Stock exchange: what is it and how to invest

The stock exchange is the first one that comes to mind when looking for financial freedom.

Unfortunately for some, it is enough to hear “stock exchange” that soon relates to a bad story. imagine that the loss of money is closely related to the stock exchange.

Most of the time, this thought is the result of a lack of information. With that in mind, we have prepared this article. Here you will understand in an objective way how the stock market works, what a stock is, and how you invest in the stock market.

What is the stock exchange?

“The only thing that stands between you and your goal is the story that you keep making up for yourself so you can’t reach it,” Jordan Belfort.

The stock exchange is an organized market where publicly traded companies trade their shares. In addition, other securities are traded on the stock exchange.

Today, the stock exchange is more democratic. In the past, it was reserved for large investors. A chaotic scenario, related to shouting and telephones that were only seen in movies and newspapers. Thanks to technology, today everything is done electronically and anyone can participate. But it involves knowledge and dedication,

Operating from 9 am to 6 pm, B3 (formerly BM&F Bovespa) is the main stock exchange in Brazil. In addition, one of the most modern and respected worldwide.

How does the stock exchange work?

When a company needs to raise funds, or finance new projects, it can make small parts of it available in exchange for money.

That is, on a smaller scale, they invite people to a society. We call this operation a public offering. First, it conducts an initial public offering (IPO) and only then does it begin to be listed on the stock exchange.

On the other hand, people can express interest by making offers to buy or sell the shares of this company. When we are still in the IPO phase, we call this primary market relationship. At this stage, stock prices are defined. This calculation takes into account the relationship between supply and demand by investors.

After the primary market, new investors who express an interest in this same company will be part of the secondary market. In this scenario, negotiations are carried out when there is a combination of purchase and sale orders between investors. That is, an investor makes an offer at a certain price and seeks other investors who wish to acquire it at the price offered.

All of these negotiations are carried out on a platform called Home Broker. The Home Broker is nothing more than an interface where investors carry out these transactions.

What are actions?

To understand the stock market’s shares, let’s make an analogy. Imagine a pizza, it is usually made up of slices. We can then consider these slices, the smallest portion of an entire pizza. Likewise, shares are the smallest share of a company. When the investor acquires one of these parcels, he becomes one of the owners of the same.

When you become a shareholder, you share the benefits. On the other hand, it also shares the risks. Hence, the resistance of novice investors to variable income.

Regardless of the stock acquired, investors can be divided into two profiles. The first one tries to win in the valorization of papers. This profile is aimed at the short term, and is subject to news, rumors, among other reasons that cause the stock price to rise or fall.

The second investor profile of the stock exchange, aims to distribute the company’s profits. On the stock exchange, we understand these profits as dividends. In other words, the company’s performance will dictate the appreciation of the stock.

  • Common shares (ON): allows the investor the right to vote in decision-making meetings
  • Preferred shares (PN): does not allow voting, but offers preference in the receipt of dividends
  • Units: combinations of several actions in one lot.

How to invest in the stock exchange?

Investing in the stock exchange consists of finding good companies and contributing to them through our investments.

The first thing to do is open an account with a broker. Try to find a renowned and well-rated institution by people who already invest. After opening the account, you will need to transfer your money to the broker’s account. From that moment on, you will be able to decide which shares to buy.

This specific moment requires the greatest decision-making capacity. For this reason, it is important to know the financial market well, especially the variable income market. You also need to know the history of these actions, the appreciation, and be attentive to all related news.

After analyzing all the possibilities, you must simply access the Home Broker and give your purchase order. This is basically the procedure of buying shares and investing on the stock exchange.

Do you want to invest, but still feel insecure to start directly on the Stock Exchange? You can do this through intermediary means like equity investment funds.

Main risks of investing in the stock exchange

Lack of information can make us make wrong decisions. On the stock exchange, these mistakes can make you lose money. One of the main risks that a person takes when investing in the stock exchange is the liquidity risk.

Let’s assume that you choose to invest in a low-traded stock. If no one is interested in purchasing it, you may have difficulty passing it on. However, if the company shows results in the long term, this title may return to appreciate.

If the investor acquires a stock and due to various factors in the financial market sees its price drop, it can take a loss. That is why it is so important to know all the market analysis tools. Currently, there are technologies that help the investor in this decision making. An example of this is investment simulators.

How much does it cost to invest in the stock exchange

Investing in the stock exchange entails some costs, these costs vary widely. Among the main fees are the custody fee, brokerage fee and emolument fee.

Now, the stock price varies a lot, there are values ​​below R $ 20.

Bovespa Index

The Bovespa Index (IBOV) is the main index and reference used to measure whether the stock exchange is falling or rising in Brazil. It represents an average oscillation of the main companies that are traded on B3.

If the Bovespa Index is positive, it means that most of the main companies on the stock exchange are appreciating.

If you want to build your equity based on long-term investments, investing in the stock exchange may be a good option. In addition, by making good choices, this type of investment can be a shortcut to your financial independence.

The Brazilian stock market has high liquidity which provides you with flexibility for decision making. If you are looking for passive income, dividends are exempt from income tax and have the potential to grow in the long run. The important thing is to combine knowledge and experience, only then will it have good results.

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