The art of investing: opportunities and terms on the stock market

The image of the stock market as a place for risk-taking speculators is long outdated. I would even argue that people who do not invest their assets for the long term these days are acting recklessly. Sounds harsh, but it’s a reality. If you invest your assets in the stock market for the long term, you have a good chance of achieving an attractive return. Those who do not invest their money for the long term accept the certain loss due to inflation.
I would therefore like to briefly explain the importance of investing wisely on the stock market and explain important stock market terms.

Why is investing in the stock market so important for retirement planning?

The stock market is a place where investors have the opportunity to invest their money in companies and thus benefit from their growth and success. Particularly in times of increased inflation, the stock market continues to gain in importance as an instrument for wealth accumulation. Historical development shows that shares can achieve a higher return in the long term than other forms of investment. By diversifying the portfolio across different sectors and markets, risk can be reduced while maintaining the potential for growth and income. Furthermore, mixed portfolios offer the opportunity to achieve additional diversification and thus further reduce risks and volatility. Mixed portfolios usually consist of a mix of equities, bonds, gold and real estate securities. Depending on the type of investor, the most suitable investment solution can be determined. This means that there is a sensible and attractive long-term investment for (almost) everyone.

Terms on the stock exchange: The key to the regulars’ table conversation

However, before you “venture” into the stock market, you should know a few key terms – not only to expand your knowledge, but also so that you can have a say at the next regulars’ table. Believe me, nothing is more embarrassing than thinking that a “bull market” is a cattle auction or that “short selling” is the order of the day in the summer. A solid understanding of stock market fundamentals is the key to shining both financially and socially – at the regulars’ table or at the next coffee klatch.

Important terms on the stock exchange:

Long:

“Long” refers to a position where an investor assumes that the value of a security will rise. The aim is to sell the position at a profit at a later date. A “long” position symbolizes confidence in future performance.

Short:

In contrast, “short” refers to a position where an investor bets on the fall in the value of a security. This position can be realized through short selling. A “short” scenario is used when investors are convinced of a fall in value.

Bull market:

A “bull market” describes a phase in which the prices of shares or other securities rise over a longer period of time. This is often accompanied by optimism and positive economic indicators.
Where does the name come from? Bulls are said to reach upwards with their horns – a perfect image for the upward trend.

Bear market:

A “bear market”, on the other hand, refers to a phase in which the prices of shares or securities fall over a longer period of time. This is often accompanied by pessimistic sentiment and economic uncertainty. Why “bear”? Well, think of a bear bouncing downwards – that describes the falling market action quite well.

Index:

An index consists of a group of shares that are considered representative of the entire market or a specific sector. The performance of the index is usually expressed by a point value and its change over time. A well-known example is the S&P 500, which comprises the 500 largest companies in the USA. Another example is the DAX with the 40 largest listed companies from Germany or the Swiss Market Index (SMI) with the 20 largest listed companies in Switzerland. Indices are often used as benchmarks for funds and individual portfolios.

Volatility:

Volatility is a measure of the risk and uncertainty of a financial instrument. It is often calculated by the standardized deviation of the return of a security over a certain period of time. High volatility means that the price of the security fluctuates strongly and can therefore also be risky. Low volatility, on the other hand, indicates that prices are relatively stable, which is considered less risky. Volatility plays an important role in portfolio theory and risk management strategies.

Diversification:

Diversification is an investment strategy or principle whereby an investor spreads his investments across different asset classes, sectors or geographical markets. The aim of diversification is to reduce the overall risk of the portfolio. In theory, this means that if one investment performs poorly, the losses can be offset by other better-performing investments in the portfolio.

Portfolio:

The entirety of an investor’s investments, which may consist of various securities such as shares, bonds, real estate, etc. A portfolio is often built up strategically to achieve a certain long-term return while taking a certain amount of risk.

Exchange Traded Fund (ETF):

An ETF is an investment fund that is traded on the stock exchange and usually tracks a financial index. Unlike traditional funds, ETF shares can be bought and sold throughout the trading day. They offer investors the opportunity to invest in a wide range of assets with a single transaction. Because ETFs are passively managed and track an index, they generally have lower fees than actively managed funds.

Advantages of working with a professional asset manager

The world of the stock market is complex and requires in-depth expertise to make smart decisions. A professional asset manager not only brings expertise in the selection of investment instruments, but also takes into account individual financial goals, risk tolerance and time horizon. By working closely together, a customized investment strategy can be developed that focuses on long-term growth and retirement planning. At a time when the right investment plays an increasingly important role in financial security, investing is a key tool for building and protecting wealth. Knowing stock market terms such as “long”, “short”, “bull market” and “bear market” enables investors to better understand how the stock market works and make smart decisions. However, to realize the full potential of the stock market and reduce risk, the expertise of a professional asset manager is invaluable. Through their expertise and personalized advice, investors can create a solid foundation for their financial future.

With this in mind, plan your financial future carefully and thoughtfully. But even if you now know a few important stock market terms, seek advice from a professional asset manager. Your assets and your nerves will thank you for it…

Yours, Mark Stock©

Mark Stock is a member of the Point Capital editorial team. “I am a stock market enthusiast and am passionate about economic history. I have been following the ups and downs of the markets for years and, of course, invest myself – preferably in shares. So my name says it all. Every month, I take up what I consider to be an exciting topic. And since the focus is on the content and not on me personally, I write under a pseudonym.”