Many beginners follow the recommendations of brokers, investment companies or experienced investors. For example, a broker can publish advice in the application to buy Sber shares and give a forecast that they will grow by 20% within six months.
But in order to consistently make a profit on the stock market, you need knowledge and skills. Qualified investors in posts and articles often talk about several areas of knowledge or show that they are familiar with them. Here are some examples of such posts: one, two, three. Let’s call these areas of knowledge:
- Principles of the market. An investor must understand how prices for underlying assets are formed. For example, they depend not only on the financial well-being of the company, but also on the mood of investors, the country’s economy, news and many other factors. If you know what they affect, you can assume how the price will change.
- Fundamental analysis. This is a way to evaluate securities and the companies that issue them. For example, investors evaluate the financial performance of a company, the value of shares, macroeconomic conditions and many other factors. This is how they understand whether a company is reliable or close to bankruptcy.
- Technical analysis. This is a way to assess a situation and securities using statistical patterns of price movements. If an investor uses technical analysis, he can assume how the price will change based on a chart of past price changes.
- Investment strategies. An investment strategy is a plan according to which an investor makes transactions. It is important for an investor to be able to form a plan based on goals, starting capital, and other parameters.
- Otherwise, he will make transactions chaotically and may earn less than he could, or not reach his goal on time.
- Risk control. It is important for an investor to know how risk management works, otherwise he may lose most of his capital. The basic principles of risk management are to buy an asset for a small share of capital and have so-called defensive assets in the portfolio. These are securities with a minimum level of risk, such as government bonds.
In addition, it is useful for an investor to know how to analyze the news, what margin trading is, how to read quote charts, and much more.
You can get the necessary knowledge on your own. For example, watch webinars, read books about the stock market and articles about individual instruments and concepts. But this is difficult: such training is not systematic and practical. There is a risk of making a mistake during the first transaction.
You can also get knowledge and skills in courses. They practice a systematic approach – they consistently tell you everything you need to know for investing. And some training programs also consolidate knowledge in practice – they give tasks and check their implementation.