Investing in stocks is a topic of interest to many, but it's often overwhelming to know where to begin. It's especially important for beginner investors to understand the basics and invest safely. In today's post, I'll provide an essential guide for beginners to easily understand!
1. Basic concepts of stock investment
There are many basic concepts that you need to know for stock investment. However, you need to choose carefully among them. Organize the essential conceptsI tried it.
If you encounter additional concepts or terms you don't understand while investing, it's crucial to study them thoroughly. For absolute beginners, concepts like market capitalization, dividend stocks, and value stocks are essential.
✅ Stock price and market capitalization
- Stock Price : Price of one share of stock
- Market Capitalization : The sum of the total value of a company's shares (stock price x total number of shares issued)
✅ Dividend and Growth Stocks vs. Value Stocks
- Dividend stocks : Stocks in which a company distributes a portion of its profits to shareholders
- growth stocks : Stocks with high growth potential and expected stock price increases
- value stocks : Stocks that are currently undervalued but have the potential to increase in value in the future.
2. Stock Investment Preparation Process
There are various securities accounts, some paid and some free, but among the free accounts, I use the Namu Securities app. I've been using it for three years. I really love this app because of its convenient UI and easy operation. It is one of them.
✅ Open a securities account
To trade stocks, you must first open a brokerage account. Nowadays, you can easily trade stocks anytime, anywhere through mobile apps.
- Choose from a variety of securities firms, including Kiwoom Securities, Samsung Securities, and Mirae Asset.
- Trading is also possible via mobile app or PC.
✅ Set investment goals
- Short-term vs. long-term investing Short-term investments aim for quick profits but carry high risks, while long-term investments can expect stable growth.
- Determine your risk tolerance : It is important to set a limit on the amount of loss you can afford.
📢 In my experience, Short-term investing is a difficult investment method even for experts with long experience and foresight.am.
Long-term investments in large companies with guaranteed growth are essential for beginners. (The greater the risk of principal loss, the greater the potential for profit.)
✅ Stock selection and analysis
PER (Price-to-Earnings Ratio)Price-to-earnings ratio (P/E) is a financial indicator that shows how much investors are willing to pay for earnings. It helps assess whether a stock is overvalued.
- If the PER is high ➡️ Investors expect high future growth, but stocks may be overvalued
- If the PER is low ➡️ Stocks may be undervalued, but they may also show slow growth or financial problems.
PBR (price-to-book ratio)It measures the value of a company's stock relative to its net assets. It helps investors assess the fundamental value of a stock.
- High PBR(>1) : The stock is trading at a premium, meaning investors believe the company has strong growth potential.
- Low PBR(<1) : The stock may be undervalued or the company may be in trouble.
- Check financial statements : Check the company's profitability, debt ratio, etc.
- PER, PBR analysis : Using indicators to determine the fair price of stocks
- Stay informed about news and market trends : It is important to read the economic flow.
3. Mistakes Beginner Investors Should Avoid
Beginner investors are exposed to many risks, as investing without proper knowledge can lead directly to losses. Therefore, the following should be absolutely avoided.
🚫 Emotional investment
- Depending on short-term stock price fluctuations Repeated trading can increase losses.
- If you keep buying and selling, only the brokerage firms will get rich from the commissions!
- Investing should be done without emotion and based on thorough analysis and planning.
- It's not as easy to set aside emotions as it is to put words to words when your own money is at stake!
- Keep your head hot! Keep your heart cool!
🚫 'Blind Investment'
- Floating around the internet It's dangerous to invest based solely on rumors.
- I have never heard of anyone being successful in investing after hearing 'information' from someone!
- You must analyze the company yourself and make investment decisions.
- Even if the stock price of the company you invested in falls Decide on an investment only when you are sure that it will never fail.Do it!
🚫 All-in investment
- Investing all your money in one stock carries a high risk.
- Divide your investments into several categories!
- Never Don't put most of your investment money into one company!
- It is essential to reduce risk through diversification (investing in multiple stocks).
4. Recommended Strategies for Beginner Investors
📣 Start small!
- It is forbidden to invest a large amount of money from the beginning.
- We recommend starting with a small investment of 100,000 to 500,000 won and building up experience as you go!
- Invest only when you can afford to lose money!
📣 ETF investing is a must for beginners!
- Compared to individual stocks Using safe ETFs (exchange-traded funds) is the best choice for beginners.
- ETFs are the saviors of beginners!
- If I had money I didn't need for 10 years, I'd invest it in ETFs! (100% Uptrend)
📣 Develop long-term investment habits!
- Stock price volatility (up and down) is natural. So, never be swayed!
- A strategy of consistently collecting blue chip stocks is a surefire way to successful investing!
In closing
Stock investing isn't just a way to make money. It's a field that requires constant learning and experience.
If you firmly understand the basic concepts mentioned above and develop the habit of investing based on thorough analysis and planning, you can expect stable returns. I hope this article proves helpful to novice stock investors.
