Now that the stock market begins to rise, some people are starting to be interested in learning to invest in the stock market, and when it starts, there is so much information that it seems impossible to decide where to start and which path to follow.
In this post, I will give an overview of all available alternatives that someone who decides to start investing in the stock market has and will comment on my opinion about the different options.
We have already seen other forms of investment, and we will continue to see the ones we lack, but I can already tell you that the investment in the stock market is undoubtedly my favorite.
What is investing in the stock market?
Investing in the stock market is, simply put, to buy shares in companies (shares), becoming a part of the company and therefore entitled to a portion of its profits (dividends).
I wish everything were so simple! You can invest in the stock market directly by buying shares; you can purchase investment funds, ETFs, CFDs, futures, derivatives, etc. The list is long, and each alternative is more complicated than the previous one, so we will see them in different articles, and I will leave an overview for you to get an idea of all the options you have quickly.
How invested depends fundamentally on the desired investment term since the purchased shares can be maintained for only a few seconds or a lifetime, clearly differentiating short-term strategies from long-term ones.
A medium-term investment can be exciting and more like a long-term investment than a short-term one, so I will not comment on this post and leave for another day.
Short-term investment in the stock market (the famous trading) is usually the most practiced since people prefer to earn a lot of money in a month than enough money in 10 years (or not?), But in my opinion, it is the least recommended option.
Why don’t I recommend investing in the stock market in the short term?
A lot of knowledge and time are necessary. If you invest in the short term, you compete with many professionals who spend many hours a day in front of the computer and often lose more than they earn. Investing in the stock market in the short term implies buying and selling stocks day by day continuously, and in my opinion, even if it is good for you, it is challenging to keep up the pace for years and years.
It is very hard psychologically. Being a trader is partly like playing poker, since being successful in both fields does not mean winning, not consistently or most of the time, but winning on a few occasions and ending in positive. This implies that it is often lost, and when you are playing a significant amount of money, you must endure tremendous pressure losing continuously.
You can enter a destructive spiral. Have you ever been to the casino, and you have put twice as much money to recover after losing the bet? The same thing can happen in the stock market, leading you to lose a lot of money.
Investing in the short term you have extremely easy to leverage (the typical announcement of investing $50,000 with only $500, which unfortunately does not mean that they give you the other 49,500), so you can fall into the tendency to double to recover up to a point where you cannot get out of it without losing much.
I don’t invest in the short term, and I don’t do it for the reasons mentioned. In my case, when I invest money, I do it intending to make a lifetime profit, and I am sure that I could not stand my life doing trading.
I consider it a difficult thing for ordinary people and that it should only be done if you want to dedicate yourself professionally to it, and of course, training long before you start.
Suppose you are interested in investing in a short-term stock exchange. In that case, the investment products are derivatives, CFDs, futures, forex, etc. Although they are not to my liking, we will see since I consider that all the alternatives must be known for deciding.
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