Five tips for a successful entry to the stock market

class=”sc-3778e872-0 cgWkHT”>

There are a few key points to keep in mind to avoid costly mistakes for first-time investors. Christian Gattiker, 54, head of research at private bank Julius Baer, ​​explains what newcomers to the stock market should pay attention to.

The stock market is not a get-rich-quick scheme and there is no guarantee that you will make a profit. The value of stocks can fluctuate rapidly, which can lead to high losses in a short time. “The stock market rewards patient people,” says Gattiker. Quick profit seekers have a hard time and often lose money or nerves.

One way to minimize risk is to diversify your portfolio. For example, investments can be divided into different types of stocks and additional instruments such as bonds or mutual funds. Diversification helps reduce overall risk. If one investment performs poorly, others can make up for losses.

Before you begin, you should be clear about your own investment goals. How much risk are you willing to take? How long do you want to invest? What financial goals do you have? The answers to these questions will help you decide which types of stocks and investments are appropriate. “Saving cash only makes sense temporarily, for example, in the event of a severe economic crisis,” says Gattiker. Otherwise, investments are more advantageous. “There is no need to take too many risks right now. Stable investments currently yield attractive interest rates or dividends.”

If you have savings that won’t need to be used in the next three to four years, you should look for good companies, “buy their shares and rarely look at them,” says the expert. His father-in-law paid 50 francs into a medium-sized stock fund each year on the birthdays of his three children and at Christmas. They brought in an average of 10 percent per year for 18 years. Instead of the total of 1,800 francs paid, more than three times that amount was in storage when the children came of age.

Long-term investors can focus on stocks with a history of steady growth. For example, blue-chip stocks are stocks of large, well-known companies with a good reputation. Those more interested in short-term gains can focus on stocks with higher levels of risk and volatility. For example, small-cap stocks in companies with a market capitalization of between CHF 300 million and CHF 2 billion.

“After a promising start to the year, we still see room for maneuver for equities,” Gattiker said. Much of the rise in interest rates has passed, and bonds should no longer be a hindrance to investors.

Key trends to watch are economic resilience and easing of inflationary pressures. “If prospects become significantly more pessimistic – if the economy starts to weaken or if inflation suddenly picks up again – the books need to be overturned,” the expert says.

Apart from technology and commodity stocks, Swiss investors are offered a wide choice of local stocks. “We believe that healthcare stocks such as pharmaceuticals that have a strong presence in our country are also valid globally,” Gattiker said. In technology, US stocks are at the forefront. As for commodity stocks, they’ve been down a bit over the past two years. There will likely be better buying opportunities in the coming months.

Julius Baer’s chief strategist explains that Swiss stocks are “the most American” in Europe: “Compared to Europe, companies on the Swiss stock market are steadily growing stocks.” However, after years of disappointment, European stocks have recently regained strength. For the Swiss market, this means second-tier stocks are gaining ground. These are slightly more agile companies, but they fluctuate more in bad times than heavyweights.

While the real estate market has grown strongly around the world, central banks have pumped a lot of money into the economy in recent years. “Meanwhile, real estate funds priced in a significant drop,” says Gattiker. In Switzerland the decline may not be as severe as in the US, UK or Sweden. However, it is important to remain cautious until it becomes clear how the rise in mortgage rates will affect home prices and supply.

Regarding gold, the expert emphasizes that it is primarily a crisis investment. “When global politics goes through crises or the United States unexpectedly enters a recession, gold skyrockets,” he says. However, in times of economic upswing, gold is more of a feed product.

Source :Blick