For anyone out there who wants to learn how to play stocks – regardless of whether you are a beginner or a veteran, here are some systematic steps that can be imitated immediately and become the main guide.
How to Invest in Stocks: Quick-Start Guide for Beginners
Identify Your Goals
Before making any major investments, make sure you evaluate the objectives of these investments yourself. Is playing stocks just for a hobby (because you have more funds) or for a career (the main source of income) and others.
Identifying your goals clearly can help your totality while investing. If this profession is to be taken seriously, a more intensive study is needed.
We advise investors to think about their respective investment profiles.
- If you want regular dividends that go up every year, you’ll be interested in income stocks;
- Investors who do not really need income but are interested in capital gains can refer to growth stocks;
- Investors who buy stocks for a specific purpose, such as their child’s education, are usually very risk-averse. They will look for the most solid, reliable stocks on the market, such as bulk oil or utility stocks;
- Other investors may buy stocks because they have more cash and are more likely to be prepared to take risks with their money.
Over time, certain stocks can provide a fair return. Every investor has a different time frame. The longer you own a stock, the more likely it is that you have to do it.
Tip: veteran investors are always looking for a combination of income and capital gains. This can be achieved through a diversified portfolio – meaning investors buy several types of stocks with different characteristics (including large or small companies).
Study and Determine Stocks
Do the research and study the stocks that you want to invest in. Make sure you don’t make the extra high investment before doing research on the company that issued the stock.
Study their financial statements. It will not be possible to invest heavily in a product, for example, a private vehicle without doing a little study and research on the product itself and its close competitors.
Tip: You should study the company’s annual reports – and these can easily be found on the official websites of publicly traded companies via investor relations.
Annual reports are the key to assessing company performance. With practice, you can understand what’s going on at the company in question. The important parts that must be checked are as follows:
- Income: money that goes into the company
- Net income: What’s left after expenses and taxes
- Earnings and earnings per share: Company profits on a per-share basis
- Price/earnings ratio (P / E): The company’s current share price divided by its earnings per share
- Return on Capital (ROE) and Return on Assets (ROA): ROE is the return made per dollar of shareholder investment. ROA is the profit generated from the company’s own money.
Using Investment Techniques and Analysis
There are tons of investment techniques and analysis out there. You want to do the analysis to get a profit and reduce the risk of loss. In general, there are 2 ways you can analyze stock movements:
- Fundamental Analysis: This is about the accuracy of assessing the condition of a company that spreads its shares on the IDX (the Indonesian stock exchange). With this analysis, you will trace financial reports, their ability to earn profits to cash flow. Technically, you will look for earnings per share, price earning ratio, and price to book value.
- Technical Analysis Overview: this one analysis can be found from a Candlestick (chart or chart) in the software provided by securities companies. Here, you can make predictions about the movement of stocks that you own or want to buy. Some of the common indicators are MACD, simple moving average, Bollinger bands, and others.
The two techniques above are quite important. Combine the two so you can understand the state of the market economy as a whole.
Recognizing a Subject of Time
Stocks are the best type of long-term investment instrument in the financial market. However, share prices are very volatile and this makes this investment activity not risk-free. But in the long run, they will pay off brilliantly.
If you intend to double your money in just one year, buying stocks is definitely not the best way to make that dream come true. However, if you are ready to invest for 10 or 20 years, then stocks are a very rewarding investment.
Stock trading is designed to provide investors with two types of returns, namely annual income, and long-term capital growth.
Choosing a Trusted Trading Application
Here is an online stock trading application that is quite user-friendly for newcomers.
- Ipotultima from Indopremier
- Most of Mandiri Sekuritas
- BNI Sekuritas
- Mirae Sekuritas
Investing in Blue Chip Stocks
Blue-chip stocks are stocks of companies that are well-established and financially sound. Blue-chip stocks are popular with many veteran investors and are safe for novice investors because they have a stable growth rate, large market capitalization, good liquidity, and have been listed on the IDX for a long time.
How to Buy Stock: Step-by-Step Instructions for Beginners
After learning and going through the steps above, now is the time for you to buy stocks online. Here’s a quick guide on how to buy stocks online safely and credibly:
Setting up a Cold Fund
Shares are proof of ownership of part of a corporation.
The more shares you buy, the greater the funds issued. The stock prices of different companies are different.
We advise anyone to invest according to their ability.
Choosing a Stock Broker
The next step is to determine a stockbroker.
We always encourage investors to choose a broker that has a good and user-friendly online stock application. You can try using dummy trades to judge whether their stock app is quality or not.
Opening a Securities Account
Like saving money in a bank, at first, you also have to open a stock account in a securities company.
This is a mandatory stage so that you can make stock transactions. Another option is to go directly to the offices of the selected securities company. Several companies receive phone calls to make registration.
Also Read: 7 Best Long-Term Investments
Customer Fund Account
After opening a share account at the broker, the next step is to open a Customer Fund Account. The share account functions for buying and selling shares, while the customer’s fund account serves as a storage container for the sale and purchase of shares transaction funds.
Deposit Funds in Securities Accounts
To be able to make transactions, you must top up your share account. Capital is always deposited into the Customer’s Fund Account. The picture of depositing is similar to sending funds to a bank savings account. You can top up funds in a Customer Fund Account via cash deposit at a securities teller, transfer via ATM or digital banking.
The deposit amount depends on the number of share transactions you want to make. There are several securities corporations that have deposit ceilings, but some don’t.
Usually, you are asked to make a deposit in advance to be able to trade stocks. After the first transaction is successful, the next transaction investor can make payment of obligations within 2 days of the transaction.
Start Buying Stocks (Online Trading)
At this stage, you are ready to trade on the stock exchange. Choose the stocks you want to buy. Make sure you remember the associated ticker code.
While ordering, you are asked to determine what nominal price to buy shares. In the application, you will see the bid price and the offer price.
If you want to buy right away effectively, install your purchase price equal to the lowest offer price, so you will immediately get the shares. If you want to buy at a low price, set your purchase price below the lowest selling price – this means you will wait in line until a seller is willing to lower the selling price to the purchase price you set.
Please note that placing your order or purchase price follows time and price priorities. After the transaction is successful and complete, check your portfolio which shows your current share ownership.
Start Selling Stocks (Online Trading)
Your shares can be sold via the same online stock application. Select the shares that you own then determine the selling price and the number of shares you want to sell.
Determining the selling price also affects how quickly the transaction can be completed. For example, if you want to sell your private stock immediately, set the highest buy price on the market at that time. But if you want higher sales results, put a higher selling price (the consequence is not necessarily sold).
Changing Stock Orders Online
In stock trading, you can change (amend) the buy and sell prices. The online stock application provides facilities to support this activity.
However, if the position you have placed has not been executed, and you want to buy or sell the stock immediately, then you can check the buy and sell price positions available on the market at that time and make changes in price according to effective market conditions.
As we know, transaction settlement is carried out within two trading days of the transaction (T + 2) on the stock exchange. The broker will send a Trade Confirmation so that we complete the stock trading transaction.
There are obligations that must be transferred to the stock account. The settlement must be completed on the second day after the trade has occurred. If the settlement is not settled by the investor within the stipulated time, then a fine of 45 percent per year will be charged.
Stock Trading Fee
When trading, you have to pay a fee for the stock trading transaction to the broker who executes the order.
Choosing stocks is not that easy, there are so many options. You can use the stock screener feature which is available free of charge at the broker – the stock screener will filter stocks based on the criteria you specify.
You can define stock screener criteria based on experience or discussions with outside parties – this is a manual way to create a preferred stock list.
Another alternative is to use preset criteria, this is a commonly used and well-known criterion by investment gurus such as Warren Buffet, William O’Neil, and others.
The strategy to be implemented depends entirely on your preferences, knowledge, and beliefs.
Diversification is a way of managing the risk of stock investment by not placing all the capital in just one or two shares, but dividing or diversifying into several different stocks.
Diversification is very helpful for investors when the price of a stock is dropping dramatically. You will not fall immediately because not all of your stock investment will drop.
Another diversification strategy is to buy an index fund, which is to buy all stocks according to the weight contained in the index, thus your profits will follow the index. Index funds can be purchased on the IDX by purchasing an Exchange-traded Fund (ETF).
ETF itself is one of the stocks traded on the IDX, but its characteristics are different from the shares issued by the company.
ETF is a mutual fund in the form of a collective investment contract in which the units of participation are traded on the stock exchange. Basically, ETFs are mutual funds, but these products are traded like stocks on the stock exchange.
ETF is like a combination of mutual funds for fund management and stock mechanisms in terms of buying and selling transactions. ETFs are very useful for diversification.
Diversification is very important in stock investment, but to be able to apply this, of course, requires a large investment fund (there is a minimum investment in the IDX, 100 shares = 1 lot).
The problem was solved by buying ETFs. With the purchase of an ETF, you only need to buy 1 share, it includes dozens of other stocks depending on the index on which the ETF is based.
After our discussion about how to play stocks. Hopefully useful and greetings of success.