Want to invest in stocks? And do not know how to start? What is the best way to invest in stocks? Through the next post I will explain this in detail, continue … !!
What is the stock market?
Many want to invest in stocks, whether local or international shares, and often they have a bad experience if they are not specialists, so I decided to write this article in a nutshell and simplify the new investor in stocks. But before we start, we first need to know what stocks are, so we prepared a short video that answers the question: What is the stock market?
How to start?
I hope you have grasped the concept well, but let me tell you some real things. According to my observations, I find many investors manage their portfolios in a wrong way and then they blame the market, so I always say: The wrong way often leads to wrong decisions. Of course, some investors tell you that he has won the stock and boast about his capabilities, even though the method of taking the decision is wrong and in this case I say it is just a stroke of luck, nothing more, nothing less.
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I remember in the Saudi market from the beginning of 2003 to February 2006 the market rose 10 times, almost in 3 years, only 10 times, imagine? During that period, buy any stock and you will earn an extraordinary profit. If you asked any investor in that period, you would find that he is a very successful investor, without skills and without knowledge, you can achieve extraordinary profits. Therefore, if anyone consulted me regarding investing in stocks, I always ask him, what is it? Your knowledge of investment and financial analysis? What is your experience in the field? The extent of your ability to take risks as shares fluctuate sharply. Unfortunately, most of the individual investors risk their capital and do not have sufficient experience, or it relies on people whose ability to manage investments cannot be trusted because their performance is not announced and not documented.
Of course, if the investor’s answer is that he does not have sufficient knowledge, it is often over the years that his performance will be worse than the market’s performance or worse than that of the managed funds from licensed and considered financial companies, but unfortunately, most investors believe that he will be smarter than the market and will achieve better than him, therefore I consider that investing in investment funds through licensed financial companies known to perform over the years is better than managing your investment on your own if you lack sufficient knowledge, of course there is an option that the investor learns by himself and reads and performs the tasks necessary to manage his investments himself, but it is a long way that needs two years at least progress T read and see.
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For investment funds, there are two main schools:
Active management or the so-called active management
And passive management
Active management is a school that believes that a better performance can be achieved than the performance of the market over the years, meaning that if the market rises, for example, 10%, it can achieve more than that, for example 13%, and if the market drops, for example, 15%, it will decrease 7% or less than the market, and over The years will make a difference between it and the performance of the market, of course this school depends on choosing a small number of shares and moving a lot between market companies.
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While static management is a school that searches for market performance only, that is, it tries to match the movement of the market, if the market rises 10%, it will rise by the same or very close to it, and in decline as well, so you find the static investment portfolio with many companies and the movement in it is limited in contrast to management Active.
There are many studies regarding which is better and the debate is long, but from my point of view if you think about the Saudi market, which is currently considered an immature market, the best is active management through investment funds, but unfortunately it is flawed by high administrative fees and subscription fees, also it needs a long time to determine the appropriate fund and if Unable to select the appropriate investment fund. Static ETFs may be a better option.
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As for mature markets like the American market, I see that ETFs or so-called ETFs which are static funds trying to match the performance of the market, I think it is better in the long run. It is very important to differentiate between static management and active management. It is also important for the investor to know his capabilities. In the absence of sufficient knowledge and experience, make sure that the stock market will often be burnt for your money. To fix his car? Or will he go to a car workshop known for its skill in repairing a car? All options are available. Think about shares in the same way. Will you learn to manage your investments yourself? Or will you hand it over to a known authority with a known history? it’s your choice
There will be other parts on the same topic but more expansion, God willing