This is how stocks work

  • Of stock market in Germany
  • inflationary and interest
  • Shares: You must Note
  • Important variables
  • Conclusion

In September 2022, inflation is compared to the same month last year to +10.0 percent estimated. Among other things, the expiry of the fuel discount and the 9-euro ticket in September will probably have had an impact on inflation. Do you want to protect your wealth and counteract inflation a little, stocks could help. We tell you what you need to know about the subject.

Shares in Germany: Current situation and information

According to Deutsches Aktieninstitut, 2021 almost 12.1 million citizens involved in the stock market. This means that every sixth person has invested in shares. Over the years, the number of active people on the stock market has increased. In 2017, it was only 10.06 million. Today, around 6.9 million people invest in equity-based funds, 3.1 million in individual shares and 2 million combines the various types of investment opportunities. With a look at inflation, it may be worth investing the money to counter inflation.

that The European Central Bank has been responsible for ensuring price stability in the euro area since 1998. She too reacted to inflation of around 10 percent in September: the ECB’s key interest rate has been unchanged since 14 September 2022 of 1.25 per cent. This is intended to counteract inflation as far as possible. If the key interest rate is raised, it means that while economic growth is held back, price increases are also held back. This important step is not to be underestimated when it comes to control of inflation walks. It usually takes a few months for the interest rate increase to take effect.

It is repeatedly argued that such interest rate hikes have a strong negative impact on equity markets. However, this aspect cannot be generalized: festivals and general connections there is no difference between the development in interest rates and share prices. In the past, equity markets have risen across the board despite rising interest rates. The German stock index, DAX, can be cited as an example. Of one short-term ups and downs on the stock market or supposed forecasts, one should therefore not be confused. In principle, this applies to both shares and equity funds. to think long term. If you decide to invest in a stock, be aware that not only rapid increases, but also periodic losses of up to 50 percent are normal.

Purchase and selection of shares

Basically can every stock investor will be. This is achieved, for example, via a online broker such as Trade Republic, Smartbroker, Scalable Capital or Flatex. Alternatively, you can too through your bank create a deposit, e.g. with ING or DKB. When choosing stocks is always be careful. The current goal is to find a company that is solid, has robust business models and perhaps already has a strong brand. Because it is these companies that can pass on the price increases to their customers without the demand dwindling. You will also like crisis-proof designated. You always have to choose individually and does not follow a particular scheme; because this does not exist with shares. An indication could be that companies in food, electricity, medical equipment, pharmaceuticals and telecommunications are less affected by economic fluctuations. But beware: Here, too, the past has already shown that it is no security is. This can be seen, for example, by looking at the E.ON share in the energy sector, which has fallen sharply. Besides, it makes sense not the entire fortune on one or a few shares allocating. A broad stock portfolio reduces the risk of loss. As a tip: You can, for example, use ETFs to spread your risk more widely. What exactly it is, we have summarized for you here.

There are a few landmark, which you can use to evaluate and select the company. You can look at the balance sheet on one side, the cash flow of a company, the price-to-earnings (P/E) ratio, the price-to-book ratio (PBV) and the dividend yield on the other. Based on these values, you can get a rough overview of the company and, taking into account the economic cycle, assess the potential. As a beginner, you should definitely find out inform the most important key figures. The consumer center also offers a dividend calculator. You can use this to calculate how the ratio between fixed deposits and shares affects the return on the share. Stocks rated as recession-proof include Johnson & Johnson, Procter & Gamble, Colgate Palmolive and Church & Dwight. But the same applies here: You must always form your own opinion.

Each share has an individual opportunity-risk profile. One advantage of investing in shares is certainly the high degree of flexibility that you gain as a result. However, you must always bear in mind that there is no guarantee that you will achieve a real return. The opportunity is certainly there if you build a portfolio of businesses that are highly likely to return to profitability over the long term; but there is never certainty. At the moment, of course, you also have to consider it businesses are also affected by inflation is. Often, a company’s margins are squeezed by the higher prices of its goods or services. Stocks give you an opportunity, but no security.

Conclusion

You find a company you like only a low investment risk in the long term represents, it pays to invest in this. Different can give you a clue indicators such as price-to-earnings, price-to-book, cash flow, dividends and return on equity. As a first-time investor, it’s worth figuring out the numbers and getting your own picture.

There is no finality with any investment a guarantee so that you can make a profit and thus counteract inflation. It is important that you are always aware of this and calculate the risk yourself precisely. Especially in times of high inflation and rising interest rates Possibility of fluctuations at any time; the risk of loss is currently higher than at low interest rates.

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