How to invest in shares and make profits: a guide from Unibank Invest

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YEREVAN, 10nbsp;October. /ARKA/. Today, more and more people are considering investing in shares, especially with the growing popularity of large public companies. Why shares can become an interesting investment for novice investors? How can a beginner take his or her first steps on the stock market with minimal risks and maximum opportunities for capital growth? How do investment strategies affect profitability and how can dividends be used to generate a stable income?/pp iNarek Gharibyan, Head of Unibank Invest, the brokerage division of Unibank, takes nbsp;ARKA news agency's questions about nbsp;investing in shares./i/pp bARKA - Why shares may interest a novice investor as an investment facility?/b/pp bN. Gharibyan/bnbsp;- Shares are securities that give their owner the right to a share in the company. In addition, the owner of the share gains the right to vote at the shareholders' meeting and, depending on the type of shares, the right to receive dividends - a part of the company's profit. These are shares of public companies that are traded on the stock exchange./pp

Why shares may be interesting for a novice investor? Because by buying shares, the investor becomes a co-owner of the company. He or she legally owns a part of that company - even if it is small.nbsp;/pp

This means that he or she has the right to a part of everything that belongs to the company: factories, property, cash, intellectual property and other assets.nbsp;/pp

The main difference between stocks and the cryptocurrency that is so popular right now is that cryptocurrency is basically just a belief in its growth, there are no real assets behind it. When you buy shares, you actually own a stake in a company. It could be factories, offices, equipment - if it's a manufacturing company - or something less tangible like technology, patents or software if it's an IT company. Either way, there is always something behind the shares, and that creates a certain value./pp

The yield on shares is quite high and is not limited in any way and can reach tens or hundreds of per cent. Let me give the most trivial example, the so-called ‘Magnificent Seven’. Six of them are shares ofnbsp;Google, Amazon, Meta, Microsoft, Apple andnbsp;NVIDIAnbsp;, the largest American companies with huge capitalisation. For some companies it exceeds $1 trillion, and no one doubts their reliability. If you look at the profitability of companies since the beginning of the year - it is tens of per cent, in the case of Nvidia, which is also part of the ‘Magnificent Seven’, it is hundreds of per cent. And only one company has shown negative returns - that's Tesla. But if a person were to buy shares in all seven companies, the returns of six of them would more than cover the loss of this one./pp bARKA - What are the main risks associated with investing in shares and how do you learn to manage them?nbsp;/b/pp bN. Gharibyan/b - It is important to take into account two key risks associated with shares: market risk, when the share price goes down, and the credit risk of the issuer. There are some strategies to reduce them: asset diversification - buying shares of companies from different industries, countries and with different market capitalisation; as well as analysing corporate statements. Since companies whose shares are traded on the stock exchange are obliged to publish theirnbsp;statements, investors can use this information to assess their financial condition. For this purpose, there are specialised websites where the main company indicators are presented in a convenient and understandable form for ordinary investors.nbsp;/pp

For example, our website Unibank Invest a href=https://unibankinvest.am/ruhttps://unibankinvest.am/ru/anbsp;has a section with basic information on how the stock exchange works, what shares are and what types of shares exist. In the Analytics section you can find our investment ideas. We provide a lot of useful materials that will help a person make informed investment decisions. But for this it is important to learn - to read specialised literature, follow the news and assess risks./pp

I realise that for many people this may seem boring or they simply don't have enough time for it. It is for such cases that there are ready-made solutions - investment funds, which are engaged in investing in companies, while the investor profits from their work./pp bARKA - And if one wants to engage in investing oneself, what factors should be taken into account when choosing a company?nbsp;/b/pp bN. Gharibyan/b - When analysing stocks, it is important to take into account several key indicators: the company's debt load, its profitability, the relevance of the industry in which it operates, and the uniqueness of the product. It is also worth paying attention to how the company complies with the law in doing business. Among the many factors that influence stock selection is the dividend policy. Some companies pay dividends annually, and many investors choose such companies to receive a stable income. There is even a concept of ‘dividend aristocrats’ - these are companies that have paid dividends for more than 25 consecutive years./pp nbsp;The key element of the analysis is data from the companies' statements. As mentioned above, our website has a section with analytics, which provides key indicators from the statements that can be used to make informed decisions when selecting stocks./pp bARKA - What are the differences between long-term and short-term stock investment strategies, and which one is more suitable for a novice investor? In particular, is it possible to make money on shares in the short term or is it better to focus on long-term investments?nbsp;/b/pp bN. Gharibyan/b - You can certainly make money on short-term strategies. But if we are talking about investments, it is a long game, because in the short-term the risks increase greatly. When it comes to stocks, it is better to be oriented for a year, if not for 3 or 10 years, because all the risks we talked about are levelled by the timeframe.nbsp;/pp

Historical hindsight shows that most stocks over a long horizon - at least three years or more - produce returns. This is enough to offset the risks that can be involved in investing in equities. If you go back to the Magnificent Seven example, the returns on those stocks over three years are huge - tens if not hundreds of per cent.nbsp;/pp

So if we are talking about investing, you have to do it for the long term, choose a strategy depending on your risk profile. The employees of Unibank Invest can also help with this and, depending on the client's goal, choose the strategy that suits him specifically, so that he invests his money correctly./pp bARKA - How do economic news and events affect the stock market, and should a novice investor follow the news?nbsp;/b/pp bN. Gharibyan/b - Yes, of course, there are a lot of macroeconomic factors to consider when choosing certain securities. You should pay attention to some basic parameters: the Central Bank rate, inflation data, GDP. And also to political events, conflicts, trade agreements between countries, corporate news - takeovers, sales of companies. It is also worth taking into account regulatory changes, changes in legislation.nbsp;/pp

But if we are talking about long-term investments, it is better not to fill your head with these things, but to take them into account when making a decision. Trading or investing on news is a very big mistake, you should not do it.nbsp;/pp

Since the whole process of analysing takes a lot of time, which most investors simply do not have, it is better to contact an investment company or a broker. They will help to collect all the necessary information, presenting it in a convenient and understandable form, so that the investor does not have to look for it himself, which makes the decision-making process much easier./pp bARKA - How do you realise that it is time to sell shares, what signals should you pay attention to?nbsp;/b/pp bN. Gharibyan/b - The answer is simple - you can sell shares at any moment when you consider the income sufficient. However, when it comes to strategy, everything depends on your initial goals./pp

For example, if the shares have grown in value, you may want to sell them even if the investment term has not expired yet. But this is not always the right move, as it is important not to get emotional about short-term growth, but to take a holistic approach to strategy. There are several factors to consider when deciding whether to sell a stock, such as the term of the investment and the expected return.nbsp;/pp

The key aspects of successful investing are discipline and sticking to a strategy. It is important to buy or sell stocks based on your investment strategy and not on momentary market fluctuations./pp bARKA - How can dividends be used in an investment strategy?nbsp;/b/pp bN. Gharibyan/b - One of the classic strategies is a dividend portfolio. As I have already mentioned, there are companies called ‘dividend aristocrats’. These are quite familiar names - McDonald's, Coca-Cola, Procter Gamble and many other companies that have been paying dividends for more than 25 years.nbsp;/pp

There are ready-made strategies for buying securities of such companies. Here, price goes into the background because the shareholder receives cash flow annually or several times a year. Of course, he should be concerned about price changes, but it is not so important, because he originally bought shares of the company to receive dividends, and it will pay them regardless of price changes on the stock exchange.nbsp;/pp

We, as a brokerage company, can put together dividend portfolios for clients, among other things, so that they don't have to spend time on it. They can thus receive annual income from the largest companies in the world./pp bARKA - What online platforms can help investors in terms of information, particularly about stocks and quotes? What books would you recommend to a novice investor?nbsp;/b/pp bN. Gharibyan/b - There is certainly literature, but I would not advise beginners to read highly specialised literature. There are many books for novice investors, including very popular ones, such as ‘Rich Dad, Poor Dad’ (by Robert T. Kiyosaki and Sharon Lechter - ed.). This book, of course, is more about financial literacy, but this kind of literature is very useful. It could be Benjamin Graham's book The Intelligent Investor. There are actually so many books out there. I would recommend reading as many as you can, as there is no single book after reading which you will become a guru investor. You can also read a textbook on securities that covers the basic concepts. It will serve as a foundation and lay the groundwork, after which the following books will become much clearer.nbsp;/pp

There are also dozens, if not hundreds of Internet portals, including Yahoo Finance, Investing.com, TradingView, where market data is provided, analytical articles are published, it is possible to view charts, communicate with investors, participate in forums./pp

We too have information about basic concepts in investing on our website, as well as investment ideas from Unibank Invest. -0-/pp nbsp;/pp nbsp;/p