In share trading, an investor buys a share in a company and thereby acquires a corresponding share in the company. Companies generate additional capital by selling shares, which in turn can be invested in the company. Now there is not just one type of share, there are some. Even for private investors, it certainly doesn't hurt to know the different types of shares. But how do the types of shares differ? What should private investors consider when selecting stocks?
Table of Contents
- What types of shares are there?
- Choosing the right share
- Trading hours at national and international stock exchanges
- What should be done at the choice of the stock portfolio to be considered?
- shares - with which investment products?
- demo account - gaining initial experience
- shares, trade via the trading app
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What types of shares are there?
In the following we would like to go into the most important types of shares. The extent to which the distinctions determine stock trading by private investors is an interesting point. For investors who want to deal extensively with stock trading, the types of shares are certainly worth knowing.
Common and preferred shares: If you want to have a say in a company's general meeting, you need ordinary shares. If an investor owns many shares of this type or a large proportion, then the vote of the shareholder will count in the vote. On the other hand, general meetings can certainly be interesting for small investors, but the voting rights prove to be low. The influence of voting is therefore not very large for small investors. In addition to the ordinary shares, there are also the preferred shares, which we also include in this category. Anyone holding preferred shares has no voting rights. Voting at the Annual General Meeting is not possible with a preference share. However, the preference share has a decisive advantage for small investors, which is reflected in the dividend.
Nominal and no-par shares: Nominal or no-par shares of public limited companies in Germany can be issued. These two types of shares also show a difference. For a no-par share, only the number of shares is relevant. There is no par value for no par value shares, as is the case for par value shares. Here the nominal value of a share shows the share in the share capital of a stock corporation. Nowadays, nominal shares are hardly common. In 1998 there was an exchange with no-par shares.
Bearer and registered shares: Anyone who has had experience in share trading will surely know that many of the purchased shares Shares are bearer shares. A bearer share is characterized by the fact that it belongs to the holder. So the one who owns the stock. This is different for a registered share. This is where the shareholder is entered in the register of the public limited company.
It should be noted that the differences in the types of shares can also prove interesting for private investors. The vote of a small shareholder is of little importance in a vote, so that the mostly slightly higher dividend of preferred shares should prove to be more attractive. Which types of shares are available can also be answered with a short information gathering.
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Select the right share
What types of shares are there? In addition to this question, the question of choosing the right stock is particularly important. Beginners should first get a current market overview to assess the situation on the stock market. The selection of shares can depend on the industry, but also on regions or countries. Europe, North America, Central and South America and others can be found among the regions. The selection of countries is large. The most popular industries include the following:
- Computer hardware
- Automobile production
- Mechanical engineering
Before the trading decision is made, an analysis of the price is advisable. What are the growth opportunities of a company? If you want to invest in stocks in the long term, you should ask yourself this question and implement the appropriate information gathering. With a long-term investment in shares, investors should not be disturbed by short-term price fluctuations. If you want to tackle stock trading at short notice, you can use real-time prices to get the right timing when buying stocks. In short-term oriented trading, it is important to keep an eye on the price development. Anyone who deposits a share in the custody account over the long term does not have to follow the current price developments.
The stock selection can be based on industry, region or country. In addition, price performance should be considered and the company's growth opportunities assessed before buying a security. The display of courses in real time is of particular interest for day traders. Investors who want to implement long-term equity investments need patience. Short-term price fluctuations should not lead to hasty sales.
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Trading hours of national and international stock exchanges
The trading hours of the German stock exchanges can differ from one another, which investors should know. If you have a deposit with an online broker or a direct bank, you can usually place orders at any time. Trading hours on the Stuttgart Stock Exchange and Tradegate are from Monday to Friday between 8:00 a.m. and 10:00 p.m. Trading stocks is also possible via electronic trading systems. XETRA is an electronic trading system of the German stock exchange. The trading hours here are between 9:00 a.m. and 5:30 p.m. every trading day. The trading hours from 8:00 a.m. to 8:00 p.m. show the following German stock exchanges:
In addition to the national stock exchanges, the international stock exchanges are of course also interesting for stock trading. Anyone who is informed about the trading hours here should pay attention to the time difference. If the trading time is specified in CET (Central European Time), this is certainly useful for investors. The opening hours of the Milan Stock Exchange are between 9:00 a.m. and 5:40 p.m. Stock trading on the New York Stock Exchange is possible from 3:30 p.m. to 10:00 p.m. (CET). The trading hours of Nasdaq are also between 3:30 p.m. and 10:00 p.m. (CET). The stock exchanges mentioned are only a selection in order to offer readers an insight. Trading times are usually listed extensively on the broker's website.
The opening times of national and international stock exchanges can usually be found conveniently via the trading calendar. When considering the trading hours, it is noticeable that the opening times can differ from German stock exchanges. This should be taken into account when trading in shares.
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What should be considered when choosing the stock portfolio?
In order to implement the online investment with shares yourself, investors first need a deposit. The shares are kept in the custody account. It is necessary to clarify in advance whether the deposit is one of the free services of a broker. With many online brokers, active investors do not have to pay custody fees. In addition to the possible costs for the depot, there are other criteria of interest. The trading conditions of a broker represent an important aspect. More expensive fees can conspicuously reduce the return achieved. To avoid this, it is advisable to consult a broker comparison. A comparison gives investors an overview of the terms and benefits.
The minimum deposit is another criterion that should be of particular interest to small investors. A high minimum deposit can prove to be a high hurdle for less capital-rich investors. The minimum trading amount can also prove worth knowing in this regard. In order to start trading, the trading account must be capitalized. At this point, the selection of the accepted payment methods is a criterion. Deposits can often be made by credit card or bank transfer. Various eWallets can also be among the accepted payment methods, but PayPal is less often represented among them.
In addition to the fees for stock trading, the fees for deposit management are a key aspect when choosing a broker There are also other criteria that are more or less of interest depending on the type of investor. For capital-rich investors, the minimum deposit should be less relevant than is the case for small investors.
Shares - with which investment products?
The shares asset class still provides today an opaque form of investment for many investors. But especially in times of very low interest rates for the overnight or fixed deposit investment, investors are looking for an alternative. Finding out what types of stocks are available for trading can be the first step towards trading stocks. The financial world presents many different investment products, which differ in the way they work. Inquiries are also important here, because only those who know how an investment product works can assess the opportunities and risks. Below we present a small selection of investment products:
Equity CFDs: Contracts for difference, also called CFDs, are a speculative financial derivative. CFDs can also be traded on stocks. Trading often takes place over the counter. Investors do not acquire a stake in the company when trading CFDs in shares and therefore do not have the right to vote at a general meeting. CFD trading is characterized by the leverage effect, which offers attractive return opportunities, but also high risks. Short or long positions can be set.
Equity ETFs: Exchange-traded funds, also called ETFs, are usually passively managed index funds. ETFs track the performance of an index. A well-known stock index is the DAX. The investment in ETFs can be made through a one-time investment, but also through an ETF savings plan. An ETF portfolio presents the opportunity to build a well diversified portfolio. In addition to stocks, bonds can also be added to the portfolio.
Binary options on stocks: Stocks of a binary option can also be the underlying. The functionality of call and put options is easy to understand. You can bet on rising or falling prices of a certain underlying. If the predicted event occurs at the end of the option term, investors will earn a return. Otherwise, the option does not end in value and the stake is completely lost. The regular returns can be up to 85%, which makes the investment product interesting for some investors. However, since the price development of a share cannot be predicted with certainty, this investment product also involves risks that cannot be ignored.
There is a wide range of investment products to choose from. Not every investment product is suitable for beginners. Investors wishing to implement CFD trading should have a certain level of experience and should also be well informed. Even if trading in binary options is characterized by an easy-to-understand mode of operation, there are risks in possible price fluctuations.
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Demo account - gaining initial experience
Anyone who has read up on the types of shares, the various investment products and a broker comparison has already taken the first steps towards trading shares. To make getting started as easy as possible, the use of a demo account can prove to be useful. With the demo account, investors can try out the trading platform and place first positions without any risk. The demo account is not used to trade with real money, but with virtual amounts with which the broker populates the demo account. Some brokers offer the demo account for free. It may be necessary to register beforehand. The demo account can not always be used indefinitely, which should be noted.
After the first information about the share trading has been obtained, the theory can go into practice. First trades can be placed via a demo account without risk. This way, investors can not only get to know the trading platform, but also try out strategies for trading.
Shares, trade via the trading app
Those who have already actively started trading in shares is in a trading app a practical way to buy and sell shares on the go. Of course, a stable internet connection is required. The operating system of the mobile device also plays a role. Many of the trading apps are only available for smartphones and tablets with iOS or Android operating system.
The functionality of a trading app also presents a convenient view of the depot. Using various trading apps, it is also possible to view charts and prices in real time in order to be able to react quickly to promising price movements. The creation of a watchlist for securities trading can also be part of the range of functions.
Via a free trading app, online securities trading is also possible on the go using the mobile device. Exactly how the range of functions is designed depends on the trading app that the broker provides. A user-friendly interface is not useful for beginners. Check whether the trading app is compatible with the smartphone or tablet you are using.
Some types of shares are more interesting than others for private investors, In addition to the return, the dividend in equity trading accounts for the profit. As a result, preference shares can prove to be an interesting choice for investors, as they are usually accompanied by a higher dividend. The selection of the right shares is the basis for successful trading. Here investors should not only inform themselves about the company that issues the share, but also about the price development. Technical chart analysis can prove useful for this. What types of shares are there? Here are the most important types of shares in a list:
- Ordinary and preferred shares
- Par value and no-par shares
- Bearer and registered shares