Investing in the stock market – who is this job for?

This question is often asked by people who want to start their journey in financial markets. Investing is often the next step after saving. If you are here, it means you are serious about investing your financial surplus on your own.

Contents

• What should you know about investing?
• How much should be invested in the stock market?
• Diversification is the key to risk reduction
• Active or passive investing
• Investing in stocks
• Investing in Bonds
• Investing in passive investment funds (ETFs)
• Derivatives, also known as financial instruments (futures contracts, options, forex market)
• Learning and gaining experience in stock market investing
• Where to open an investment account?

What should you know about investing?

Above all, investing should be simple and inexpensive. You don’t have to use complicated financial engineering to create your own investment plan and, at the same time, a system for effective investing. Once you know the basics, you can develop your own investment plan and create the right strategy that works best for you. Keep in mind that the stock market is not a place to make quick fortunes, as it is often portrayed in the movies. If you think you’ll make money quickly in the stock market, you’re probably taking on too much risk. Sooner or later, the market will teach you humility. There are no shortcuts. Investing is a long-term process in which a calm strategy, based on discipline and patience, will help you achieve satisfactory returns on your investment.

Before you start investing seriously, you need to answer a few basic questions. First, think about how much of your hard-earned savings you want to invest. You also need to decide on the time frame you want to set aside for them. If you are planning your investments with retirement in mind, consider opening a Private Pension Account or an Individual Retirement Account (IKE AND IKZE) brokerage account. They take advantage of tax optimization and are exempt from the capital gains tax (podatek belki), which will have a significant impact on long-term investing.

How much should be invested in the stock market?

Many people wonder how much free capital is needed to start investing. It’s important to correct the often-heard claim that you need a lot of money to begin. This is simply not true. It really only takes a few hundred zlotys to get started. What matters most is your approach to investing and maintaining a long-term mindset. You can add extra funds to your account each month and learn to invest in small amounts. For beginners, starting with smaller investments is actually recommended, as it allows you to gain experience without taking on significant risk.

Many professional investors started out the same way. At first, they treated investing as a hobby, but over time, they began dedicating more and more time to it. As a result, their investment performance gradually improved, and the amount of capital they committed to the market increased. When an investor earns the equivalent of a month’s salary in just two or three days, full-time work can start to feel limiting. They begin to question what their primary source of income should be.

It’s important to understand that the stock market is not an easy place to make money. Successful investing requires experience and solid knowledge. The market teaches humility, but it can also become a path to financial independence. However, reaching that goal takes time, effort, and determination.

If you’ve already decided to invest, the next step is figuring out how much you can invest and for how long. You’ll also need to choose the right financial instruments and properly diversify your portfolio. It’s not as simple or straightforward as it might seem.

Diversification is the key to risk reduction

Diversification is the intentional inclusion of various financial instruments in an investment portfolio it is aimed at reducing investment risk. While proper diversification won’t eliminate risk entirely, it can help protect your portfolio during downturns in specific assets.

Risk management and capital preservation must remain priorities for both long-term and short-term investors.

A fundamental principle of investing is that you must understand the financial instruments you’re putting your money into. Your risk tolerance also plays a key role because no matter how solid your investment plan or strategy is, the market will go through both good and bad periods. Learning to handle these fluctuations is essential, and proper portfolio diversification, or dividing your capital across different assets, can help you manage the ups and downs.

Active or passive investing

The next thing to consider is how you want to invest, whether you lean towards active or passive investing. This choice will largely depend on how much time you plan to invest, how often you need to monitor your investments, and the time horizon you decide on. It’s important to consider your investment philosophy with transaction costs in mind, as they can significantly impact the performance of your investment portfolio. For this reason, passive investing is often recommended for beginners.

Opening a brokerage account expands your options and allows you to purchase securities listed on stock exchanges.

What can you invest your savings in with a brokerage account.

Investing in stocks

Stocks are nothing more than shares in a company. Since in most cases, an individual investor cannot afford to buy an entire company, stocks allow us to purchase a portion of a business.

 By purchasing shares in a given company, we become its co-owners in proportion to the shares we have purchased relative to the total number of shares issued. We have the right to participate in the General Meeting of Shareholders organized by the company. Of course, shareholders with the most shares will have a decisive influence on the company, but as a minority shareholder, you are still a co-owner of the enterprise.

With shares, you can build a portfolio that is actively or passively managed, while also benefiting from the dividends companies pay to their shareholders.

I invite investors interested in this type of investment to visit the 'STOCKS’ section.

Investing in Bonds

Bonds are an ideal instrument for diversifying your portfolio, and with a larger capital, it is worth allocating some of your funds to this financial tool.

They are debt securities, meaning they allow a country, city, municipality, or company to borrow money from investors in exchange for offering them interest on the borrowed capital.

I invite investors interested in this type of investment to visit the 'BONDS’ section.

Investing in passive investment funds (ETFs)

An ETF is an ideal low-cost financial instrument for novice investors. Without requiring extensive knowledge or large capital, this instrument helps to effectively diversify a portfolio.

ETFs are funds listed on the stock exchange, typically based on indexes. Their goal is to mirror a specific index and achieve the same rate of return. ETFs are considered passive funds because their management focuses on closely tracking the index, and they are much cheaper than traditional investment funds, which are often actively managed in an attempt to beat the market.

I invite investors interested in this type of investment to visit the 'ETFs’ section.

Derivatives, also known as financial instruments (futures contracts, options, forex market)

Financial instruments based on leverage are intended for highly experienced investors. These instruments allow for investment in both the growth and decline of an asset. The leverage mechanism lets you open a position worth, for example, 1/10 of the total contract value (i.e., 10%), with profits or losses calculated based on the full contract value. When investing in this group of instruments, it’s important to be aware that the risk of losing your invested funds is very high. These instruments are typically used by short-term investors, often for one-day investments.

Raw materials, currencies, cryptocurrencies, and various types of CFD derivatives, such as those based on exchange rate differences, this is the Champions League (Super Bowl?) of investing. Unfortunately, 90% of investors lose money in this market. Financial leverage can sometimes reach as high as 1:100, meaning you can earn quickly, but also lose all your capital even faster. This market is suited for investors with several years of experience and a strong command of capital management

Learning and gaining experience in stock market investing

To invest effectively and responsibly in the stock market while achieving satisfactory returns, you need to understand the properties and characteristics of various financial instruments, as well as the mechanisms that govern stock exchanges. If you decide to invest, be prepared to systematically acquire a substantial amount of knowledge and continuously educate yourself in this field. And that’s exactly why the website parkietfinansowy.pl was created. We aim to help you gain experience in stock market investing and avoid the common mistakes made not only by beginners, but by investors at all levels.

Zachęcam do zapoznania się z materiałami na Naszej stronie, w których zajmiemy się między innymi takimi zagadnienia jak:

• Investment plan
• Creating an investment strategy
• Capital management
• Investment psychology
• Common mistakes in investing
• Risk associated with investing
• Technical analysis
• Fundamental analysis
• Analysis of listed companies
• Many other important topics essential for effective investing in both the Polish and international stock markets to achieve satisfactory returns.

Where to open an investment account?

If you are certain that you want to start investing in securities on the stock exchange, you must make an important decision: where to open a brokerage account. While the market offers many options, it’s important to understand that each transaction made through a brokerage account incurs costs, both from the purchase and sale of the financial instruments.

Currently, there is a broker on the market offering 0% commission for transactions up to €100,000 per month. It provides shares of both Polish and international companies, as well as a wide selection of ETFs. I’m talking about XTB, of course. Unfortunately, the downside of this account is that it cannot be used as a Private Pension Account or an Individual Retirement Account (IKE/IKZE) account.

Details of the XTB offer can be found here: link

Therefore, if you plan to invest with a very long-term perspective and intend to use these funds only in retirement, you can currently open an IKE/IKZE brokerage account, for example, at a BOŚ or MBANK brokerage house, and take advantage of tax relief.

Worth a read: link

When choosing a brokerage account, I suggest closely examining the FEES and COMMISSIONS TABLE. In investing, transaction costs can significantly impact the performance of your investment portfolio.

We encourage you to visit our website regularly and expand your knowledge.