vs Value: Two strategies for investing in the stock market

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