Purchase stocks, take sleeping pills, and stop looking at the papers. After many years, you will see: You are rich.
Author: Thomas F. Pfeifle
What are Shares?
Shares are stakes in companies, more precisely public limited companies, which anyone can purchase on the stock exchange. The public limited company issues shares in order to finance itself and increase its equity capital. Metaphorically speaking, the company splits up into thousands of small pieces and sells them. Anyone who purchases one of these pieces of the company is thus the owner of that piece and co-owner of the company and is called a shareholder.
As a shareholder, you benefit in many ways from owning the share. Annually the shareholders' meeting of the company takes place. All the owners of the company meet there in order to decide about the profit of the company and the board of directors. At the general meeting, each shareholder has one vote per share. The more shares you own, the more votes you have at the shareholders' meeting. The firms' profit can either be retained and remain at the disposal of the company or be distributed in the form of a dividend. The dividend is like the interest rate at a bank and is paid to shareholders per share. The amount of the dividend is determined each year at the Annual Shareholders' Meeting.
Another way of profiting from the share is through the price gain. The price of the share is always determined by supply and demand, and changes constantly. The better a company is doing, the better the economic situation is and the more confidence shareholders have in the future of a company, the greater the share price will develop. The retention of profits at the shareholders' meeting can also have a positive effect on the share price.
Why should I invest in Shares?
There are two different ways of earning money. The first is to go to work and exchange your time and capacities into money and earn your monthly paycheck, or you take your money and let your money do the work. By investing it.
In the past decades a very common way of letting your money do the work, was giving your money to the bank and getting interest in reverse. With interest rates over 5% and more, this was a very effective way to increase your wealth by using the compounded interest effect. Nowadays this method is now heading into a dead end. Due to interest rates below 1% and even negative interest rates, giving your money to the banks is no potentiality anymore.
The only way, to let your money do the work, is to invest it elsewhere in feasible alternatives and there is a huge amount of possibilities, which we cover in our articles on our website.
One possibility is the investment in shares. As mentioned above, one can benefit from shares in two different manners, through dividends and through stock price gains. History has proven, that share prices, over a long period of time, are very likely to increase. The chance of loosing your money in long term, is beneath 2%. If we look at the Dow Jones, the US-American Index, we can see that the curve is rising and rising. Even though, there has been the second world war, the huge recession, financial crisis and the world financial crisis in 2008. The key to success is, to overcome recessions and economic downturns and just wait and let time pass. You can take almost every index or share of a huge company, and you will see, that over time the chances of winning are tremendously high.
To benefit from your investments, you must take the rules of investing into account. Only invest money, which you are not depended on the next 10 years, and the longer the term of your investment, the smaller the risk and the higher the profits.
The investment in shares bares some risk, which could be easily diminished by portfolio diversification and long-term investing, nevertheless there remains some risk. In contrast, shares have some immense potential. The chances of making profits in long term is very high, and if one invests into large companies and corporations, the chance of failure can be kept very small.
How can I invest?
The first thing you need to invest, is a deposit. A deposit is a virtual storage room for your shares, ETFs and Bonds, where you can buy, hold and sell them. Almost every bank offers deposits and you can easily request them by going to your local bank. If you do not want to have your deposit from a bank, there are many other providers for deposits. You can easily use them in form of an application on your smartphone and buy and sell your assets wherever you like to. We picked our Top 3 online providers, which offer the best conditions and possibilities to start investing.
1. Trade Republic
A great possibility to get a deeper look into the world of shares, is offered by the free App Best Brokers. This role play gives you 25K of fake money to invest in real time, to learn more about the stock exchange and the opportunities of the stock market.
Other Investment Apps