People take action to trade on the stock market for a variety of reasons. Some of them were influenced by a movie they watched, while others turned to the stock market as a conscious investor after long-term Forex studies.
Regardless, the so-called high returns from the exchange attract many people who do not have the appropriate level of education to work with financial instruments. Therefore, after signing a brokerage agreement, the search for profitable investment tools will begin. They are usually based on free analytics provided by brokers. Lack of your own brokerage account management strategy results in a lot of casual transactions and in many cases losses.
But how do you create a strategy for managing your brokerage account? To do this, you must first define your financial goals and the timing of their success. You should prepare a financial goal.
What is the financial goal?
Every financial goal has two main characteristics, price and maturity. Statements like "I want to make a lot of money not to work" or "I want a cool car" cannot be financial targets. On the other hand, formulations such as "I need 500 thousand TL in this capital and about 7% annual profitability in order to quit my job" or "I want to buy a luxury jeep" are already much better because the price is at least approximately known. At the same time, if you specify the time frame you want to achieve, you can say that the financial goal is formulated.
Which tools are suitable for specific targets?
When you set financial goals, you need to define the financial instruments by which you will achieve them. Targets can be conditionally divided into short term (up to one year), medium term (1-3 years) and long term (more than three years). It is very important that you choose financial instruments based on this section.
For short-term purposes, in most cases it is better to invest with regular bank deposits. For a short while, the difference in deposit and bond returns won't be significant enough to be worth dealing with with bonds. Now you can earn 7-8% annual yield on bonds without much risk, while on deposits you can count on up to 5% annual income. After a year, the 2% yield difference will not have a significant impact on your financial plans and it will appear more like a mistake.
For example, if you deposit 5% of 100 thousand TL per year in the bank, you will get back 105 thousand TL in a year. After depositing the same 100 thousand TL in bonds at the rate of 8% per year, you will get back 108 thousand TL per year. Note that if you want to choose your own ties and this is your first time doing so, you will need to spend enough time researching this asset class. Due to the lack of experience, it is quite possible that you will receive losses instead of profits in a period of up to a year.
It seems quite logical to use 1-3 year bonds and financial instruments based on them. The 3% difference in annual profitability in a three-year investment can increase your income by almost half. For example, if you put 5 thousand TL on a bank deposit at 100% per year and reinvest the interest received, 115 thousand TL will accumulate in three years. If you invest this money in bonds with an annual yield of 8% and re-deposit coupon payments, you will receive almost 126 TL in three years. So your investment income will almost double.
It is already possible to use stocks and tools based on them in investment options for more than three years. Also, it is recommended that you combine stocks and bonds in your investment portfolio.
Timing and efficiency
In financial planning, special attention should be paid to the timing of achieving financial goals and the profitability of the tools used can have a significant impact. Therefore, it is desirable to have some profitability criteria that you can rely on when preparing financial plans.
Bank deposits, at a reasonable rate of deposit Central Bank's basic interest rate varies between. For example, the Central Bank's deposit rate is 7%. Accordingly, the fair rate on deposits is between 5% and 7% per annum. Banks rarely offer deposits with higher interest rates than the Central Bank's basic interest rate, and if the bank offers a deposit rate below the Central Bank's key rate, then you should look for another bank.
The size of the Central Bank's interest
The yield on bonds is also highly dependent on the Central Bank's interest rate. In most cases, you can find bonds with a return and you don't have to take any more risks. For example, if the Central Bank interest rate is 7%, then the bond yield for financial planning needs should be 8% annually. You can find more profitable bonds with an acceptable level of risk, but it's better to keep your financial plan conservative so as not to be disappointed that you won't be able to fulfill it on time.
Stocks are the most difficult investment tools. The yield can be too high or negative. However, you can get an average annual return of 15-17% for the stock market. Before entering the stock market, you need to prepare a personal financial plan in which you define your financial goals and the timing of their success, and accordingly, you should choose the appropriate financial instruments.
You also need to take into account the profitability of the selected investment tools when planning, and here it is advisable to make prudent predictions to avoid trouble in the future. Only when you decide on your financial goals and the timing of their success, you can open a brokerage account and trade on the stock market.
Do not neglect to seek professional support
However, if you are doing newer work on investment and do not know how to act in general, then visit trusted-broker-reviews.com. Click for more information. You can start earning quickly and easily thanks to the platform that will guide you after successfully analyzing all the movements you will make. This site will be very useful in evaluating your easy money making investments, comparing investment instruments and will help you succeed in making your investments more valuable by providing you with important ideas.