Creating an investment portfolio composed of shares is every investor’s dream. We will show you three basic risks that you may encounter when investing in stocks.
There is one mini-story in the famous newspaper strip Dilbert, how the main protagonist of this cartoon comics spends his working time watching the development of the shares he owns. At the same time, he sings: “It’s a great joy, as my shares grow, if my boss catches me, he will probably kill me.”
If you do not speculate on securities, you should not monitor their value too often. Of course, you should have a basic idea of the financial results of the joint stock company in which you operate as a shareholder. Buying stocks and forgetting about them is also not a good way to manage your financial assets.
Risk One: The value of a stock changes over time
The first risk you should know when investing in stocks is that the value of the stock changes over time. Fluctuations are influenced not only by the company’s management itself, but also by external influences. These include, for example, the market situation, competition, or natural or other disasters. The security may or may not fluctuate on a daily basis.
The price of a share on the stock exchange is to some extent also influenced by the behavior of other shareholders. Under the psychological influence of shareholders, the value of a security may fall or rise within a few minutes without the market price affecting the share price.
Second risk: The amount of the dividend is decided by the shareholders
A certain risk relates to the payment of a dividend. Each company can suspend the payment of a dividend, for example, because it failed in the previous financial year. Sometimes, however, dividends are not paid because most shareholders do not want to. This is the case for those companies that have one majority owner. For example, he may decide to make a profit in a way other than the payment of dividends.
To a certain extent, insurance companies are those companies that have a larger number of shareholders holding several percent shares in the company. These shareholders include, for example, various funds, banks or pension funds. Institutional shareholders generally have a high interest in the payment of dividends and therefore will not unnecessarily delay the company’s profits.
The dividend process works by proposing the amount to the shareholders to the company’s board of directors. Shareholders approve the amount and method of dividend payment by voting at the General Meeting, which is held at least once a year.
Risk three: Speculation on the rise and fall of stock prices
If you are not a conservative investor holding a stock for dividend yields, you should carefully study the issue of speculative buying and selling of stocks. However, the goal of this server is not to support traders, but investors who want to value their assets through capital markets and other bank insurance products over a longer period of time.