Investments on stock exchanges can be a greater earning possibility than a bank deposit. Thus, investing on capital markets is an attractive way to increase the value of personal savings in the medium or long term. According to the National Bank of Moldova, shares of publicly listed companies, bonds, investment funds, options and other financial instruments are traded on stock exchanges, IPN reports.
The NBM warns that there is a difference between investing on the stock exchange and speculation on the stock market, known as "trading". An investment is a decision made with the aim of increasing the value of the invested capital and is based on an analysis of the estimated efficiency of the investment. Unlike investing on the capital market, trading is a speculative activity. In the case of trading, positions are opened and closed at an interval of a few days, unlike the classical stock market investment, where investors remain for a long term.
The advantages that a person who decides to invest on the stock market can have are the accessibility of investing in the stock market with a minimum capital, the flexibility and the possibility of direct control over the investment portfolio. In addition, investors can sell on the stock exchange, at market price, the financial instruments they own when they deem it appropriate. At the same time, investments in bonds and stocks can also be used as a source of passive income in addition to capital gains or can exceed the inflation rate in the long run, protecting the purchasing power of the invested capital.
Market volatility is one of the disadvantages of investing on stock exchanges. The prices of financial instruments can vary significantly in the short term, which can lead to financial losses. Investors must be prepared for price fluctuations and accept that not all stock market investments are profitable. Some of the invested assets may not return as expected and this can lead to capital losses.
In order to ensure a successful investment, the NBM explains its stages. The first stage is to understand the market and the financial instruments placed on the market. The stage in which investment objectives and risk tolerance are set is also important. Also, investing on the stock market involves choosing an intermediary, a diverse and constantly adjusted portfolio, which is essential to minimize risk. Thus, investing on stock markets can offer significant opportunities for capital growth, but it comes with risks and challenges. Investors must be well-informed and prepared to handle market volatility.
The information on stock market investments was presented within the National Financial Education Campaign that is carried out by the National Bank of Moldova in partnership with the Independent Think Tank "Expert-Grup", with support from USAID (MISRA).
