How do professional investors buy stocks

Which stocks to buy now? Hold or Sell? Recommendations and tips

How do I buy stocks? Which stocks to buy now? Which stocks to sell? Every investor is spoiled for choice when it comes to buying securities. What are the best stocks? Regardless of whether you are a newcomer to the stock exchange or an experienced hand on the trading floor: choosing the right stocks is a challenge. The investment universe is enormous and the market is flooded with news. There are 50,000 companies listed on the stock exchange worldwide. In Germany alone there are over 500 stock corporations (DAX, MDAX, SDAX, TecDAX etc.). But how do professionals proceed with the analyzes and how can private investors benefit from them? Buying professional and targeted stocks tips and recommendations can be of great importance to any investor interested in the stock markets. The depot can be happy. In the following we give you an overview of how professional stock market advisors carry out analyzes of which stocks to buy. Concrete tips and analyzes for the best return opportunities should of course not be missing.

At the beginning of the question "which stocks to buy now" it is useful to have a look at how the capital market works. The latest capital market research has cleared up some paradigms of the long-propagated efficient market and shows private investors in particular some avoidable mistakes. When deciding which shares to buy now, investors are nowhere near as rational as they have been for a long time. This holds up a mirror to many private investors who are subject to distorting emotional tendencies (bias, which describe systematic deviations from rational action). The "home bias" means that investors hold a disproportionately large number of papers from companies that are located in their home country. The result is a considerable underdiversification, which is reflected negatively in the return achieved. According to studies, there is even a “local bias”, i.e. too high an allocation of local companies to depots. This effect also results in a painful loss of returns for every investor. Other effects that private investors should be warned about can be found in abundance in the specialist literature.

The so-called disposition effect should be emphasized. Many investors tend to shy away from painful losses by selling losers and start from a reference point, usually the entry price. A cherished, best stock is held on for far too long, even if the price development is permanently disappointing. Deciding which stocks to buy shouldn't be a lifelong bond like “good times or bad”. Can from former favorites Depot corpses that hardly have a chance of ever reaching the starting price again. This has devastating consequences for investors.

For semi-professional investors in particular, excessive trust in one's own ability to read the market is a problem that can turn into fatal Overconfidence flows out. Many investors give positive developments too high a probability, while negative expectations are quantified with too low a probability. A faulty self-assessment is often visible in excessive action. The strategy of buying securities in quick succession and selling them off again rarely leads to success. The winner is usually only the bank, which can collect multiple fees at the same time. "Back and forth empties pockets," know experienced stock market professionals. From this you can learn which stocks to buy. The net return of this strategy is significantly lower compared to less volatile investors.

In addition, many risk-averse investors do not dare to buy individual stocks. You don't have time to deal with the news and key figures of the companies. They often put their money in passive funds, ETFs at. An ETF (Exchange Traded Fund) index fund replicates lists of stocks, i.e. indices such as the DAX in Germany or the MSCI World worldwide. This ensures that the performance of the ETF always runs parallel to the index. Compared to actively managed investment funds, an ETF does not require a complex market analysis due to the index replication. Therefore, the fees of the ETFs are significantly lower. An ETF is therefore a good opportunity for beginners to get into stock trading at low cost without much effort. ETFs pay off especially with a long-term investment horizon. However, since ETFs track a complete index, a poorly performing stock in the index can reduce the entire return. With an ETF you not only do just as well as the underlying index, but also just as badly in low phases. One example is the development of the Dow Jones during the 2008/2009 financial crisis. During this period, the Dow Jones fell by around 40 percent, and with it all ETFs that replicated the Dow Jones. On the other hand, some individual stocks from the Dow Jones such as ExxonMobil or IBM only had to accept minor discounts. This shows that the index can even be beaten with individual stocks.

Those who don't want to invest in an ETF may go in Funds with a focus on stocks. These funds contain several selected stocks in one package. In this way, investors can invest their assets in specific sectors or regions (e.g. with a focus on shares in Germany or the euro area) without having to deal intensively with them. The fund manager, who selects the best stocks according to his investment strategy, analyzes the fundamental company data as well as the news. With funds, however, there are a large number of fees, which is why trading is expensive. In addition, the components of the fund are often opaque.

Thus, the capital market shows clear shifts due to irrational action. This is exactly where the music of many stick pickers plays. It creates a great benefit of being targeted Market recommendations and tips.

But beware! Particular attention should be paid to relevant internet forums. There, so-called penny stocks (stocks that are quoted in the cent range) are often hailed. Hot bets on particularly hyped papers promise a certain thrill, but have nothing to do with a strategic investment and often lead to a total loss. If you are looking for specific analyzes of which shares to buy, you should use a reputable share letter such as the PLATOW stock exchange, which can demonstrate a positive long-term performance of its model portfolio. Such stock market letters provide a fundamental and / or technical basis for their recommendations.

 

Selling, Buying, or Holding Stocks: The Fundamental Analysis

Fundamental analysis is a type of analysis that uses macroeconomic and company-specific data, such as the profit and loss account or the balance sheet (more about other methods of stock analysis). They form the basis for the strategic and methodically well thought-out selection. Speak which stocks sell, buy or hold. Every analysis starts with a thorough going through of the business model. In all honesty: Without a look at how a company is doing, no investor can come to a reasonable assessment of which stocks are selling, buying or holding. For this reason, every investor should consider these basic questions when deciding which stocks to buy now: What exactly is the company doing? How does it make its money? Which factors do sales and business success depend on? Is it active in a future market? Anyone who buys securities becomes a co-owner of the company. Everyone should know exactly where they are investing every euro.

Furthermore, an investor should get an idea of ​​the overall market when analyzing which stocks are selling, buying or holding. This includes developing a feeling for the economy and how dependent the company is on it. What do economic experts say about the future economic outlook? How do sales and production markets react to external shocks? At the meta level, questions about the basic market development and possible disruptive trends that will change the company's business model or already threaten it noticeably are of particular importance. All of these questions flow into a professional fundamental analysis.

There are a number of metrics that analysts use in their fundamental analysis to decide which stocks to sell, buy or hold. Two of them are particularly important and also relatively easy to calculate: the price / earnings ratio and the dividend yield.

As the name suggests, the price / earnings ratio (P / E ratio) the relation between the current price and the annual profit per share. For the calculation, the current price is divided by the earnings per share. The P / E ratio indicates how many times the profit a share is currently valued with. In other words, it denotes the number of years in which the company would have earned its market value with constant profits.

The P / E ratio is usually based on the estimated profit for the current or the next year. One tries to do justice to the expected profit development. Information from the current period is already anticipated in the prices on the exchange. The stock market adage “The future is traded on the stock exchange” also applies to the P / E ratio analysis. But this is also the biggest problem with the P / E ratio: the analysts' earnings estimates are fraught with great uncertainty and in some market phases - especially at the beginning of an economic downturn - quite useless. Only the price / earnings ratios that are based on earnings from previous business periods are secured. Normally, however, the P / E ratio allows statements to be made regarding the over- or undervaluation of a share. The lower the P / E ratio, the cheaper the value appears compared to the overall market or to competitor shares.

However, there is no reliable basic rule as of which P / E ratio can be regarded as "fair valued". The P / E ratios can vary greatly depending on the market phase and industry. As a rule of thumb, however, the P / E ratio shouldn't be higher than the expected percentage earnings growth. Even papers with high double-digit P / E ratios do not have to be expensive if the company in question has corresponding earnings growth. Therefore, a company at breakeven can appear extremely expensive because the value in the denominator is still very small.

On the other hand, a low P / E ratio can even be a warning sign at times. Because sometimes the market is already significantly further than the average analyst estimates: In expectation of falling profits, the price has fallen, which means that the long-outdated P / E ratio makes the paper look cheap. Numerous investors have already fallen victim to this "optical illusion".

It is even clearer with the Dividend yield. Anyone who holds a security for a longer period of time is not necessarily interested in the current price, but in the return that results from the annual distributions. Here, too, the environment is important: In the current low interest rate environment, a return of 2.5% can be very worthwhile.

In summary: With the P / E ratio, investors quickly get an impression of how “cheap” a company is currently valued. And with the dividend yield, you can find out whether the security pays you an attractive reward for holding it. Together, the two metrics form important factors in fundamental analysis that no investor should ignore when deciding to sell, buy or hold stocks.

The basic assumption of fundamental analysis is essentially that, in addition to the stock market price of a security, there is a company value that can be determined by analysis (so-called "intrinsic value") to which the price adapts sooner or later. If the price is below the "intrinsic value" of a company, the securities should therefore be bought. Companies can be examined within the framework of fundamental analysis according to so-called qualitative and quantitative criteria. While quantitative methods refer to the business figures of a company, the qualitative analysis looks at the business concept, the industry and the management, among other things. There is a subjective scope for the analyst to evaluate the qualitative criteria in particular. This can lead to several analysts determining different "intrinsic value" for the same company. Tips and price forecasts for individual papers should therefore only serve as a starting point and guide for investors when selling, buying or holding stocks.

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Buying and Selling Stocks: The Technical Analysis

The fundamental analysis is not the technical analysis (more on stock analysis) as a competitor when deciding which stocks to buy, although this is repeatedly propagated by relevant experts, but as a helping hand. It is precisely for the market timing, i.e. the right time with Securitiesbuy and sell of great importance.

Technical analysis is essentially about recognizing a pattern from past price developments in order to show trends for future price developments. “Technical analysis” sounds like you want to connect measuring devices to the courses to check where a possible error lies. And that's not entirely wrong. The point is to recognize what is “in” the courses and to deduce from this what the potential that is hidden behind the pure courses can mean for the future. Because course patterns of the past tend to repeat themselves, especially since they are by no means miraculous, coincidental structures, but mostly logic behind them. You can find out a lot about what gives you greater planning security for your investments and makes it easier to decide which stocks to buy and sell now. But one thing must be said in advance:

The stock market is not an exact science! Why not? Because it contains a component that ensures that when you use technical analysis, it's always about shifting probabilities in your favor, but never about absolute certainty. And this component is the person, the investor, himself. Even if you consistently stick to the signals about which securities are buying and selling that the technical analysis provides, you must always take into account that others may not do it, but rather emotionally act out of the gut. But even if the majority of investors get nervous, you are well served to consistently implement what information the charts give you - because that will always prevail over short-term irritation phases in the end.

What a trend everyone can think: either the trend is up, sideways or down. How does this help you decide which stocks to buy? The basic message is: If downward movements turn into rising prices again at a higher level than before, this means that market participants are optimistic because they consider a security, an index, a currency or a commodity to be attractive and worth buying at a higher price level classify as the last price decline. In short: if you see such a picture over the course of the course, the general mood is positive - and that is of course always good.

Chart analysts therefore do not believe in ratios such as the P / E ratio when deciding which stocks to buy. Their theory is that such information has already been incorporated into the current price, i.e. it does not reveal anything about the future price development. Chartists therefore prefer to look for trends in the chart image to find out which securities are buying and selling. The lines of the upward and downward trends as well as the moving averages of the past trading days are therefore important to them.

A popular theory is that a trained trend will initially continue. If a paper has been rising for a few months, for example, the technician will try to connect intermittent highs and lows with an upward-pointing line. In the ideal case, this results in an upward channel that marks important future resistance and support. In addition, the technical analysis also deals with moving averages, usually of the past 38 (short-term trend) and 200 trading days (long-term trend). Resistance and support are derived from this as well. In certain constellations, buy signals are derived from this (e.g. if the short-term line crosses the long-term line from bottom to top).

After the thorough analysis, there should always be a specific recommendation, and every investor must be able to draw a clear vote on the question of buying or selling securities? What is decisive here is certainly the current one Market environment to have an eye on what makes sense to be able to say.

Buying stocks - recommendations and tips

Anyone who follows all of these steps will certainly still need help to find their way through the thick of the DAX, MDAX, SDAX and TecDAX. For this reason there are professional advisors. Established stock market letters such as the PLATOW stock exchange provide you with the Buy stocks tips. Stock market letters with helpful tips to buy stocks enjoy great satisfaction and high performance. Since it was launched in 1996, the editorial team's sample portfolio has grown by over + 2,500% with the PLATOW experts' recommendations for buying shares. This long-term performance confirms the seriousness and expertise of the tips for buying stocks.

In order to be able to time stock buying tips correctly, you need a lot of experience and a feeling for news and future developments. In order to protect yourself against shocks that can catch you cold, it is advisable to work with stop / loss orders when buying stocks. Buy all shares Recommendations from PLATOW end with a specific recommendation for action for the reader, including a limit and a stop.

How do I buy stocks?

After you have decided on stocks instead of ETFs or funds and a number of fundamental questions have been clarified, let's get down to business: How do I buy stocks? A step-by-step guide is provided to help you decide which stocks to buy.

Tip 1: Create a portfolio for buying and trading securities

The first step is based on researching suitable custodian banks and online brokers. It is important to compare the order fees and the costs of managing a portfolio. In an overview, an investor can then make a conscious decision. Before you put your money on the fire and expose yourself to the risk, it is advisable to get a template Depot to open. This enables you to try out different strategies and gain valuable initial experience that can be worth gold. You will also familiarize yourself with the technology and develop a feel for the market.

Tip 2: follow up sample depot from experts

If you want to set up your own portfolio in order to get a head start on the broader market, you are well advised to rely on reputable expertise. It can therefore be very helpful for private investors if experts list their best stock recommendations in the form of a sample portfolio. This provides a good first overview of promising papers. Investors can use this as a guide and follow their development before they even get involved. There are already some providers of model depots on the market. Investors should therefore pay attention to the risk class of the portfolios. Is the focus more on blue chips from the DAX or are small caps more likely to be dealt with? Some are riskier and therefore offer higher Potential returns, other model portfolios increasingly have defensive values ​​in their portfolios and are geared towards maintaining value. The experts at PLATOW Börse run a model portfolio with a medium to long-term investment horizon with a focus on Germany (MDAX, SDAX, but also DAX). The virtual model depot was launched in 1996 and has since achieved a performance of over + 2,500%. It is characterized in particular by a high degree of transparency and seriousness. In addition to the successful model portfolio, subscribers to the PLATOW exchange receive many other individual recommendations three times a week that may be of interest to their personal portfolio.

Tip 3: Investment goal, willingness to take risks: which stocks to buy

Before you repeat the mistake mentioned at the beginning, it is important to formulate a strategic investment goal precisely. For which investment period do I want to invest? How much money do I have at my disposal? And most importantly: What willingness to take risks, i.e. what financial absorption power to cope with a loss, do I bring with me? Based on this, a suitable statement can be made which stocks will buy.

Orientate yourself on the tips from Experts | and make a suitable selection based on fundamental data and your personal strategy. You should avoid lump risks. Spread your investment as broadly as possible in terms of industry and market.

Tip 4: Avoid These Beginner Mistakes

Based on the scientific findings mentioned at the beginning, some recommendations for action are derived. Avoid These Beginner Mistakes:

  1. Too short-term thinking
    The fact that investors tend to think too short-term can create several problems. For one, don't rate the latest developments or news too highly. That the stock has risen sharply in the past few months doesn't mean that it will continue to do so in the future. On the other hand, it should Investment horizon don't be too brief. The return development is not linear over a long period of time, but is subject to constant fluctuations. Before you buy, you should also make sure that the company has a future for the next 10-20 years, then you are well on the way to choosing the best stocks for your portfolio.

  1. Emotional distortions
    Leave your emotions aside when it comes to the purchase goes. Make yourself aware of the home and local bias. Do not overestimate your own abilities, but rely on the help and tips of professional investors for your portfolio.

  1. Buy on credit
    Special warning applies to buying securities on credit. A “surefire tip” for someone who gets into debt can quickly turn into a total loss. So stay away from investments financed with credit. Your Willingness to take risks should be based on the amount of money you can easily handle.

  1. Put all one's eggs in one basket
    An absolutely avoidable mistake, but unfortunately it is made by far too many. Diversification is the magic word. With investments that are as broadly diversified as possible, you make yourself more independent of individual companies and more resistant in the event of a crisis. It is advisable not only to focus on one region; it is better to spread your investments. Don't just focus on domestic markets like Germany, but also take a look at other interesting markets.

Tip 5: Where and how do I buy securities?

A security is usually bought in markets, also known as Stock exchange are designated. This is where supply and demand for a security come together. In Germany, the most traded on the stock exchanges in Frankfurt and Stuttgart. Thanks to modern communication technology, nobody has to be physically present at the scene of the event. As a rule, an order to buy, a so-called order, can be placed through the house bank or a specialized custodian bank. This process can now be completely digitized. Investors place an order via the provider's portal. The investor should first compare the depot providers in terms of their cost structure in detail.

Once a custody account is opened, the software does a lot for the investor. The mobile trade Nowadays, it is also possible to buy something on the go via smartphone, tablet and notebook. However, a little more rest is recommended for beginners. On the bank's platform, you can browse for securities, indices or regions and choose the paper you want. In the buy or sell order, investors should check that the name, the securities identification number (WKN) and the ISIN code match the company of their choice. You can determine the size of your investment amount from the number of units selected and the most recent rate. In addition, more details can be specified with each buy order, e.g. the choice of the stock exchange. The fairest prices are offered where the paper is traded frequently and in large numbers. So-called order types restrict even further. An unlimited buy order is called the “cheapest” or market order. With a limit order, you give your order a fixed price and a time frame. Limit buy orders are only executed if the security price is equal to or less than the limit. It thus protects investors from excessively expensive entry prices. The situation is similar with the limited sell order, with which you determine the minimum price at which you are ready to sell. If investors want to buy or sell securities at an event further in the future, stop orders are also an option. After the specified stop price has been reached, a simple sell order is executed. Placing a stop is very important and always advisable, especially to minimize losses.

Tip 6: watch stocks and keep an eye on current picks

Once a purchase is made, the work is not done. Always have a look at the current market environment and the news about the company. Work with us Stops and adjust them precisely according to the latest developments. We recommend a stop distance of 20 to 25% to the entry price or the current price.

 

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