Trading on the Frankfurt Stock Exchange
How to get and understand information
Market opinion and risk
Therefore, you need to consider a couple of things before making your decision to buy a specific share. Firstly, you should be very clear about how much risk you are willing to take.
Secondly, you should form your own opinion of the market through targeted and in-depth research. It is very important not to look at individual companies, but to assess the greater picture. Daily newspapers are suitable sources of information when it comes to an explanation of interactions between the stock market and economic conditions. They offer well-founded background information and analyses on the stock market, the overall economy and individual sectors.
Stock market professionals often recommend that one should select four to five titles and observe them closely. It is helpful to focus on a specific sector, such as automotive or pharmaceuticals. Information on the size of the respective market and companies operating in it is essential. For that purpose, Deutsche Börse offers 18 different sector indices that track the development of the companies included therein. Of course, different sectors are subject to different risks. This is why each investor should define how much risk they are willing to take and consider these factors when deciding on a sector. One should also note that the sectors may perform differently than the overall market. Further information on the performance of particular sectors is provided in the sector reports published by several banks.
According to Professor Bernhard Pellens of Bochum University, not only is the profit and loss account of great importance to investors, but also the cash flow, as these figures cannot be manipulated. The cash-flow figures are of interest for investors because it shows how much cash profit was generated by the company in operational business. Thus, it reflects the surplus of operational income. The better this ratio is, the more liquid the company.
There are several ways for exchange novices to benefit from expert know-how. Investment clubs provide a useful platform to learn more about the world of the stock exchange among like-minded people. Investment clubs offer bundled knowledge and experience and usually follow a clearly defined investment strategy. Whether conservative or speculative – there is a club for each type of investor. For those who prefer to acquire theoretical knowledge, a wide range of literature is available. Numerous books give advice on investment strategies and a range of business magazines also make research available to investors.
Essential sources of information
Television and agencies