Text by Trading Platforms
Investing in financial markets can be a daunting task. When you hear of people having large stakes in companies around the world, or contributing to an actively managed fund, it can seem inaccessible and exclusive.
The truth is, it’s extremely easy to make investments in financial markets – even if they’re overseas. Whilst, in the past, this used to be a matter of high minimum investments and phone calls with a broker, today it’s a matter of downloading a smartphone app.
The first step towards investing in financial markets is to pick out one of the best trading platforms in Portugal. Something like eToro is super accessible because there’s a social media element to it – you can see what other users are investing in, talk about it, and even automatically copy their trades.
Often these apps are used because they have none or very low commission on ETFs and stocks. That means you can invest in a company with very little wasted costs (fees). It’s important to not go in completely blind of knowledge and rely on copying others, but the support shouldn’t be neglected either.
Many of these apps will facilitate your purchase of currency, stocks, ETFs, and even funds. Minimum deposits are low, so you can essentially go easy and invest as little as you like.
Investing in funds is perhaps the best example of how investing became so democratised. A global index fund is essentially a fund in which an investment firm (i.e. Vanguard) uses you money to invest in thousands of companies from different industries and countries around the world. This is called diversification because if there is a property crash in Belgium, it’s unlikely to affect your tobacco company holdings in Japan.
Of course, you can opt for only ethical or green businesses too. The ‘fund’ version of this is called ESG funds, which stands for environmental, social, and governance funds. So, a fund manager would pick out hundreds if not thousands of green or socially positive companies around the world, like electric car companies and vegan hospitality.
The investment decisions are your choice alone, but they’re essentially free and one click away – something that the financial markets are still adjusting to. It can be argued we have seen some volatility that is derived from the influx of such retail investors, from apps such as Robinhood in the US, where users treat investing the same way Twitter treats trending topics.
To mitigate this, you can either opt for the funds that are managed for you (or algorithmically automated ones), or spend a longer amount of time researching companies to back up your investment decision, which helps mitigate buying into temporary hype.
There are some markets that even these investment apps cannot access, such as the Indian stock market, which is not open to foreigners. However, there are more than enough markets to help build a geographically diversified portfolio. And being in 2021, it would be a crime to not mention that cryptocurrencies are also available on many of these apps too, though you want to compare their fees with larger exchanges such as Binance and Coinbase.