Although few people know how to invest in the stock market, it is a very popular term among Spaniards.
Investment in the stock market is known for the high returns and benefits it generates, but also for its complexity.
However, at the moment of truth you don’t need to be a professional to know how to invest in the stock market
Anyone can learn to invest in the stock market without having any previous knowledge.
Keep in mind that to know how to invest you have to know how to make the best decisions and there are many factors that influence this.
In this guide you will have a solid base explained in a simple way so that you can learn to invest in the stock market from zero and on your own.
What is the Stock Market and how it works
The Stock Exchange is a market (known as a stock market or exchange market) and is where the purchase and sale of shares, representative titles and other financial products are carried out.
The process of buying and selling is facilitated by brokers who act as intermediaries between investors and companies, making these negotiations accessible.
In fact, if you search on the Internet where to invest in the stock market a series of intermediaries will appear, to buy shares is done in the stockbrokers or brokers and the same to sell them.
You should know that you can invest in two types of stock markets: the primary market and the secondary market
Investing in the primary market exchange
The primary or first market is where companies and banks make the first issue of transferable securities.
This is when a company goes public for the first time and puts its shares up for sale. You would buy these shares (more commonly called shares) directly from the company.
Companies that decide to go public are basically looking for financing and external resources to expand and grow.
To obtain this capital there is the option of the company applying for a loan but getting enough money to make an investment of this magnitude through loans is not generally one of the most viable solutions.
To do so, they publicly announce their values so that anyone can invest by buying these shares.
In this way they get enough capital to reinvest in themselves and consequently grow.
Investors buy with the expectation that if the company grows it will also grow in value.
Investing in the secondary market
Generally, when you invest in the stock market you will be investing in the secondary or second market where those securities are transferred (but not for the first time). The purchase and sale operation is carried out between the investors and not between the company and the investor.
These operations are carried out through a stockbroker or broker (later on we will explain what a broker is and what you should look for in order to choose one).
But let’s take it one step at a time. Do you know what stocks are in the stock market? And what are dividends?
We’ll explain it to you later.
What are the shares in the Stock Exchange
Shares (the term is also known as title, equity or securities) are units of companies that are put up for sale and represent a share of the company’s share capital.
In other words, the shares are pieces of the company that are being sold.
You can buy from 1 share to whatever you want from that same company. Regardless of how many shares you buy (even if you buy 1) you will automatically be considered a partner in the company.
The investor who buys shares becomes the owner of the business and acquires the right to share in the profits of the company in proportion to his or her share, i.e. the shares bought.
Only companies that are corporations (S.A.) can be listed on the stock exchange, publicly and openly displaying their capital stock, i.e. their financial results and economic situation. These reports are also updated every 3 months.
In other words, the company ceases to have its own property and becomes public, being the shareholders its owners.