Interest in share trading is growing again: low yields on bonds, life insurance and fixed-term deposits as well as latent inflation risks make investments in real economic holdings as attractive as active trading.

More than 8 million Europeans own shares

Shares are among the most widespread trading instruments and millions of shares are bought and sold every day worldwide. According to the annual shareholder statistics of the DAI, around 8.4 million Europeans owned shares in 2014 - around 2.5 million held equities and a further 5.9 million held equity funds in their custody accounts.

Via Exness Asia, private investors can trade on all relevant stock exchanges in the world. In particular, costs on European and North American stock exchanges have fallen significantly in the last ten years. In addition, many brokers have upgraded their over-the-counter trading, which has tended to lower costs in trading certificates and warrants.

Thorough preparation for share trading

Stepping onto the trading floor is not rocket science for private investors, but it does require thorough preparation. First, the role of the equity portfolio in private wealth planning must be determined, taking into account existing assets. Then strategies should be found with which the envisaged goals can be achieved. The time required, previous knowledge, risk tolerance, etc. must be taken into account. Finally, it is important to acquire the necessary basic knowledge about the stock market.

How does stock trading work?

Shares are shares in the equity of a company that is listed on the stock exchange. Those who own shares are co-owners of the company to a certain percentage and, as shareholders, receive dividend payments and/or voting rights when it comes to company decisions.

As with all other financial products, prices are determined for shares that apply to the purchase or sale of a security. These are updated on an ongoing basis. The price is determined by supply and demand - a stockbroker compares all buy and sell orders and calculates a price that secures the most turnover.

Share prices are therefore influenced by supply and demand, but what influences supply and demand? These include economic and political developments, company annual reports or even a change in company management.

The most important facts at a glance

• Shares are shares in the equity of a company
• Shareholders are co-owners of a company
• Shareholders receive dividend payments and/or voting rights
• The share price is determined by supply and demand 

Anyone who owns life insurance is already investing in fixed income:

• 88.7% of the capital of life insurers was invested in bonds
• only 3.9% of the portfolio was invested in real estate
• the share of equities was even lower at 3.3%. 

In short: If you already have a life insurance policy, building up a share portfolio can diversify your personal portfolio and better protect it against inflation.

The low costs also speak in favour of direct investment in shares without the diversions via equity funds. Since the turn of the millennium, order fees at German online brokers have fallen significantly. Orders placed via the internet on Xetra, the most important stock exchange platform, cost less than €10.00 with low-cost providers. The total costs of an equity portfolio are therefore significantly lower than those of actively managed investment funds if trading activity is not too high.