Which stocks should you buy as a beginner?
"One of the biggest mistakes investors make when buying stocks is that they focus on the DAX and maybe the Eurostoxx 50 and nothing more. However, this creates a certain amount of "cluster risk", meaning that they have only invested in their home market and so naturally miss out on returns in the US, Pacific and emerging markets. That's why it's important to diversify and take your stock portfolio global."
"Which stocks are the best to buy?" ask beginners and newcomers to stock trading. Basically, one should never concentrate on individual stocks, but rather diversify more broadly with regard to the various markets. Diversification not only reduces the risk of the investment. Those who focus only on individual stocks may miss out on the returns of other markets. When they buy stocks for the first time, newcomers in particular tend to focus only on their home market. In Germany, this is the DAX stock index. However, orienting oneself to the DAX is by no means wrong. Especially for the first purchases, it is a good idea to include the DAX 30 stocks. The DAX 30 contains the 30 largest German companies listed on the Frankfurt Stock Exchange. These companies have the highest stock exchange turnover and the largest market capitalization. This makes them a good entry point for beginners. In addition to this, however, it is also worth taking a look at the international markets. Here, too, there is a corresponding country index, such as the DAX, to which one can orient oneself. In the U.S., for example, this is the S&P 500, which includes 500 large U.S. companies.
When considering which securities to buy as a beginner, it is also worth considering equity and mixed funds. Mixed funds are a mixture of equity and bond funds. Thus, the fund manager can invest in both stocks and bonds. If the prices on the stock market are good, mainly stocks are bought. If prices on the stock market fall, one can switch to other, safer bonds and thus achieve a broader spread of risk.
How many shares should one buy as a beginner?
How many shares one should buy as a beginner depends on various factors. First of all, the amount of shares also depends on the risk the investor is willing to take and also his investment objective, i.e. the desired return, plays a role in this decision.
In addition, it depends on how much capital is available for the investment. Since only money that will not be needed in the next few years should be invested in securities, the amount available also determines how many shares can be purchased. That is why it is so important, especially for beginners, to check their finances thoroughly in advance and to determine the investment capital before starting to buy shares. Those who find this difficult can also turn to an independent fee-based advisory service.
Of course, you might now get the idea that buying many cheap shares could be useful for beginners. However, this is not necessarily the right way. Because first of all, the price of a single share is not particularly meaningful. Therefore, before making a decision, one should look at the key figures of the desired shares and then decide whether this is a good investment.
Buying many different stocks also initially seems to follow the recommendation to diversify in the stock portfolio. However, buying too many different securities is just as unhelpful as buying a single stock. In order to maintain an overview of the development of one's securities, especially as a beginner, even small investors should follow the rule of including no more than five to seven different securities in their stock portfolio.