Why should I invest and is it suitable for me?

Investing can indeed generate higher returns than bank deposits, but there is also a risk of losing everything. Unlike bank deposits, which are insured and guaranteed by the state within certain limits, the stock market does not provide such protection, making it possible to lose all invested funds. Additionally, market fluctuations and declines in the value of securities are more common than bank failures.

Therefore, before entering the stock market, it is crucial to establish a financial safety net. It is advisable to keep a portion of your savings, at least 3-6 months' worth of income, in a deposit or savings account at a bank. Only when you have built a reserve for unexpected expenses and still have some discretionary funds available, and you are willing to take on the associated risks, should you consider investing.

It is important to understand that generating profits through investments is not based on blind luck, similar to casinos, but rather on well-thought-out actions. It is a serious endeavor that requires informed decision-making rather than treating it as a mere game.

I want to give it a try. Where should I start? The modern stock exchange operates electronically, allowing you to trade online without leaving your home. However, before you begin, there are several important considerations to make:

1. Determine the amount of money you are willing to invest. In theory, you can start with any amount, even as low as 1000 rubles. However, such a small investment may not cover transaction fees or justify the time spent on trading. It is generally advisable to start investing with a sum of several tens of thousands of rubles. It is important to envision a scenario where you might lose all the invested funds and assess whether it would significantly impact your financial situation. If you realize that such a loss would not be catastrophic for your budget, you can proceed with investing.

2. Consider the amount of time you are willing to dedicate. If you are willing to undergo training, immerse yourself in the subject, and consistently monitor the stock market, you can try trading on your own. In this case, you will need to find a broker who will serve as your intermediary for accessing the stock exchange. You will be responsible for making your own buying and selling decisions, while the broker executes your instructions.

If you do not wish to invest a significant amount of time and effort, it is advisable to explore options for trust management. This allows professionals to handle the investment of your funds on your behalf.

You can enter into an individual contract with a trustee, transfer your funds to them, and they will decide when to buy, sell, and manage your investments with the goal of maximizing profits within your chosen risk level.

Another option is to invest in unit investment funds (UIFs). These funds consist of pre-selected sets of various securities or assets, such as shares of Russian mining companies. The buying and selling of assets within a mutual fund are managed by a management company.

You can choose a suitable fund and purchase its units directly from the management company or through a broker on the stock exchange. If the company's investments perform well, the unit prices will increase, resulting in a profit for you. Conversely, if the investments decline in value, you may experience losses.

3. Select a strategy and assets. A strategy encompasses the investment parameters that define your behavior on the stock exchange. This includes the types of instruments you choose, the expected returns, the acceptable level of losses, the investment period, and the frequency of transactions.

In a simplified version of a strategy, you would choose:
- Assets: Government bonds, shares of pharmaceutical, oil and gas companies, banks, and a fund that invests in precious metals.
- Investment period: 1 year.
- Maximum allowable losses: 20%. If the assets decline in price by 20%, you would sell them, even if the year has not yet elapsed.

When opting for trust management, it is also essential to decide on a strategy. In this case, you can choose from existing market offerings or negotiate an individual strategy with your appointed manager.

4. Find an intermediary company. Once you have determined your strategy, you can proceed with selecting an intermediary. The crucial aspect is ensuring that the broker, trustee, or mutual fund management company possesses a license from the Bank of Russia.

If you have decided to invest independently, you will need to follow these steps:
- Establish an agreement with a broker.
- Open and fund a brokerage account.
- Install a specialized trading program.
- Commence buying and selling securities.

If you have chosen the path of trust management, entering into a contract and transferring funds to a trustee or a management company of a mutual fund will be sufficient.

Common mistakes to avoid: - Avoid investing all your funds in securities. It is advisable to create a financial safety cushion by setting aside 3-6 months' worth of salaries in a bank deposit. Only then should you venture into trading on the stock exchange, investing an amount you are prepared to accept losing.

- Do not rely on chance and ensure you acquire proper training. If you plan to trade independently, undergo training first. Many brokers offer courses for novice investors, and trading programs often provide a demo mode where you can practice without risking real money.

- Do not let emotions drive your decision-making. Acting impulsively can lead to numerous mistakes. Novice investors should avoid overreacting to minor price fluctuations on the stock exchange. However, it is crucial to act decisively when significant price changes occur.

- Establish a limit for acceptable losses. For example, if your assets have declined in value by 20%, it is advisable to sell and "cut your losses," even if you are tempted to wait for a potential price rebound. Succumbing to this temptation may result in even greater losses.

- Diversify your investments and avoid concentrating all your funds in a single asset or sector. Investing in securities from different industries helps mitigate risks. For instance, if you solely invest in oil companies' securities, your exposure to potential losses will be high. Diversifying across various sectors, such as chemical industry, machinery, telecommunications, reduces the risk of losing your invested capital.

- Be cautious of promises of excessively high returns, such as earning 500% per day. Such guarantees are typically made by fraudsters. A responsible intermediary should warn you about the risks associated with the stock market. Remember that the market is volatile, and you are solely responsible for the decisions you make.