Trading on the stock exchange should be fun, and for this it is important to determine as quickly as possible which style of investing suits you. How to do it?
What are the investors?
Investor groups are usually divided according to the following parameters:
- qualification;
- an experience;
- the amount of investments;
- way of managing money;
- risk appetite;
- goal.
How to find yourself in this variety of definitions? Isn't it easier to start investing, and then - how will it go? Easier, but the result may not meet your expectations, and you will forever close the stock market for yourself.
Let's take a closer look at each category.
Qualification
The state divides investors into qualified and non-qualified (“quals” and “non-quals”, as they are commonly called). "Quals" get access to complex, risky (and potentially more profitable) instruments - for example, Eurobonds on the OTC market, structured notes.
To become a "qualifier", an investor must meet one of the following requirements:
- own securities or money in the amount of at least 6 million rubles;
- have work experience in a Russian or foreign organization that made transactions with securities / financial instruments (at least two years if the organization is recognized as “qualified”, and at least three years if not);
- make transactions with securities at least once a month, on average ten times a quarter and in the amount of at least 6 million rubles during the last four quarters;
- have a higher economic education or one of the professional certificates (for example, a financial market specialist, CFA).
You can get the status of a qualified investor, including through a broker or a management company.
An experience
Investment experience also affects the choice of securities. Inexperienced investors are advised to start with a small amount, several tens of thousands of rubles. You can invest it in exchange-traded funds, stocks of large well-known companies and government bonds. It is important not to invest all the money in one instrument, but to distribute it among several (5-10) securities. Watching the change in the value of your portfolio, you will better understand what level of return (and what possible losses) will be comfortable for you.
Gradually, you will begin to better navigate the tools and investment ideas, not be afraid of temporary price declines, and learn to overcome the temptation to buy stocks that have already risen in price.
Experience in a falling market is especially highly valued.
Investment volume
It opens access to the status of a qualified investor (see above about this criterion) and, as a result, to a wider range of tools.
The larger your capital, the more you can reduce risks by distributing investments between securities of different categories: stocks and bonds, issuers from different industries, different countries.
The amount on the brokerage account is often reflected in the service status: basic, premium and "private". A higher status gives access to a personal consultant and the formation of an individual investment strategy.
Some foreign brokers have minimum requirements for the amount that the client must deposit into the account.
Way to manage money
You can trade on the exchange yourself or with the help of a management company. Investing on your own takes time, skill, and a willingness to make tough decisions. Professional managers have all this: they not only have the necessary skills and knowledge, but also take on part of the psychological burden, removing worries and emotional experiences from the client due to constant monitoring of quote fluctuations. Their responsibility is also the choice of companies, adjusting the strategy for investing funds, depending on various factors. The manager saves the client's time, but also costs money.
Of course, one does not exclude the other. You may well acquire shares of an investment fund and at the same time invest part of the capital in securities at your discretion. You can even compete with your manager in profitability.
risk appetite
How much of your portfolio are you willing to lose? The higher the number, the more aggressive investor you are, which means that you are psychologically ready to invest in instruments with potentially higher returns. The higher the risk, the higher the return: this is the basic rule of exchange trading.
Your profile is more likely to be conservative if you:
- careful
- not ready to lose part of the savings,
- not ready to take risks due to lack of experience or temperament,
- difficult to experience stressful situations, and the news background can seriously spoil your mood.
And if you:
- Willing to take risks for high returns
- love excitement,
- do not react to fluctuations in the economy with stress and panic,
- have sufficient experience and knowledge to take risks,
then you are probably closer to an aggressive investor.
Target
How quickly will you need the money you invested in securities, and exactly how much money will you need? The required yield depends on this, and hence the choice of instruments.
For example, if you need an annual (or even monthly) recurring return on capital, the best option is to invest it in bonds or stocks that pay dividends. Such a strategy will not bring much income, but it will bring regular payments.
Another option: you invest 1 million rubles in order to buy an apartment in 15 years, which now costs 6 million rubles. This means that the average annual real (excluding inflation) return on investment should be about 12%. This can be obtained with a well-composed stock portfolio. But the closer the deadline for acquiring an apartment, the more conservative the portfolio should be, because if the shares start to get cheaper, then you will not reach the goal.
In general, the more time you have to reach your goal, the more risk you can take.
How do you define your investment personality?
Having familiarized yourself with the above types of investors in the financial market, you should think about your investment tactics, and the following will help you with this:
1. Extended financial tests of brokers and management companies. Large investment companies use artificial intelligence to determine their investment profile, which eliminates subjectivity. Financial institutions have at their disposal analytical data and a staff of professionals who are interested in ensuring that your portfolio is as profitable as possible and at the same time suits your risk profile and other parameters listed above.
2. Profiling tests on the websites of banks, brokers and management companies. If you speak English, you will be able to access foreign versions of tests and questionnaires on the Internet.
Types Investors - the securities market
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