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Valuing and buying stocks
From fundamental to technical analysis: learn how to value stocks and companies, recognize chart patterns and interpret specific indicators.
Content:
Whether a stock is the right investment product for you depends on your risk profile and your investment goals. However, you should also ensure that it shows potential for positive price development.
As a shareholder, you want to benefit from higher potential returns and be able to exercise your right to dividends. Since stocks are subject to price fluctuations (volatility), shareholders need to be aware of this risk.
As a shareholder, you become a co-owner of a company and can share in price gains when it increases its value. In addition, you can benefit from a share in the profits in the form of dividends. Investing in successful companies can therefore significantly contribute to growing your wealth.
Another advantage of owning shares in publicly traded companies is that you remain liquid. You can sell your shares at any time and the proceeds will be credited to you promptly. When putting together your stock portfolio, you are also free to decide which sectors you want to invest in and which industries and business areas you do not want to support.
Your success as a shareholder depends on the success of the company you invested in. The stock market is volatile and subject to constant fluctuations. If you invest a lot of money in only a few stocks, there is a risk of high losses. The broader and more diverse your portfolio, the less noticeable price fluctuations will be.
Your investment horizon is also important when buying stocks. There is a higher risk of loss with short-term investments due to market volatility. To increase your likely profit in the stock market, you need to be patient. You should therefore only invest money that you will not need in the next five to ten years. You should also not underestimate the time and effort involved in buying stocks: selecting suitable companies and keeping a constant eye on how they are doing requires extensive research and expertise.
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When investing your money, you need meaningful evaluation criteria that allow you to get a good picture of the stock, the company, the industry environment, etc. These criteria also make it easier to compare individual stocks. Some evaluation criteria have proven their worth on the stock market, making it easier for investors to compare their options.
Fundamental analysis is an essential part of stock valuation. It focuses on the company itself and the associated industry, and relies on some of the following business metrics:
Good to know
When evaluating your shares, do not base your decision on just one criterion, but take as many factors as possible into account. This is the only way to get as complete a picture as possible and make well-founded decisions.
While a fundamental analysis helps you find the right stock, technical analysis helps you determine the right time to buy or sell. You can derive predictions for future price developments based on past price movements and patterns. However, historical performance is in no way a guarantee of future results. In principle, the following key figures serve as a guideline.
If you want to build wealth and invest your money yourself, you can buy and sell stocks online, for example in ۶Ƶ Digital Banking. You can enter your stock orders in Mobile Banking or online banking and confirm the desired transaction.
Brokers transmit your purchase or sale via the electronic trading system of the relevant exchange operator. The system calculates the prices automatically.
Select a broker
Brokers are financial service providers who connect investors with financial markets. In short, brokers forward trade orders to a trading center. Banks and savings banks, direct banks and online brokers can all perform this task.
When choosing a broker, also pay attention to the fees and the offer: Do they mainly offer shares from Switzerland or do they have access to stock exchanges worldwide? Is the selection limited to a few industries or is there a wide choice of stocks? To select the right broker, we recommend comparing custody accounts via one of the many internet comparison portals that compare both banks and digital financial platforms.
Open a custody account
To buy, hold and sell stocks, you need a custody account. This account can be opened at your bank either online or in person at a branch. If you open a custody account at a bank that is not your house bank, you will also need to open a regular bank account at that bank.
If you open a custody account with an online broker, the registration process also takes place via their website or an app. After entering your information, you will receive a link by email to activate your account. Opening an account online requires verification of the account holder’s identity. A valid identification document – this can be a Swiss ID or Swiss foreigner’s ID – usually needs to be uploaded or scanned.
Depositing money
Once you have opened the custody account at your bank, the money will be debited from your regular bank account. If your custody account is managed by an online broker, you have several options: make a deposit by credit or debit card, by bank transfer or as an instant transfer via an external financial service provider.
Selecting stocks
There is no one-size-fits-all answer to the question of which shares to buy. It is advisable to invest in different industries, currencies and markets over the long term. Diversified investing is important in order to balance out fluctuations in the stock market. For example, if an entire industry suffers losses or a currency loses value, you can optimize the risk/return ratio.
If you have your eye on a particular share, you should look at the company’s current situation – and also consider its future development in order to assess its potential. A look at the valuation methods described above can provide information when making a purchase decision.
Completing the purchase
Once you have opened a custody account and decided to buy a particular share, the purchase process follows. Open the order or purchase screen on the website or app of your custody account, enter the name of the company share and/or its 12-character ISIN (International Securities Identification Number) and place the order.
As a shareholder, you can use fundamental analysis and technical analysis to get a good picture of the stocks you hold and the ones you want to buy. While fundamental analysis helps you find the “right” stock, technical analysis helps you find the right entry or exit point. The key to successfully building your wealth with securities is discipline in sticking to your investment strategy. It is therefore important to know your investor profile and to be consistent in pursuing your investment goals.
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