What is the concept of a share? When we say share, something comes to mind for many, but most people are not aware of what exactly the concept means or expresses. There are also other specialties of shares, and some investors replace other investment instruments with shares, which will also be discussed.
📈What is the concept of a share?
Before you start buying stocks, we need to clarify what a stock is. A stock is nothing more than a security that embodies ownership rights and has no maturity, unlike, for example, a bond, which is a debt instrument with a maturity.
💡When you buy shares in a company, you acquire a stake in it. You become an owner, even if only to a small extent, of the company, and as such, the management of the company must serve your interests.
The concept of a share can also be approached from an accounting perspective, then the definition would be as follows: a security issued when a joint-stock company is founded or its share capital is increased, which represents a share of the company's share value. The nominal value of the issued shares is equal to the company's share capital. By purchasing the security, the owner of the share provides his capital to the company, thus the company raises capital by transferring ownership.
It is also worth mentioning that in English there are several words used to express the concept of stock, and words with similar meanings can be "mixed" with each other in foreign language translations, so it is good to know which one has the exact meaning. These are the following:
- 📉Capital (equity): practically means ownership, expressing a given percentage of ownership in the company
- 📉Stock (stock): we generally call it a share, and various compound words can be formed from it, such as stock market, e.g. stock market, and so on
- 📉Share (share): actually this is also a share or shares, only in this sense it means a certain proportion of ownership, i.e. how ownership is divided, from the company owned or desired to own.
📌In practice: Equity occurs in startups, these are illiquid shares, even though platforms like to say that it is the same as a stock. A share becomes a stock when it is listed on a stock exchange as part of an IPO, but not until then.
📈The concept of a joint-stock company
Continuing the previous line of thought, you can acquire a stake in any company, not just a joint-stock company. You can enter into a contract at any time to buy yourself into any company, there is nothing to prevent this. However, we do not call this a share or a share, since neither company has issued, nor can it issue, securities to which ownership rights are attached. This can be confusing because there are some platforms on which the ownership rights of startups, such as Crowdcube or Republic Europe, can be traded, where this is denoted by the word equity. These are privately held, unlisted companies, but you can still buy part of the ownership rights. I have written 4 articles about this, which you can find here: Startup section
Abroad, special laws govern the operation of joint stock companies, but they are called differently in each country, e.g. in the USA they are referred to as “C” and “S” corporations. In Hungary, a joint stock company can be formally private or publicly operating.
source: Fool.com
The shares of the former cannot be traded on the stock exchange, and they represent the owners' relative ownership shares in proportion to the capital. So, if the initial capital is 1 billion USD and the owners invest 250 million USD in equal shares, then their ownership share will be 25% each. You can also create a private limited company if you meet the legal requirements.
If a joint stock company is open, it can issue shares. The first such issue is the IPO, Initial Public Offer. I have already written about this in the article about IPOs (IPO meaning, IPO share issuance). Shares must be listed on a stock exchange, so they become freely tradable. From now on, the price of shares will be determined by market conditions, and the price will move depending on supply and demand.
📌In practice: I have often heard the misconception, even from investors, that they do not buy shares of certain companies because they do not want to support the company's activities, such as oil, tobacco, military companies, etc. This is a fundamental misunderstanding. When you buy or sell a share on the market, you are exchanging shares with another investor, not buying or selling it from the company. There are two exceptions to this, IPO and share dilution, when you actually buy the paper from the company.
💸What about startup “shares”?
As I mentioned earlier, shares in startups are not real shares, and since supply and demand do not match, since they are not publicly traded instruments, there is no or very low liquidity. Of course, the financial sector finds a “good solution” to every problem, which is why these are typically traded on the secondary markets of individual platforms. Of course, there is not much liquidity here either, which is why prices do not really follow market conditions. After the aforementioned IPO process, these companies also enter the stock market, and from then on the aforementioned supply and demand rules apply to them.
💡It is also important to mention the so-called OTC brokers, which are brokerage firms that do not have direct access to the stock exchange. This means that unlike brokers that access the stock exchange directly and match real buy and sell orders, in the case of OTC brokers the market maker is the broker itself.
This usually means that they can trade at much higher costs, but in return they may have access to securities that are not listed on traditional exchanges.
🏦Types of shares
A share purchase can be completed not only by purchasing the share directly, but also, for example, an investment fund, a typical banking product, or an ETF, i.e. an exchange-traded fund, which may contain shares. In other words, when I use the term share purchase, I mean a specific paper purchased within the framework of a controlled capital market transaction. If you are not familiar with this term, please read my article on taxation. (Dividend Taxation – What to Watch Out for in 2025). Now that we have clarified this, let's look at what types of shares there are.
Types of securities:
- 💰Common Stocks (common stock): this is the "general" type of stock, you acquire it with an ordinary purchase, it does not provide additional rights beyond those listed above.
- 💰Preference share (preferred stock): usually provides some kind of priority, such as veto, dividend, liquidation, preemptive rights, but usually the main thing is the voting rights. These are also usually indicated in the stock identifier, e.g. Bank of America common stock is traded under the ticker (BAC), while the preferred stock is traded under the ticker (BAC.PRA).
- 💰Employee shares: It is only given to the company's employees for the purpose of supplementing income and as an incentive, as a kind of benefit. Typically, senior managers are rewarded in this way, the other right is the option to buy and sell, and its transferability is limited.
- 💰Interest-bearing shares: An extremely rare form, the securities pay a predetermined interest rate in addition to dividends.
- 💰Redemptible shares: Redeemable shares give the company the right to buy and the shareholder the right to sell.
In the case of stock purchases, the above is very rare, except for common and preferred shares. Many companies operate in this way, e.g. MSC Industrial Direct Co. (MSM), the founding family owns a significant portion of the preferred stock. This gives them veto and voting rights, and these shares are not sold. We have analyzed quite a few such stocks, for example Brown Forman or Nike (Brown Forman (BF.B) Stock Analysis, Nike Inc. (NKE) Stock Analysis). This way they are able to prevent hostile takeovers, the company is fully controlled by them, etc. I wrote more about the above and the rights of shareholders, e.g. liquidation quota and the like, in a previous article: Step-by-step process for buying shares (2025)
🌍Country-specific stock regulations
Some countries may also regulate shares in a special way, issuing different series. China is a very good example of this, and there has been a lot of talk about the problems there recently. The Analysis Center also produced an excellent video on the topic:
The point is that among Chinese stocks, there are “A” and “B” series, the first of which can only be purchased by Chinese citizens and is only listed on the Shenzhen Stock Exchange. “B” type shares are only listed on the Shanghai Stock Exchange, and can also be purchased by foreigners, but only with limited rights. The reason for this is that foreigners can never acquire majority ownership in a company. At least that was the original idea, but what actually happened was that the B shares were not really bought by investors, and therefore their liquidity became very low. Later, the shares of individual companies were also listed on the Hong Kong Stock Exchange, which became the H series, which could be purchased by both foreign and domestic investors and were dollar-denominated shares.
The point is, if you buy, say, Alibaba stock (BABA), then it is very important which exchange you buy it on. The situation is further complicated by the fact that when the stock was introduced to the American stock exchange, it was listed as a so-called ADR paper, and by now the registered company had practically nothing to do with the original company, investors could only purchase a shell company with the same name, through a so-called VIE structure. I won't go into more detail on the subject, but the point is that you really need to look at what you're buying, because brokers can list securities with different characteristics under the same name.
💹What are shares good for? In short: for everything
As we have already discussed, a stock is a security that represents ownership. This is very fortunate because it is actually the operation of the underlying company that determines what is invested in. The characteristics of the company show how that stock will behave, and naturally this underlying content will also affect the change in the stock price in the long term.
💪🏼I want to expand on the idea that a share can actually "simulate" other financial market instruments.
🧾Bond-like stock?
A bond is a debt security with a face value, interest rate, maturity, and you actually get your loaned money back at the end of the term, according to the face value. A government bond, in simple terms, is a bond that has a government guarantee for repayment. But what if the price of a share is also very stable, so it rises or falls very little, but it pays dividends, which is the interest here, and you can sell it at any time, so you choose the maturity. Described this way, it looks eerily similar to a bond, even though legally we are still talking about a share. Therefore, some investors use certain stocks as bond substitutes.
📌In practice: I've already burned myself on a stock I wanted to use as a bond replacement for AT&T (T), but it didn't really work. So anyone who wants to buy bonds should buy some highly liquid, low-risk bond ETF, such as US government bonds, because it is much more predictable than a company whose price is affected by a sudden change in its fundamentals or a panic.
🏦Shares as real estate?
Central and Eastern Europeans have a special affinity for owning real estate. There are historical reasons for this, but the point is that in Hungary, for example, most people want to or own real estate, even if they could rent, which is much more typical in Germany or the USA, for example. Real estate has the advantage that it can generate real returns even over decades (this is also possible with stocks). A particularly popular form is buying a home, the price increase is the return, and renting it out is the interest. These are again quite stock-like properties, so why not use it to simulate real estate or other investments, such as forests or land?
There is a special category of stocks, real estate managers, or REITs, which is an abbreviation for Real Estate Investment Trust. These are companies that manage real estate. This is a fairly large category, and you can find a wide variety of companies in it. In addition, in the US, they also have special rules, such as having to pay out 90% of their profits in exchange for tax benefits. This will mean that most of these companies pay out relatively high dividends, which you can think of as rent, as if you were renting out your own property.
🪙Stocks and precious metal investment
I'm not a big fan of investing in precious metals, and I'm not alone in this, for example Warren Buffett doesn't like them either. Their main problem is that they don't pay interest, they're not productive assets, and they're difficult to trade. In return, they hold their value well, acting as a kind of escape currency. Many investors hold gold, silver, or both in their portfolios for this very reason. Precious metals are also mostly produced by mining companies operating in the form of joint-stock companies, so it is understandable that their share prices are roughly correlated with the price of precious metals (since their revenue and profits will be largely determined by the price of the given precious metal).
So, by investing in such companies, you can simulate the price movements of precious metals much more cost-effectively than buying them physically, which are usually very expensive to hold. In addition, you can also benefit from the business results of the given company.
💎How to buy shares
There are several ways to buy shares. Although I mentioned startups earlier, I will stick to publicly traded companies. I have written about the possibilities in a previous article (Step-by-step process of buying shares), but I will briefly describe the gist here.
Basically, you can buy shares directly or through an intermediary, broker or bank. In the first case, you need to find the company whose shares you want to buy, contact details can usually be found on the website/investor relations section. The minimum amount usually starts around 50 thousand USD, so you have to count on a large sum, and you will also have to bear all kinds of other legal costs. I personally don't know anyone who has registered shares in a company this way, but I have heard of someone who has succeeded. Overall, it doesn't really make sense for an average small investor to choose this path, the method is simply too cumbersome and expensive.
The other way is to open an account with a broker who has access to the market where the company's shares are listed. And here comes the first question: how do you know this? Usually, brokers have an instrument search engine on their website, where you can see what markets and what securities they access. Each security has an ISIN code, which is a unique identifier, the first two letters of which indicate the stock exchange in which country the security is listed. There is nothing to prevent a broker from being able to access the same security on multiple exchanges. For example, a European security may have multiple securities listed under different stock identifiers, say one on the EU stock exchange and one on an American stock exchange.
📌In practice: My experience is that most securities are available to most citizens through Interactive Brokers. There are few things you can't find here, but you may have to pay for access to some markets.
📀Where can I buy shares?
One of the most important considerations when buying shares is costs, as these directly reduce returns. If I were you, I would avoid banks by far, partly because they will try to sell you their own banking products, and partly because their in-house brokers are quite expensive. However, some people find the higher costs worth it due to their institutional background, so it's mostly a matter of taste.
I usually favor discount brokers, because the premium and private banking services, but also the opportunities offered by fund managers, have not impressed me so far, mainly due to the very high costs. For this reason, Interactive Brokers and LightYear are the first two tips that come to mind. Of course, if you don't want to invest for the long term, but want to trade options, Tasty Works is more advantageous, but there are thousands of other service providers in the world, it is always worth looking around where you are tax resident.
It is worth comparing the fees of each broker to get a more complete picture of the costs involved in buying and selling. It also doesn't matter what strategy you want to use to buy and sell shares. Are you a trader who typically holds shares for a short period of time, or an investor who holds their securities for years. Since these have different cost implications, you should also take these into account, I wrote more about this in a previous article: Step-by-step process for buying shares (2025)
✨How risky is stock investing?
Typically, people want to hear a number or to determine the risk of investing in stocks compared to a benchmark. If I had to place it on an imaginary scale, I would say it is one of the riskier instruments, but simply because people do not invest with adequate knowledge. And with that, I've mentioned one of the best tools for risk reduction: you need to gain expertise in the subject.
The other answer to the risk of investing in stocks is what the risk/reward ratio is. Over the past 120 years, the stock market's average return has been 9.5-10%, but this is a nominal return, meaning it's just a number. In reality, however, it is the real return that matters, meaning that all factors that would actually reduce the nominal return must be subtracted. That is, the return must be reduced by the cost of currency exchange and brokerage, as well as inflation. Looking back on the past, real returns in the long term were best achieved with real estate and stocks, meaning that anyone who wants to realize actual profits will not have too many choices in terms of assets.
Another important thing is that the risk of stocks is often expressed in terms of their volatility, i.e. how much the price fluctuates. It is important to note that volatility is not the same as risk, as it does not involve permanent capital loss, it only expresses the movement of the total value of the stocks. However, if you start from the assumption that you buy stocks at a random moment and then sell them at a random moment, i.e. realize the current profits and losses, then the risk can indeed be expressed in terms of price movements. In practice, however, by choosing the right time frame, this risk can be greatly reduced. I wrote about the above in more detail in a previous article (Step-by-step process of buying shares). To explain the above a little more scientifically, you can use the Sharpe and Sortino ratios, the essence of which you can read below.
📏 Sharpe ratio – the reward of risk
The Sharpe ratio shows how much the return on a given investment exceeds the risk-free return, and with what level of volatility (i.e., return fluctuations) it achieves this. The higher this value, the better the “return to risk” was. The formula is:
Sharpe = (portfolio return – risk-free return) / standard deviation.
- Example: if a stock has achieved a 10% annual return, the risk-free return is 3%, and the standard deviation of the return is 12%, then: Sharpe = (10 – 3) / 12 = 0.58
- This means that for every unit of risk, there was 0.58 units of excess return.
📌In practice: What is considered a risk-free rate? Typically, it is the rate on government bonds issued by the government, because the government cannot go bankrupt in its own currency. In practice, this means that the rate on the 3-month Treasury bill, known as the T-Bill in the US, is considered risk-free, which is 4.25% at the time of writing. That is, if 10% is the rate on the stock market index, then the risk premium is 5.75%.
🎯 Sortino rate – only the bad risk counts
The Sortino ratio is an improved version of the Sharpe ratio: it only takes into account negative deviations, so it looks at performance compared to downward-moving returns. This is especially useful for investments where returns are occasionally exceptionally positive, but the investor is only concerned about losses. The formula is:
Sortino = (portfolio return – risk-free return) / downward standard deviation
- Example: let's say the same stock had a return of 10%, a risk-free return of 3%, but only the standard deviation of negative deviations was 8%. Sortino = (10 – 3) / 8 = 0.875
- This is a better value than the Sharpe value of 0.58, because here we only consider the “bad” risk.
📌In practice: I don't usually calculate Sharpe or Sortino ratios for my own investments because it would be quite difficult to calculate based on individual stocks. If you want to do this, look at the Beta value of the stocks, it shows the co-movement with the average. You have to take this into account for each stock, correct the average market return with beta, and adjust it based on the position size... So it's complicated, but fortunately there are software for this, such as Portfolio Visualizer.
🧨Specific risks of buying shares
Most investors only look at expected profits and tend to forget the cornerstones of risk management. The following list should serve as a reminder of what you need to calculate:
- 🪙currency risk: If your national currency is not USD or EUR, you will usually need to convert your own currency into one of these two currencies. It is worth considering keeping your investments in USD or EUR for the long term, as inflation and exchange rate losses can eat away at your returns.
- 🏛️institutional risk: It is nothing more than the risk of the bank or broker. This can also be indirect, e.g. if a discount broker receives data from another broker. In this case, both organizations pose some risk. Solution: spread your investments among several brokers.
- 🏢corporate risk: the risk of the company issuing the stock, e.g. going bankrupt, committing fraud, being sued, etc. It is worth searching for the words AOL and Enron in this topic.
- 💰liquidity risk: The point is that if no one wants to buy or sell the securities, their liquidity disappears. This means that you can't get rid of them either, because there is no seller or buyer on the other side. It typically doesn't affect large exchanges, but it's a common occurrence for startups.
- ⚖️political, economic risk: This is especially relevant now, as the Chinese Communist Party has significantly intervened in certain Chinese sectors. This has really shaken up the stock market, hitting companies like Alibaba (BABA) or Tencent (TCEHY).
- 💎Risk of capital loss: Typically, the individual's risk is due to the poorly chosen time frame. Once you put money into the stock market, you don't want to take it out for 7-8 years. Unfortunately, however, unexpected events can always happen that force you to do so, and if your portfolio balance is negative at that time, you are forced to realize a loss.
- 🤯manias and panic events: It is not generally considered a risk. However, the stock market is 90% psychology, which is why many investors jump in and out of positions, panic or get caught up in FOMO, the feeling of missing out, and make bad decisions.
📌In practice: Of the above, as a Hungarian, I regularly run into currency risk, but since HUF/USD is very volatile, anyone who can handle it has a lot of entry points, so it's worth looking at the volatility of USD and EUR for your own currencies. The solution to institutional risk is simply to hold your money with multiple brokers. If you have a bank account, ask if your bank provides brokerage services and what kind, knowing the costs, of course.
I have already encountered liquidity risk on a major stock exchange, specifically on New York, in connection with a Polish ADR stock, Dino Polska (WSE:DNP), the analysis of which you can read here: Dino Polska stock analysis. Americans simply don't know European papers and don't buy or sell them, so the order was fulfilled slowly. And in my startup investments, this is a regular, almost basic situation.
🏞️Foreign stocks (which is different for everyone)
As I mentioned earlier, individual stocks can be accessed on different exchanges. Logic would dictate that the company's stock would be listed on the stock exchange of that country. For example, the Hungarian OTP stock must be found on the Budapest Stock Exchange (BSE) (OTP.BUD). This is completely logical for Hungarian citizens, however, if a foreign investor wants to invest in OTP, he or she needs access to the Hungarian market, which would not be so easy for a foreigner. Therefore, two solutions are usually used: either investors look for a broker who has access to multiple markets and exchanges, or companies list their securities on larger exchanges.
Fortunately, most brokers now reach the larger markets, but I will mention a few exceptions. Erste Bank typically reaches the market through XTRA, i.e. the German stock exchange. This can be inconvenient because the American equivalent of European stocks, i.e. ADRs, are not listed for cost reasons. However, if you choose USD as the currency for your purchase, a conversion cost will be included in the formula. For this reason, I bought a share not at Erste Invest, but at Interactive Brokers. From this perspective, buying US stocks is the easiest: it is the largest market, everyone can access it, and USD is always the basis for the purchase.
You cannot buy Chinese stocks as a non-Chinese citizen unless they are listed on other exchanges, where ADRs are also available, and the US market. In contrast, Largan Precision (3008.TW) can only be found on the Taiwan Stock Exchange, if your broker can reach it, as they do not have an ADR listing.
💡To sum up: before choosing a broker, it is worth finding out which markets the provider covers. If you would otherwise diversify your capital at the broker level, it is recommended to choose providers that do not cover the same markets.
🏠What is the home bias phenomenon?
Home bias is the tendency of investors to over-prefer stocks in their own country, even when better return opportunities or diversification are available in international markets. This bias often stems from emotional attachment, familiarity, or lack of information.
A Hungarian investor, instead of investing globally, for example in American or Asian stocks, follows BÉT stock prices, thinks only about buying BUX shares and ends up buying OTP, MOL or Richter shares, even though this increases the country risk of his portfolio. A Polish investor, on the other hand, buys Dino Polska (Dino Polska analysis) or Auto Partner SA, or perhaps Orlen shares. Home bias therefore limits the benefits of diversification and can worsen the return-to-risk ratio in the long run.
🏞️Stock prices in iO Charts side
We created this page specifically to make it easier to access data related to different stocks. Since most investors look at the stock price first, we listed that on the first page, but there are countless other pieces of data available if you scroll down or click on the menu items above the “stock information” header. These act as jump points and take you to the relevant category.
Of course, you can also sort the data by time period, and you can also save the drawn graph by clicking on the small image icon. I would like to highlight one service, which is also available for free, which I have not seen anywhere else, and these are the individually created, hand-generated graphs. In the case of stocks that are close to our hearts or that are popular in the world, we have also created special data sets. These are tied to some specifics of the company. For example, Tesla (TSLA) you could see colorful charts of car sales, while Pfizer (Pfe) we show how much COVID vaccines contributed to the company's revenue growth in 2021.
Summary of the concept of share topic
Many of you are probably surprised how it is possible to write so much about stocks, even though I have only scratched the surface of the topic. But even so, you have still got a relatively comprehensive picture of what a stock is, what you can do with it, what types there are and what risks are involved in holding them. Of course, this article is just a foundation for you to continue working on things independently, and I wish you much success in this.
Frequently Asked Questions (FAQ)
What is the meaning of a share, what are its characteristics compared to a bond?
A stock represents an ownership stake in a company, while a bond represents a debt to a company or government. A stockholder can receive a share of the company's profits (in the form of dividends) but also a proportional share of the company's losses, so the risk is higher - but the return can also be higher. In contrast, a bondholder receives a predetermined interest rate and gets the principal back at maturity, but has no say in the company's operations and is not entitled to profit sharing. In summary: stock = ownership, bond = loan.
What is the concept of investment?
An investment is a financial or material outlay intended to generate greater value or returns in the future. This could be stocks, bonds, real estate, or financing a business, but it could also include time and money invested in education or technology. The investor gives up current money or resources in the hope of getting more in return in the future, while also taking into account the risk that this is not necessarily guaranteed.
What is the meaning of broker?
A broker is an intermediary person or company that executes buy and sell orders on behalf of its clients in various financial markets, such as stocks, bonds, or forex. A broker does not trade for its own account, but connects buyers and sellers in exchange for a commission or fee. It can be a traditional (e.g., bank broker) or an online platform (e.g., eToro, Revolut, Interactive Brokers), and its services can include advice, analysis, or portfolio management. The term broker also includes commercial banks and other fund managers, as long as they provide brokerage services.
What is the concept of simple return?
Simple return shows how much money an investment has made compared to the amount invested, expressed as a percentage, over a given period of time, usually one year.
- 📌 Formula: Simple yield (%) = [(Sales price – Purchase price) / Purchase price] × 100
- 🔍 Example: if you bought a share for 1 HUF and sold it for 000 HUF, then: simple yield = [(1200 – 1000) / 1000] × 100 = 20 %
This indicator does not take into account time horizon, compound interest, or reinvestment, so it is only suitable for basic comparisons.
What is an income statement?
An income statement is a financial statement that shows how much a company has earned or lost during a given period (e.g., quarter or year). It includes revenue, expenses, taxes, and the final profit or loss.
🔍 What is it good for? It helps you understand where a company makes its money, what it spends on, and how efficiently it operates. Investors often use it to calculate, for example, EPS (earnings per share) or operating profit (EBIT).
What is the concept of subscribed capital?
The subscribed capital is the amount of money that is officially made available by the owners when a company is founded or when capital is increased, and which the company records in its articles of association or company agreement. It is part of the company's share capital and is registered with the company court, which is why it is called "registered". The subscribed capital shows the extent to which the owners of the company have committed themselves to financing the company, and from a legal point of view, this amount is the minimum basis for the company's equity.
Which broker should I choose to buy shares?
There are several aspects to consider when choosing a broker - we will write a complete article about this - but I would like to highlight a few that are worth considering:
- size, reliability: The bigger a broker, the safer it is. Those with a banking background – Erste, K&H, Charles Schwab, etc. – are even better, and well-known brokers are typically more reliable.
- expenditures: Brokers operate with various costs, such as the account management fee, the portfolio fee - which is the worst cost -, the purchase/sale fee and the currency exchange cost (if USD is not deposited in the brokerage account)
- Availability of instruments: It doesn't matter which broker has which market available, or whether they add the given instrument upon request and how quickly.
- account type: cash or margin account, the latter can only be used for options. For Hungarian tax residents, having a TBSZ account is important, but citizens of other countries also have special options – such as the American 401K retirement savings account – which are either supported by the broker or not.
- surface: is one of the most underrated aspects, and it can be a real pain. Anyone who had an account with Random Capital, a now-defunct Hungarian broker, knows what it's like to work on a platform left over from the 90s. Erste's system is lousy slow, Interactive Brokers requires a flight test, and LightYear believes in simple but modern solutions.
Based on the above, I recommend the Interactive Brokers account because:
- the world's largest broker with a strong background
- a few million instruments are available on it, and shares listed on multiple markets – e.g. both the original and the ADR – of a single share are often available
- Interactive Brokers a discount broker, they have the lowest prices on the market
- you can link your Wise account to them, from which you can quickly transfer money
- Morningstar's analyses are available for free under the fundamental explorer (good for analysis)
- EVA framework data is available under fundamental explorer (useful for analysis)
- they have both cash and margin accounts, Hungarian citizens can open a TBSZ
- you can use three types of interfaces: there is a web and PC client and a phone application
What data sources did you use to analyze stocks?
For quantitative analysis, we primarily use various stock screening sites, and for qualitative analysis, we use company reports and other analyses, such as the Substack channel, podcasts - Business Breakdowns - and similar sources.
What matters: value or quality?
The answer is both, but quality is more important. It is much better to buy a very high-quality company at a fair price than to buy shares of a cheap but poor-quality company.
What is the best time frame to buy shares?
The minimum is 5 years, but you should consider the time horizon from 10 years to infinity. Our approach is typical "buy and hold", the emphasis is on selection, then we try to hold the shares for as long as possible, which requires conviction. We rarely sell, mainly if we feel that the thesis we set up has been broken or if we have made a mistake.
Which is better: individual stocks or ETFs?
There is no truth to this question. It is very easy to track the market with an S&P 500 ETF, and it is worth doing this for beginners, because it can be done with a little knowledge and practice. Analyzing individual stocks requires 30-50 hours per company, so we do not recommend it to those who do not like this. We wrote about the process of buying an ETF in the following article: ETF meaning, purchase
Do you hold the shares in a TBSZ account?
Why don't you specify a specific purchase price for the shares in your analyses?
We do not set purchase prices for several reasons: firstly, because it is impossible to calculate the exact value of a company. Secondly, because we cannot give investment advice, these analyses are only made to support the decisions of others. That is why we use fair value estimates from other services, as well as a certain margin of safety. Ultimately, your conviction will decide how much a company is worth to you.
Which stock price will rise or fall?
Nobody knows, because there is no magic bullet that can tell. It can be based on mathematical probabilities. The prices of high-quality companies that have growing sales, are able to reinvest the cash generated into the business, and have high intrinsic value creation tend to rise in the long term. But in the short term – a few years – the market and the price can move anywhere.
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