You are determined to start investing in the Stock Market so that your money works for you and generates income. You feel motivated, full of energy and impatient to start getting benefits. You sit in front of your computer ready for everything, take a sip of your glass of water and ... you face the harsh reality: you do not know where to start!
You decide to research on the network, so you spend hours and hours reading blogs and financial portals trying to discover what your first steps should be. However, everyone tells you different things , even contradictory, so there comes a time when you feel totally lost without knowing what to do. That is when all that motivation and energy that you had becomes overwhelmed, tired and desperate.
Is this situation familiar to you?
If so…
... here is the solution!
As I also experienced this situation, I know that in this moment of overwhelm what you need is for someone to accompany you in each of the steps you must take to start investing in the stock market on the right foot . And, precisely because I had to go through the same thing as you, now I want to be the one who helps you .
In my case it took me a long time to discover, understand and apply everything that I am going to tell you next. I had to learn it based on trial and error and I would have loved someone to tell me the way I should follow. That's why I created this tutorial, so you can discover, step by step and in a few minutes, everything you need to do before you start investing in the Stock Market, so that you can apply it now and save yourself a lot of time, money and effort.
And, although this tutorial is free, it is full of value, so in exchange for sharing it with you I am going to ask you one thing: that you can feel the motivation and energy that you had at the time you decided to start investing in the Stock Market .
Let's go there!
Step by step tutorial: everything you need to do before you start investing in the Stock Market
In addition, it is not just about knowing the different types of income you have at your disposal, but knowing which one fits best with your goals and your lifestyle .
Choosing one type or another will condition the amount of money you will earn, when you will collect it and how you will have to manage all of your investments.
For this reason, now that you are very clear that you want to invest in the stock market to put your money to work, the first thing you should do is decide what type of income you want to get with your investments .
Basically you have two types of income at your disposal: capital gains and dividends .
Income through capital gains
The capital gains are the benefits you get when you sell your shares at a price higher than the one you bought them.
For example, if you buy one hundred shares at € 9 each (you invest € 900) and sell them at € 11 (you recover € 1,100) you get a capital gain of € 200 (€ 1,100 - € 900 = € 200).
Notice that in order to convert these capital gains into real profits you must sell your shares. As long as you do not sell them, what you actually have are latent capital gains , which have not yet translated into income in your investment account.
Dividend income
Dividends are the part of the profits that a company distributes among its shareholders. Therefore, they are an income that you receive in your investment account for the simple fact of having your shares.
Every year companies announce the amount of dividends they will pay for each of their shares as well as the exact date of payment, so you can know in advance how much money you will collect and when you will receive it.
For example, if a company announces that it will pay a dividend of € 1.39 per share in 2017, it means that you as a shareholder will charge € 1.39 for each of your shares. Therefore, if you have one hundred shares you will receive dividends of € 139, while if you have a thousand shares you will receive € 1,390.
Notice that, once you have bought your shares, you will receive the same dividend whether they rise in price or fall, since they pay you a fixed amount of money for each share regardless of its price.
Capital gains vs. dividends
Now, so that you can decide what type of income is best for you according to your particular situation, I am going to show you which of them allows you to earn more money and which provides greater stability at your income level :
Which allows you to earn more money?
The capital gains give you the possibility to enjoy higher returns and in less time than dividends , since they allow you to take advantage of sharp increases in prices.
While it is quite complicated to get an initial annual return via dividends of more than 7% - 8%, it is not strange to see capital gains of 20%, 30% or more. As an example, I tell you how I won 58% in one year on the Stock Exchange.
Obviously, no one guarantees you get those capital gains, much less in each and every one of your investments. Most likely, while some of your shares rise in price, others remain for a time below the price you paid for them.
What you should have clear is that the capital gains give you the possibility to earn a lot more money and in less time than dividends.
Which brings more stability to your income level?
Not only should you look at the amount of money you can earn, but also how your income will be distributed over time.
In this sense, dividends provide more stability to your income , since they allow you to know in advance the amount of money you are going to charge for each of your actions and the exact date in which they will pay you.
By the way, some companies concentrate their dividends in a single annual payment, while others distribute them in two or three smaller payments distributed throughout the year.
In the case of capital gains, on the other hand, you will never know when you can get them, so sometimes you can enter a lot of money at once while in others you spend many months without collecting anything.
So, what kind of income is best for you?
It will depend on your particular situation. My recommendation is that you choose the type of income that best suits your lifestyle and financial needs.
Remember that if you need the stability that comes from knowing how much and when you will receive money from your investments, dividends will be the most appropriate type of income for you. On the other hand, if you do not need this stability, the capital gains will allow you to get a higher return for your money.
Now that you are just in time to start investing in the stock market, a mix of both types of income may be the best option. This way you can focus part of your investments on dividends to enjoy a stable income, and allocate the rest to the capital gains to take advantage of price fluctuations and give a boost to the profitability of your portfolio. A distribution of 50% - 50% can be a good starting point.
With investment philosophy, I refer to the conceptual framework that will mark your way of thinking about your investments . It is also the set of rules that will tell you at all times what you can and what you can not do to invest successfully.
If you are still unclear about the investment philosophy that best suits your needs, do not miss the MEGA GUÍA! Find the type of investment most suitable for you.
When you start investing in the stock market, most people make the terrible mistake of not being clear about what type of investment they follow, so they feel lost and do not know what to do.
And choosing the right philosophy can make your way to your goals much easier, while not doing so could become an insurmountable obstacle .
(You see how important it is to follow a proper investment philosophy, if you still do not have it and a little oversight has caused you to skip the MEGA GUÍA , this is the ideal time to read it).
Think about it like that. Your investments will generate an income, either through capital gains, dividends or a combination of both, to which you will have to subtract all the costs related to your investment activity to obtain your real benefits.
And do you know where the higher investment costs come from for most people who start investing? From buying and hiring a bunch of tools that you really do not need .
So now I'm going to tell you what you do or do need to invest and what you do not . Believe me, you will save a lot of money and a lot of headaches.
A computer
Any computer that supports an Excel spreadsheet program helps you . So you do not need to spend money to buy a new and more powerful, the one you have now is more than enough to start investing in the stock market successfully.
And, what about the mobile or the tablet? In my opinion, they will be useful if you want to consult the prices of your actions or enter a purchase or sale order, which, I warn you, you will NOT have to do very often.
However, to make your analyzes and know what companies to buy , decide when to buy them and manage the global of your portfolio, the mobile and the tablet can be uncomfortable , either by its small screen or by the limitation when using sheets of calculation.
An ADSL connection
Your domestic ADSL connection. And period. No connections of maximum speed, or second connections in case the first fails, or other rare things. Remember that you will not be buying and selling shares at all times, since that would not be to invest, but to speculate.
Actually, you only need to connect to the Internet when you want to place a purchase or sale order, check prices or download the financial statements of a company, which will represent, at most, 5% of the time you spend on your investments.
A broker
As you can not buy and sell shares directly on the Exchange, since you must have a license for this, you will have to hire the services of a broker to execute the purchases and sales in your name.
Later I will explain what brokers are my favorites and how to open your first investment account step by step, so now I will not expand on this topic. Then I tell you.
Other optional free tools
Apart from the essentials, such as the computer, the ADSL connection and the broker, there are other FREE tools that can also be interesting when you start investing in the Stock Market.
"My Portfolio" from Investing.com
It is a free functionality of the financial portal Investing.com that allows you to track your investments, such as consulting quotes, organize them according to different criteria and set alarms to warn you when they go up or down a certain price. Here is a step-by-step tutorial on how to configure and use it to your liking .
Various accessories
I like to use a calculator, paper and pen. That's why my office is always full of papers with scribbles that sometimes I do not even understand. So if you want to check that you do not need a lot of tools to earn money in the stock market, I'll open the doors of my investment office.
Believe me, do not bleed your capital before you even start investing with useless tools that will not serve you at all.
Real-time quotes
If you consult any financial portal you will see that the quotes appear with a delay of about fifteen minutes. This means that the price you are looking at is not the current one, but the price that was there a while ago.
Many newbies think that they will invest better if they hire a monthly fee to have access to the quotes in real time, since they will be able to buy and sell before anyone else.
But you know what? Investment is a very relaxed discipline, so you will not need to consult prices continuously, much less in real time.
You will only be interested in knowing the quotes when you are considering a possible purchase or a possible sale, which will only happen from time to time. Also, you do not need to be stuck to your monitor looking at the prices to buy and sell, since you can place orders that run at the price you want without you being present.
So forget about paying a fee to have access to prices in real time and allocate your money to what will really make you get benefits: your training and your investments.
Multiple monitors
Many people believe that to start investing in the stock market they need to have two, three or even more monitors connected to their computer, which is absurd.
Seriously, do not eat the jar telling you that you need to have price charts (probably in real time) on one monitor, financial news on another and I do not know what stories on a third party.
Tell me one thing: does your laptop or desktop computer have a screen? If so, you already have the optimal number of monitors to start investing in the stock market successfully and make money .
Subscriptions of payment to financial bulletins
A classic. If you want to read financial news you can enter any online portal and have all the information you want for free, without having to pay anything.
- But Marc, is that those who sold me the subscription told me that they had special information that only I would know ...
- Yes, of course, you and the other millions of people who are subscribed.
Seriously, do not tell you milongas. Destiny your money to train you and put it to work for you, not for others.
So now I'm going to tell you which brokers are my favorites , why I like them more than the rest and how to open your first investment account step by step.
Warning: I really talk about them because they are what I use in my day to day, since they do not pay me anything for doing it.
And, what are your needs? Well, again, very easy: to be able to buy and sell shares of companies through a reliable online platform.
Many brokers will give you the possibility to negotiate with an infinity of complex financial products, operate even in the markets of other planets and hire a lot of additional services. Okay, all this does not interest you.
What you want is only to be able to place an order to buy or sell European (and perhaps American) companies at the price you want and collect the dividends when it is your turn. Therefore, you do not need a very complete broker, since by definition the services that you are going to use are offered by everyone.
The brokers that I use
Over the years I have tried quite a few brokers, some of which I liked more than others. However, I currently invest only with two:
Why Degiro?
Because it is one of the cheapest I know. At the time of writing these lines, their rates are the following:
As you can see, it has very low purchase and sale commissions for the Spanish Stock Exchange. It does not charge a custody fee, nor for the collection of dividends, nor does it require a minimum amount to open an account. What it does charge you is a connectivity fee of € 2.5 per year for each Exchange in which you invest, except Spanish:
To know the commissions of the shares of foreign companies, you should check here each of the Stock Exchanges , which are lower than in most brokers.
In addition, the times I have contacted them have responded quickly and professionally , and their online platform has not given me any problems .
The only downside that I have found since investing with them is that, if applicable, the Deposit Guarantee Fund only covers up to € 20,000 per account and holder, which means that if the broker goes bankrupt, your capital is covered up to that figure.
Note: this Guarantee Fund is in theory, because, in practice, when a broker breaks down is usually absorbed by another, which takes over the accounts of their customers. Therefore, although you must take into account the coverage of the Guarantee Fund, you should not be overwhelmed or obsessed with the issue.
Why the Orange Broker of ING Direct?
Because I have been working with him for many years and, before the entry of the low cost brokers, he was one of the few systemic brokers (belonging to a bank) with "affordable" commissions.
In addition, until relatively recently allowed the shares of the Spanish Stock Exchange in registered accounts , which means that your shares were in your name. Due to a change in the law, however, all brokers currently use omnibus accounts, which means that your shares are not in your name, but in the name of the broker. Therefore, with this change of Law, the Orange Broker lost this advantage.
Their rates are currently the following:
As you can see, if you do not make a purchase or a sale for six months, they charge a custody fee of € 4.84 for each company (value as they say) that you have . But even in my case, I have been with them for many years and I am buying and selling rather little, it has never been six months without buying or selling any action, so in practice I have never paid such custody fee.
Despite being more expensive (there are really few as cheap as Degiro), the Orange Broker is covered by the Dutch Deposit Guarantee Fund up to € 100,000 per account and holder for cash accounts and up to € 20,000 for the shares.
As regards your online platform and customer service, I do not have any complaints either.
Once you have exceeded € 20,000 in your investment account, I would consider opening an account with the Orange Broker (or another low cost broker). I followed the reverse process, but because Degiro did not exist (at least in Spain) when I started investing. And, so you can see that I am not obsessed with the coverage of the Guarantee Fund, I am not at all worried about having more than € 20,000 in my account with them.
Well, the first thing you have to do is enter your web page .
Once inside, you must click on the green button " Yes, I want to become a client ":
It will take you to a page where you must indicate your data and click on the blue button that you will find at the bottom to register:
Once registered you will go to the customer registration page, where you will be asked for some more information. When you have completed the form, you must click on " next ", choose the type of account " Basic Account " that comes by default and validate the process through the email that will be sent to you. And that's it!
And that's when you start asking ...
And if you already have about € 10,000, € 20,000, or more? In this case my recommendation is that you do not start with all that money at once. Think that your first investments should not be oriented only to earn money, but also experience.
Nobody can guarantee that you do not make some newbie mistakes, like the mistakes that I made and that I paid with my money, so my goal is to do everything I can to make them the minimum possible.
For this reason, and although you have much more capital, I recommend you start with an amount of between € 2,000 and € 4,000 and gain a little experience before committing higher amounts.
If you want to go deeper into the amount of initial money to start with, I'll leave you with the following article: How much money do you need to start investing in the stock market?
Note: At the moment you do not charge anything for entering or withdrawing money from your investment account, so the costs of the transaction will depend on your usual bank.
The first thing you should do is open the Degiro website and click on the blue button that says " Log in " that you will find on the top right:
Now you will have to enter your username and password to access your account:
Once inside you must go to the " orders " drop-down menu and click on " Transfer money ":
Next, it will give you several options to transfer money to your investment account, where you must choose the one that suits you best:
The only thing you will have to do is order a transfer for the amount you want from your personal account to your investment account and in a couple of days you will have the money ready to start investing.
Therefore, you must be very clear that sometimes you will buy some shares and these will start to rise and rise, while in other cases they will lower and lower.
I tell you this because, if you start to mentally weaken, it does not matter if you do everything else well ... you will end up losing money with your investments.
You start by getting nervous, then you will doubt your decisions, you will look at the prices in real time to be aware of any small pennies that go up or down and, finally, will take over you such amount of overwhelm that you will skip your own rules .
And it will be then when you will make your worst investment decisions, you will lose money, you will be frustrated and you will begin to think that this of the Stock Exchange is not for you.
But you know what? You can avoid this destructive process by accepting, in the depths of your being, that the price of your actions will oscillate , sometimes upwards and sometimes downwards.
However, as a general rule you will keep your shares without letting yourself be carried away by latent capital gains, since selling ahead of time, or even selling shares that you planned to keep indefinitely, can leave you a lot of money on the table.
So, when the prices of your shares rise a lot, do not let the potential benefits hypnotize you and stay true to your initial strategy .
Do you want to continue collecting your dividends year after year? Do not sell them Do you think they are not yet expensive enough to sell them? Do not sell them Are the shares you want to buy too expensive? Do not buy them yet.
And if prices plummet?
In this case you should remain calm, and the best way to do it is remembering that it is the big downs of the stock market that can change your life for the better.
Think wisely. The cheaper the stock, the more you can buy for the same amount of money. So if you want to invest to collect dividends, as these are a fixed amount per share, by having more shares, you will earn more dividends. This will make the profitability via dividends of your investments increase.
Also, if you are looking for cheap stocks to sell in the future with capital gains, the cheaper you buy them, the more money you will earn when the price rises again .
And if the companies that you already have in portfolio fall a lot of price? Well, instead of scare and sell at a loss as most do, you can take the opportunity to average down and buy more at a better price as in the super purchases more quantity of items that are on offer.
I leave you with a couple of phrases from the famous investor Warren Buffett so that you understand the importance of acting calmly in the face of price fluctuations:
"The best time to buy a business is when the rest of the people are selling it, and not when they are buying it.
"The smart investor avoids greed and lets fear create opportunities."
If you want to discover more famous phrases of this genius of investment, here is a compilation with the 25 best phrases of Warren Buffett and the lessons he transmits.
Okay ... but how much will you have to pay?
It will depend on the stretch of benefits in which you find yourself . At the time of writing, the tax rates for investments in the stock market that you declare in Spain are the following:
This means that the first € 6,000 you earn on the Exchange in a year, whether through capital gains or via dividends, will pay 19% of taxes. The benefits that exceed € 6,000 will pay 21% and, if you win more than € 50,000, you will have to pay 23% for those who exceed this amount.
For example, if you earned € 80,000 this year, you would have to pay the following:
€ 6,000 to 19% -> You would pay € 1,140 in taxes.
€ 44,000 to 21% (those between € 6,000 and € 50,000) -> You would pay € 9,240 in taxes.
30,000 € to 23% (€ 80,000 - € 50,000) -> You would pay € 6,900 in taxes.
In total you would pay € 17,280, which represents a 21.6% tax compared to € 80,000. Therefore, you would have a net profit of € 62,720.
If you had losses when selling shares for a price lower than the one you bought them, you could compensate them with the capital gains and lower the total amount of taxes payable.
By the way, notice that you would pay considerably less than if you earned the same amount working.
Note: perhaps you read somewhere that the first € 1,500 in dividends do not pay taxes. Well, this was previously true, although in 2015 this bonus was eliminated.
On the one hand there is the case of capital gains, which are paid when you make the income statement. This means that when you sell shares with capital gains, you charge the total gross amount in your investment account and, until you make the declaration of income the following year, you can enjoy that money.
In other words, you first collect the capital gains and then, when you make the income statement, you pay the taxes . And, as the declaration can be made in June of the following year, this implies that you can enjoy that money during a period of between six and eighteen months.
On the other is the case of dividends, which pay taxes at the time of collecting them. This means that the net amount is directly entered into your investment account, once the taxes have been deducted.
So, you should remember the following:
Benefits via capital gains -> First you charge and then pay taxes with the rent.
Benefits via dividends -> You pay taxes at the time of collecting them.
In the case of capital gains, it is exactly the same as if you were investing in Spain , so do not worry.
However, in the case of dividends that you receive from foreign companies, at the time of collecting them you will pay first in the Treasury of the foreign country and then, of what is left, you will pay the Spanish Treasury again.
Yes, that's right, you will pay twice . It's fair? Not for me, but it is what is known as double taxation.
The good news is that in order to avoid double taxation, many countries have agreements that in practice allow you to recover up to 15% of the retention they have charged you in the foreign country .
The bad thing is that in most European countries the taxes are higher than the Spanish ones, so that 15% is not enough to compensate all the double taxation , only a part.
Note that in the case of capital gains you do not have that problem, since when you take the initiative when making the income statement, they only appear in the Spanish Treasury, not in the other countries.
Note: in the United States, the United Kingdom and the Netherlands double taxation is completely avoided, so you end up paying the same for the dividends collected in these two countries than those charged from Spanish companies.
Your next step to start investing in the stock market with confidence is to solve all your doubts.
To end
I hope this tutorial has helped you to know where to start investing in Stock Market and what your first steps should be. With all the information I have shared with you, I hope that you can forget forever that feeling of exhaustion, fatigue and despair that you had at the beginning and that you walk with motivation and energy towards your goals.
If you liked the tutorial and you think it can help more people, I encourage you to share it on your social networks.
And, as always, I ask you to express your opinions and experiences through the comments.
You decide to research on the network, so you spend hours and hours reading blogs and financial portals trying to discover what your first steps should be. However, everyone tells you different things , even contradictory, so there comes a time when you feel totally lost without knowing what to do. That is when all that motivation and energy that you had becomes overwhelmed, tired and desperate.
Is this situation familiar to you?
If so…
... here is the solution!
 |
| Northeast Today |
In my case it took me a long time to discover, understand and apply everything that I am going to tell you next. I had to learn it based on trial and error and I would have loved someone to tell me the way I should follow. That's why I created this tutorial, so you can discover, step by step and in a few minutes, everything you need to do before you start investing in the Stock Market, so that you can apply it now and save yourself a lot of time, money and effort.
And, although this tutorial is free, it is full of value, so in exchange for sharing it with you I am going to ask you one thing: that you can feel the motivation and energy that you had at the time you decided to start investing in the Stock Market .
Let's go there!
Step by step tutorial: everything you need to do before you start investing in the Stock Market
Step # 1 Decide what kind of income you want to get with your investments
One of the most frequent mistakes I see in people who want to start investing in the stock market is not knowing what kind of income they want to get with their investments. And, do you know what happens when you are not clear about what you want to achieve? That you do not know what you should do or where to throw.In addition, it is not just about knowing the different types of income you have at your disposal, but knowing which one fits best with your goals and your lifestyle .
Choosing one type or another will condition the amount of money you will earn, when you will collect it and how you will have to manage all of your investments.
For this reason, now that you are very clear that you want to invest in the stock market to put your money to work, the first thing you should do is decide what type of income you want to get with your investments .
Basically you have two types of income at your disposal: capital gains and dividends .
Income through capital gains
The capital gains are the benefits you get when you sell your shares at a price higher than the one you bought them.
For example, if you buy one hundred shares at € 9 each (you invest € 900) and sell them at € 11 (you recover € 1,100) you get a capital gain of € 200 (€ 1,100 - € 900 = € 200).
Notice that in order to convert these capital gains into real profits you must sell your shares. As long as you do not sell them, what you actually have are latent capital gains , which have not yet translated into income in your investment account.
Dividend income
Dividends are the part of the profits that a company distributes among its shareholders. Therefore, they are an income that you receive in your investment account for the simple fact of having your shares.
Every year companies announce the amount of dividends they will pay for each of their shares as well as the exact date of payment, so you can know in advance how much money you will collect and when you will receive it.
For example, if a company announces that it will pay a dividend of € 1.39 per share in 2017, it means that you as a shareholder will charge € 1.39 for each of your shares. Therefore, if you have one hundred shares you will receive dividends of € 139, while if you have a thousand shares you will receive € 1,390.
Notice that, once you have bought your shares, you will receive the same dividend whether they rise in price or fall, since they pay you a fixed amount of money for each share regardless of its price.
Capital gains vs. dividends
Now, so that you can decide what type of income is best for you according to your particular situation, I am going to show you which of them allows you to earn more money and which provides greater stability at your income level :
Which allows you to earn more money?
The capital gains give you the possibility to enjoy higher returns and in less time than dividends , since they allow you to take advantage of sharp increases in prices.
While it is quite complicated to get an initial annual return via dividends of more than 7% - 8%, it is not strange to see capital gains of 20%, 30% or more. As an example, I tell you how I won 58% in one year on the Stock Exchange.
Obviously, no one guarantees you get those capital gains, much less in each and every one of your investments. Most likely, while some of your shares rise in price, others remain for a time below the price you paid for them.
What you should have clear is that the capital gains give you the possibility to earn a lot more money and in less time than dividends.
Which brings more stability to your income level?
Not only should you look at the amount of money you can earn, but also how your income will be distributed over time.
In this sense, dividends provide more stability to your income , since they allow you to know in advance the amount of money you are going to charge for each of your actions and the exact date in which they will pay you.
By the way, some companies concentrate their dividends in a single annual payment, while others distribute them in two or three smaller payments distributed throughout the year.
In the case of capital gains, on the other hand, you will never know when you can get them, so sometimes you can enter a lot of money at once while in others you spend many months without collecting anything.
So, what kind of income is best for you?
It will depend on your particular situation. My recommendation is that you choose the type of income that best suits your lifestyle and financial needs.
Remember that if you need the stability that comes from knowing how much and when you will receive money from your investments, dividends will be the most appropriate type of income for you. On the other hand, if you do not need this stability, the capital gains will allow you to get a higher return for your money.
Now that you are just in time to start investing in the stock market, a mix of both types of income may be the best option. This way you can focus part of your investments on dividends to enjoy a stable income, and allocate the rest to the capital gains to take advantage of price fluctuations and give a boost to the profitability of your portfolio. A distribution of 50% - 50% can be a good starting point.
Step # 2 Choose the investment philosophy that's right for you
Once you have clear which type of income is best for you according to your particular situation, you should choose a sound investment philosophy, defined and appropriate to your needs .With investment philosophy, I refer to the conceptual framework that will mark your way of thinking about your investments . It is also the set of rules that will tell you at all times what you can and what you can not do to invest successfully.
If you are still unclear about the investment philosophy that best suits your needs, do not miss the MEGA GUÍA! Find the type of investment most suitable for you.
When you start investing in the stock market, most people make the terrible mistake of not being clear about what type of investment they follow, so they feel lost and do not know what to do.
And choosing the right philosophy can make your way to your goals much easier, while not doing so could become an insurmountable obstacle .
(You see how important it is to follow a proper investment philosophy, if you still do not have it and a little oversight has caused you to skip the MEGA GUÍA , this is the ideal time to read it).
Step # 3 Prepare the tools you need without spending a single euro
If your goal in wanting to start investing in the stock market is to make money, you should be able to see it as a business or a professional activity. And, as with any business or professional activity, you should try to keep costs as low as possible.Think about it like that. Your investments will generate an income, either through capital gains, dividends or a combination of both, to which you will have to subtract all the costs related to your investment activity to obtain your real benefits.
And do you know where the higher investment costs come from for most people who start investing? From buying and hiring a bunch of tools that you really do not need .
So now I'm going to tell you what you do or do need to invest and what you do not . Believe me, you will save a lot of money and a lot of headaches.
Tools that YES or YES you need to start investing in Stock Market
There are only three tools that you will need to invest, either now that you are starting or when you have been investing for 20 years. Two of them are probably the ones you are using right now to read this tutorial.A computer
Any computer that supports an Excel spreadsheet program helps you . So you do not need to spend money to buy a new and more powerful, the one you have now is more than enough to start investing in the stock market successfully.
And, what about the mobile or the tablet? In my opinion, they will be useful if you want to consult the prices of your actions or enter a purchase or sale order, which, I warn you, you will NOT have to do very often.
However, to make your analyzes and know what companies to buy , decide when to buy them and manage the global of your portfolio, the mobile and the tablet can be uncomfortable , either by its small screen or by the limitation when using sheets of calculation.
An ADSL connection
Your domestic ADSL connection. And period. No connections of maximum speed, or second connections in case the first fails, or other rare things. Remember that you will not be buying and selling shares at all times, since that would not be to invest, but to speculate.
Actually, you only need to connect to the Internet when you want to place a purchase or sale order, check prices or download the financial statements of a company, which will represent, at most, 5% of the time you spend on your investments.
A broker
As you can not buy and sell shares directly on the Exchange, since you must have a license for this, you will have to hire the services of a broker to execute the purchases and sales in your name.
Later I will explain what brokers are my favorites and how to open your first investment account step by step, so now I will not expand on this topic. Then I tell you.
Other optional free tools
Apart from the essentials, such as the computer, the ADSL connection and the broker, there are other FREE tools that can also be interesting when you start investing in the Stock Market.
"My Portfolio" from Investing.com
It is a free functionality of the financial portal Investing.com that allows you to track your investments, such as consulting quotes, organize them according to different criteria and set alarms to warn you when they go up or down a certain price. Here is a step-by-step tutorial on how to configure and use it to your liking .
Various accessories
I like to use a calculator, paper and pen. That's why my office is always full of papers with scribbles that sometimes I do not even understand. So if you want to check that you do not need a lot of tools to earn money in the stock market, I'll open the doors of my investment office.
What you DO NOT need and it will make you waste your money
Now that you know the tools you need to start investing in the stock market, I want to tell you what you do NOT need but that many people still insist on buying and hiring, thinking that they are the key to making money.Believe me, do not bleed your capital before you even start investing with useless tools that will not serve you at all.
Real-time quotes
If you consult any financial portal you will see that the quotes appear with a delay of about fifteen minutes. This means that the price you are looking at is not the current one, but the price that was there a while ago.
Many newbies think that they will invest better if they hire a monthly fee to have access to the quotes in real time, since they will be able to buy and sell before anyone else.
But you know what? Investment is a very relaxed discipline, so you will not need to consult prices continuously, much less in real time.
You will only be interested in knowing the quotes when you are considering a possible purchase or a possible sale, which will only happen from time to time. Also, you do not need to be stuck to your monitor looking at the prices to buy and sell, since you can place orders that run at the price you want without you being present.
So forget about paying a fee to have access to prices in real time and allocate your money to what will really make you get benefits: your training and your investments.
Multiple monitors
Many people believe that to start investing in the stock market they need to have two, three or even more monitors connected to their computer, which is absurd.
Seriously, do not eat the jar telling you that you need to have price charts (probably in real time) on one monitor, financial news on another and I do not know what stories on a third party.
Tell me one thing: does your laptop or desktop computer have a screen? If so, you already have the optimal number of monitors to start investing in the stock market successfully and make money .
Subscriptions of payment to financial bulletins
A classic. If you want to read financial news you can enter any online portal and have all the information you want for free, without having to pay anything.
- But Marc, is that those who sold me the subscription told me that they had special information that only I would know ...
- Yes, of course, you and the other millions of people who are subscribed.
Seriously, do not tell you milongas. Destiny your money to train you and put it to work for you, not for others.
Step # 4 Open an investment account with the right broker
As I mentioned before, an investment account with a broker is one of the three essential tools you need to start investing in the stock market.So now I'm going to tell you which brokers are my favorites , why I like them more than the rest and how to open your first investment account step by step.
Warning: I really talk about them because they are what I use in my day to day, since they do not pay me anything for doing it.
What you must take into account when choosing a broker with which to start investing in the Stock Market
Well, very easy: the cheapest among those that satisfy all your needs.And, what are your needs? Well, again, very easy: to be able to buy and sell shares of companies through a reliable online platform.
Many brokers will give you the possibility to negotiate with an infinity of complex financial products, operate even in the markets of other planets and hire a lot of additional services. Okay, all this does not interest you.
What you want is only to be able to place an order to buy or sell European (and perhaps American) companies at the price you want and collect the dividends when it is your turn. Therefore, you do not need a very complete broker, since by definition the services that you are going to use are offered by everyone.
The brokers that I use
Over the years I have tried quite a few brokers, some of which I liked more than others. However, I currently invest only with two:
- Rotation
- ING Direct Orange Broker
Why Degiro?
Because it is one of the cheapest I know. At the time of writing these lines, their rates are the following:
As you can see, it has very low purchase and sale commissions for the Spanish Stock Exchange. It does not charge a custody fee, nor for the collection of dividends, nor does it require a minimum amount to open an account. What it does charge you is a connectivity fee of € 2.5 per year for each Exchange in which you invest, except Spanish:
To know the commissions of the shares of foreign companies, you should check here each of the Stock Exchanges , which are lower than in most brokers.
In addition, the times I have contacted them have responded quickly and professionally , and their online platform has not given me any problems .
The only downside that I have found since investing with them is that, if applicable, the Deposit Guarantee Fund only covers up to € 20,000 per account and holder, which means that if the broker goes bankrupt, your capital is covered up to that figure.
Note: this Guarantee Fund is in theory, because, in practice, when a broker breaks down is usually absorbed by another, which takes over the accounts of their customers. Therefore, although you must take into account the coverage of the Guarantee Fund, you should not be overwhelmed or obsessed with the issue.
Why the Orange Broker of ING Direct?
Because I have been working with him for many years and, before the entry of the low cost brokers, he was one of the few systemic brokers (belonging to a bank) with "affordable" commissions.
In addition, until relatively recently allowed the shares of the Spanish Stock Exchange in registered accounts , which means that your shares were in your name. Due to a change in the law, however, all brokers currently use omnibus accounts, which means that your shares are not in your name, but in the name of the broker. Therefore, with this change of Law, the Orange Broker lost this advantage.
Their rates are currently the following:
As you can see, if you do not make a purchase or a sale for six months, they charge a custody fee of € 4.84 for each company (value as they say) that you have . But even in my case, I have been with them for many years and I am buying and selling rather little, it has never been six months without buying or selling any action, so in practice I have never paid such custody fee.
Despite being more expensive (there are really few as cheap as Degiro), the Orange Broker is covered by the Dutch Deposit Guarantee Fund up to € 100,000 per account and holder for cash accounts and up to € 20,000 for the shares.
As regards your online platform and customer service, I do not have any complaints either.
So, which one should you choose to start investing in the stock market?
If you are starting to invest in the stock market, I recommend doing it with only one broker to keep it as simple as possible. And, to this day, I would be without any doubt with Degiro, for being the cheapest among those that cover all my needs.Once you have exceeded € 20,000 in your investment account, I would consider opening an account with the Orange Broker (or another low cost broker). I followed the reverse process, but because Degiro did not exist (at least in Spain) when I started investing. And, so you can see that I am not obsessed with the coverage of the Guarantee Fund, I am not at all worried about having more than € 20,000 in my account with them.
How to open your first investment account step by step
Now that you know who would choose Degiro if I had to start investing in the stock market, I'm going to show you how to open your first investment account with them step by step . If for whatever reason you prefer to start with another broker, do not worry, since the process will be very similar.Well, the first thing you have to do is enter your web page .
Once inside, you must click on the green button " Yes, I want to become a client ":
It will take you to a page where you must indicate your data and click on the blue button that you will find at the bottom to register:
Once registered you will go to the customer registration page, where you will be asked for some more information. When you have completed the form, you must click on " next ", choose the type of account " Basic Account " that comes by default and validate the process through the email that will be sent to you. And that's it!
Step # 5 Transfer money from your personal account to your investment account
Once your investment account is open you need to transfer from your personal account the amount of money you want to start investing with.And that's when you start asking ...
With how much money should I start?
One of the advantages of investing in the stock market is that it adapts to practically any amount of money, however small it may be. If at this moment you only have € 300, then you start with € 300 without any problem.And if you already have about € 10,000, € 20,000, or more? In this case my recommendation is that you do not start with all that money at once. Think that your first investments should not be oriented only to earn money, but also experience.
Nobody can guarantee that you do not make some newbie mistakes, like the mistakes that I made and that I paid with my money, so my goal is to do everything I can to make them the minimum possible.
For this reason, and although you have much more capital, I recommend you start with an amount of between € 2,000 and € 4,000 and gain a little experience before committing higher amounts.
If you want to go deeper into the amount of initial money to start with, I'll leave you with the following article: How much money do you need to start investing in the stock market?
Transferring money to your investment account for the first time
Since I have shown you how to open your first investment account in Degiro, for being the broker with which I would invest if I started now, I will show you how you can very easily transfer money from your personal account to your investment account with them.Note: At the moment you do not charge anything for entering or withdrawing money from your investment account, so the costs of the transaction will depend on your usual bank.
The first thing you should do is open the Degiro website and click on the blue button that says " Log in " that you will find on the top right:
Now you will have to enter your username and password to access your account:
Once inside you must go to the " orders " drop-down menu and click on " Transfer money ":
Next, it will give you several options to transfer money to your investment account, where you must choose the one that suits you best:
The only thing you will have to do is order a transfer for the amount you want from your personal account to your investment account and in a couple of days you will have the money ready to start investing.
Step # 6 Prepare yourself mentally for price swings
Before starting to invest in the stock market, you should be aware that stock prices will rise and fall. You have to accept that you can almost never buy at minimums and sell at maximum, except when luck is on your side.Therefore, you must be very clear that sometimes you will buy some shares and these will start to rise and rise, while in other cases they will lower and lower.
I tell you this because, if you start to mentally weaken, it does not matter if you do everything else well ... you will end up losing money with your investments.
You start by getting nervous, then you will doubt your decisions, you will look at the prices in real time to be aware of any small pennies that go up or down and, finally, will take over you such amount of overwhelm that you will skip your own rules .
And it will be then when you will make your worst investment decisions, you will lose money, you will be frustrated and you will begin to think that this of the Stock Exchange is not for you.
But you know what? You can avoid this destructive process by accepting, in the depths of your being, that the price of your actions will oscillate , sometimes upwards and sometimes downwards.
How to act when the prices of your shares rise strongly?
What should you do when the prices of your shares rise strongly? It will depend on your goals and the investment philosophy you follow.However, as a general rule you will keep your shares without letting yourself be carried away by latent capital gains, since selling ahead of time, or even selling shares that you planned to keep indefinitely, can leave you a lot of money on the table.
So, when the prices of your shares rise a lot, do not let the potential benefits hypnotize you and stay true to your initial strategy .
Do you want to continue collecting your dividends year after year? Do not sell them Do you think they are not yet expensive enough to sell them? Do not sell them Are the shares you want to buy too expensive? Do not buy them yet.
And if prices plummet?
In this case you should remain calm, and the best way to do it is remembering that it is the big downs of the stock market that can change your life for the better.
Think wisely. The cheaper the stock, the more you can buy for the same amount of money. So if you want to invest to collect dividends, as these are a fixed amount per share, by having more shares, you will earn more dividends. This will make the profitability via dividends of your investments increase.
Also, if you are looking for cheap stocks to sell in the future with capital gains, the cheaper you buy them, the more money you will earn when the price rises again .
And if the companies that you already have in portfolio fall a lot of price? Well, instead of scare and sell at a loss as most do, you can take the opportunity to average down and buy more at a better price as in the super purchases more quantity of items that are on offer.
I leave you with a couple of phrases from the famous investor Warren Buffett so that you understand the importance of acting calmly in the face of price fluctuations:
"The best time to buy a business is when the rest of the people are selling it, and not when they are buying it.
"The smart investor avoids greed and lets fear create opportunities."
If you want to discover more famous phrases of this genius of investment, here is a compilation with the 25 best phrases of Warren Buffett and the lessons he transmits.
Step # 7 Calculate how many taxes you will pay
Before starting to invest in the stock market you must be aware of the taxes you will pay for the benefits you get. And, although these may vary depending on your individual situation, in most cases you will apply the general rule, which is what I am going to show you now.How much will you have to pay for your profits in the stock market?
Both the capital gains and the dividends will pay the same taxes , since both are considered as Capital Income.Okay ... but how much will you have to pay?
It will depend on the stretch of benefits in which you find yourself . At the time of writing, the tax rates for investments in the stock market that you declare in Spain are the following:
This means that the first € 6,000 you earn on the Exchange in a year, whether through capital gains or via dividends, will pay 19% of taxes. The benefits that exceed € 6,000 will pay 21% and, if you win more than € 50,000, you will have to pay 23% for those who exceed this amount.
For example, if you earned € 80,000 this year, you would have to pay the following:
€ 6,000 to 19% -> You would pay € 1,140 in taxes.
€ 44,000 to 21% (those between € 6,000 and € 50,000) -> You would pay € 9,240 in taxes.
30,000 € to 23% (€ 80,000 - € 50,000) -> You would pay € 6,900 in taxes.
In total you would pay € 17,280, which represents a 21.6% tax compared to € 80,000. Therefore, you would have a net profit of € 62,720.
If you had losses when selling shares for a price lower than the one you bought them, you could compensate them with the capital gains and lower the total amount of taxes payable.
By the way, notice that you would pay considerably less than if you earned the same amount working.
Note: perhaps you read somewhere that the first € 1,500 in dividends do not pay taxes. Well, this was previously true, although in 2015 this bonus was eliminated.
When will you have to pay your taxes?
While the amount of taxes payable is the same whether we talk about capital gains or dividends, the thing changes when we focus on the time to pay them.On the one hand there is the case of capital gains, which are paid when you make the income statement. This means that when you sell shares with capital gains, you charge the total gross amount in your investment account and, until you make the declaration of income the following year, you can enjoy that money.
In other words, you first collect the capital gains and then, when you make the income statement, you pay the taxes . And, as the declaration can be made in June of the following year, this implies that you can enjoy that money during a period of between six and eighteen months.
On the other is the case of dividends, which pay taxes at the time of collecting them. This means that the net amount is directly entered into your investment account, once the taxes have been deducted.
So, you should remember the following:
Benefits via capital gains -> First you charge and then pay taxes with the rent.
Benefits via dividends -> You pay taxes at the time of collecting them.
And, what about foreign companies?
When you invest in shares of companies listed in other countries, you must take into account another detail .In the case of capital gains, it is exactly the same as if you were investing in Spain , so do not worry.
However, in the case of dividends that you receive from foreign companies, at the time of collecting them you will pay first in the Treasury of the foreign country and then, of what is left, you will pay the Spanish Treasury again.
Yes, that's right, you will pay twice . It's fair? Not for me, but it is what is known as double taxation.
The good news is that in order to avoid double taxation, many countries have agreements that in practice allow you to recover up to 15% of the retention they have charged you in the foreign country .
The bad thing is that in most European countries the taxes are higher than the Spanish ones, so that 15% is not enough to compensate all the double taxation , only a part.
Note that in the case of capital gains you do not have that problem, since when you take the initiative when making the income statement, they only appear in the Spanish Treasury, not in the other countries.
Note: in the United States, the United Kingdom and the Netherlands double taxation is completely avoided, so you end up paying the same for the dividends collected in these two countries than those charged from Spanish companies.
Fantastic. And now that I know all this, what are the next steps that I should take?
Once you have completed all the steps above, you have almost everything ready to start investing in the Stock Market!Your next step to start investing in the stock market with confidence is to solve all your doubts.
To end
I hope this tutorial has helped you to know where to start investing in Stock Market and what your first steps should be. With all the information I have shared with you, I hope that you can forget forever that feeling of exhaustion, fatigue and despair that you had at the beginning and that you walk with motivation and energy towards your goals.
If you liked the tutorial and you think it can help more people, I encourage you to share it on your social networks.
And, as always, I ask you to express your opinions and experiences through the comments.
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