Where to invest in the stock market

Establishing where to invest in the stock market is difficult if you do not know the objectives to be pursued. Sometimes I find it difficult to establish where to do it myself, not because I am lacking ideas, but because I wait for the right moment. At the same time, the fact that not all investments have the same meaning. Some are determined by their duration in time, others by the amount invested and, of course, the purpose of the investment. They are not all the same.

The great utility of the present times, despite the world problem, is that much of the products in stock are available to the public in general. And if we cannot invest directly in what we intend, we can do it in other ways. As an example, ETFs manage to fix part of these problems that the small investor wants. Some of them were related to investing in indices, government bonds, which was traditionally more complicated and required larger sums of money. Therefore, and in connection with current times, we are going to see what options we have and where to invest in the stock market according to the objectives pursued.

Options to understand where to invest in the stock market

There is a long list of products and things to select from in the commercial world. Among the existing ones to understand which one is the right one for us to invest in the stock market are the following:

• Forex: It is the decentralized exchange market. It was born to facilitate the monetary flow derived from international trade.
• Raw Materials: In this sector we can find the main raw materials used for production such as copper, oil, oats and even coffee. There are also precious metals such as gold, silver or palladium within this sector.
• Behaviour: It is best known for its excellence. In this type of market we can buy "portions" of companies and benefit from their evolution or lose out. Everything will depend on the company whose shares have been bought. We can also find stock indices for countries like India.
• Bills, bonds and obligations: This market is characterized by the purchase and sale of debt securities, both corporate and state.
• Financial derivatives: They are products whose value is based on the price of another asset, generally an underlying one. There are many types of them, CFD's, Options, Futures, Warrants ...
• Investment funds: Some of them managed by a person, others by algorithms and some automated that replicate indices or investment strategy systems. The most popular ones usually work with stocks, but they can be dedicated to other products such as raw materials.

What to consider when choosing where to invest

There are different factors that will determine where to invest in the stock market. The period of time whose investment we are willing to bear, the level of profitability we are pursuing, how much risk we are willing to take on, etc.

• Time frame: Much of the different investment philosophies can be found in the time horizons that we set for ourselves. Then there is from short to long term. The longer term those investments are put in, the more likely they will not lose the investments. Despite everything, this great horizon has as its counterpart the fact that we cannot have the money sooner. Guaranteeing the capital that is expendable for us to live will help us establish what temporary flexibility we have.

• Cost effectiveness: The level of profitability that is pursued may vary depending on the company and the sector that is being used. An operation with a certain degree of leverage is not the same as a fixed income investment. This profitability bonus is usually accompanied by higher risks. In the leveraged operation, capital could be lost or even doubled, while in the second, the fixed income operation, it would be unlikely (not impossible) that one of the two scenarios would occur. On the other hand, profitability can be achieved by looking at the long term, or also with companies whose growth is essential. Knowing where to invest for the profitability obtained is very sensible.
• Risk: What losses are we willing to bear for possible gains? An investment focused on the short term is not the same as on the long term. There are many events that can occur over a long period of time, so the risk always exists. Despite everything, there are specific events that cause the price of assets to vary in the short term, so it is also essential to know how far we can go. It is always necessary to pursue the least risk, to guarantee the returns, but if the risk is greater, that is justified.

Differences between investment and speculation

In short, and personally the most important thing, it is essential to differentiate investment from speculation.

Speculation is the buying or selling of any asset with the expectation that its price will go up or down. in a certain future. Therefore, the role of a speculator is to anticipate the future price of the product that he has bought. The more accurate the forecast, the better the results. This type of movement is usually characterized by a contextual analysis of the situation, technical analysis, or any indicator or reason that makes the price anticipate. As an example, buying gold with the expectation that it will rise or placing a sell order on the Eurodollar with the expectation that the euro will lose value, the dollar will gain value, or both.

The investment is usually the purchase of an asset with the expectation that a higher return will be generated. of the contributed capital. If speculation tends to be more short-term (not always, there are long-term speculations), investing tends to look long-term. At this point the investor performs the pertinent calculations in which he tries to find a return on capital and at the same time ensure it. If the objective is achieved, the purchased asset can be revalued so that at the time of sale it generates these capital gains as in the case of the speculator. As a difference, the profitability that you may have obtained, as in the case of many listed companies, is the achievement of payments paid in the form of dividends. A regularity that in the long term will have to be added to the capital gains, to see the total profitability.