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Individual stocks offer the opportunity to earn higher returns and bring more dynamism to your portfolio. Modern platforms like eToro and Swissquote make getting started easier than ever. Here's a look at what you should pay attention to when investing in stocks.
Warren Buffett and company have shown how it can be done: Investors can build considerable wealth by buying and selling individual stocks in a targeted manner. However, many people have yet to take full advantage of these opportunities. According to a study by Moneyland, only Just over a third (36%) of Swiss respondents hold domestic stocks and 32% hold foreign stocks. Gender differences are also evident: men invest in stocks more frequently than women (45% in Swiss stocks versus 26% in Swiss stocks). Furthermore, as wealth increases, so does the proportion of stocks: while 35% of those with assets between 20,000 and 50,000 francs own Swiss stocks, this is the same among those with assets between 100,000 and 300,000 francs. One proportion rises to 50%, and among those with assets between 100,000 and 300,000 francs, this proportion rises to 75%. Assets exceed 1 million francs and own shares.
With modern platforms such as eToro, Saxo Bank, Swissquote, Yuh, Neon or Interactive Brokers, you no longer need a large fortune to invest in individual stocks. New options like odd lots make the stock market accessible to everyone. Below I've put together five tips on how to “spice up” your portfolio with targeted individual stocks and make the most of the stock market's opportunities, and what you should be watching for.
Do you prefer individual stocks or ETFs?
When investing in stocks, you have several options. You can buy shares of a company directly or invest in a fund, such as a passively managed index fund. Here are the pros and cons of both methods:
Advantages and Disadvantages of Individual Stocks
Individual control: Targeted investments can be made in selected companies.
No ongoing administrative fees: Unlike ETFs, there are no annual fees.
Voting rights: Speak directly at the general meeting of shareholders.
Dividends: Depending on the stock, dividends are higher than EFT.
Less Diversified: It is more difficult to achieve widespread dissemination.
Need more time: Research and analysis of individual companies is necessary.
Transaction costs are higher: Depending on the platform, frequent transactions can result in significant costs.
Advantages and Disadvantages of ETFs
Reduce costs: Ongoing fees are lower compared to, for example, actively managed funds.
Simple: Perfect for anyone with less experience and less time required.
transparency: Clear composition and strategy.
Safety: Protected as a special asset.
Ongoing costs: The annual management fee is not much.
Less control: It is not possible to exclude or overweight individual companies.
No direct voting rights: Voting rights are assigned to the ETF provider.
ETFs offer a variety of options and are particularly advantageous when starting out due to their ease of operation, broad diversification, and low cost. Individual stocks can be interesting if you want to invest specifically in a specific company.
The combination of the two is exciting. For example, you can invest broadly in one or more ETFs, or you can buy individual stocks of specific companies.
What system do you need
Whatever you decide, whether just investing in ETFs or other individual stocks, you should do a emergency fund To avoid selling your investments at an inappropriate time.
You also need appropriate trading infrastructure: Deposits from banks or online brokers. Here are some comparison points to consider when choosing a broker:
- Trading fees for Swiss and foreign stocks/ETFs
- Escrow fee
- Minimum deposit
- Available trading products and markets
- Ease of use of the platform
- Safety and Regulation
- customer support
Please note that Transactions through traditional banks are often much more expensive than through online solutions. For example, you can find comparisons of different providers on Moneyland.ch or Brokervergleich.ch.
5 tips on how to solve this problem:
1. Set clear goals and stick to your plan
Before you start buying individual stocks, you should set clear goals for yourself. What do you hope to achieve with your investment? Do you want to build long-term wealth, realize short-term profits, or benefit from dividends? The clearer your goals are, the easier it will be for you to develop an appropriate strategy.
Tip: Set a time frame, an appropriate amount, and the maximum risk you're willing to take on a simple trading plan, and stick to it. This will help you avoid making impulsive decisions based on market fluctuations.
2. Be smart and do proper research
Before investing your money in an individual stock, you should research the company in depth. Find out what the company does, how it is positioned in the market, and what its future prospects are. Financial indicators such as the price-to-earnings ratio (P/E ratio), the lower the better, as well as sales and profit development, debt ratios and dividend policy.
Tip: Various tools such as Yahoo Finance, Google Finance or brokerage platforms help to provide a quick overview of relevant key data. Other platforms such as Tradingview.com, marketscreener.com, investing.com, TheMotleyFool.com (providing daily stock recommendations), obermatt.com (great for Swiss stocks), finanzen.ch also provide useful information.
3. Choose a company whose business model you understand
It can be tempting to invest in companies that are growing rapidly or appear to be particularly innovative. But before investing in a stock, you should understand the company's business model. This is the only way you can better assess risks and opportunities. Ask yourself: How does the company make money? What products or services does it offer? Who are the main competitors?
Tip: A common mistake is trying to “time” the market. It would be more effective to focus on a company's valuation rather than the market as a whole. If a company has solid fundamentals, it will typically perform well over the long term, even if the overall market suffers short-term setbacks.
odd lot
Invest in scraps, even small amounts
Fractional shares of Shun Tak stock fragmentswhich allows you to own less than a full share; just a small portion of a company's stock. This is especially useful for expensive stocks, since buying the entire stock requires a lot of money. This means you can invest in companies even for small amounts. Disadvantages: You do not own the share outright and it cannot be transferred.
4. Build a diversified investment portfolio
Even if you decide to buy individual stocks, you should not ignore the principle of diversification. There are countless models on how to build a portfolio of individual stocks, such as:
- Analyst Ratings: You follow analysts' buy and sell recommendations.
- Industry Champion: You rely only on leading companies.
- Against the trend: You fight against market trends.
- The investment portfolio is as follows: You're looking at big, well-known investors.
- Value investing: You're trying to find a bargain.
- Fundamental analysis: You make your selections based on economic sector and company data.
- Technical analysis: You analyze charts and price developments based on certain patterns and key data.
Tip: Theories vary on how many stocks you should own. However, data show that from approx. The diversification effect of 20 stocks decreased significantly. There are also countless theories about allocating investment amounts among different stocks. A simple option is to allocate the amount as evenly as possible among different stocks.
5. Establish clear buying and selling rules
Individual stocks can experience large swings, especially during times of economic uncertainty. Keep in mind that stock prices can be affected by sentiment in the short term, but in the long term it's usually a company's fundamentals that matter most.
Tip: Establish clear buying and selling rules ahead of time. For example, you can set a maximum loss or profit for closing a position. This will help you keep a cool head during turbulent times.
Individual stocks are no longer just for the rich. With the right strategy, they can be an exciting way to add extra pizzazz to your portfolio.
Do you own a stock? Or would you rather use Electronic Funds Transfer (EFT)? What is your experience? 📈
Olga Miller…
… worked at UBS for more than a decade in a variety of roles, including setting up the Women's Advancement Initiative and the UBS Gender ETF. She then founded SmartPurse, an independent financial image offering financial digital courses and workshops on the platform. Miler has blogged at MoneyTalks for five years and her first book, Rich, Richer…Me!, a humorous financial guide, was recently published by Observer Verlag.
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