How can I invest on Bitpanda?

Are you ready to start? Bitpanda makes it easy for you.

Download the Bitpanda mobile app for iOS or Android on your smartphone to register.

Verify your Bitpanda account in a few minutes with one of Bitpanda’s trusted verification providers, choose the payment option you prefer and deposit your initial balance.

You can now start investing in various assets such as Bitpanda Stocks, cryptocurrency and precious metals 24 h. You can create your Bitpanda account here.

With this article, we do not intend to advise you on investment matters, or make you an offer or invite you to buy any digital asset. This text is for informational purposes only and no representation or warranty, either express or implied, is made about the impartiality, accuracy, completeness or correctness of this article or the opinions contained therein, nor should they be relied upon.

Bitpanda Stocks allows you to invest in fractional shares. Fractional shares in Europe are always enabled through a contract that replicates the underlying share or ETF (financial instruments according to section 1 paragraph 7 lit. d WAG 2018). Investing in stocks and ETFs carries risks. For more details, see the brochure at Bitpanda Official Website.

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What is quality investment?

Are you ready to start investing but first you want to know more about investment strategies? Learn about the fundamentals of quality investing, an investment strategy based on the quality of an asset and not so much on price or growth prospects.

There are many different ways to select the assets you want to invest in. It can be based on your personal financial situation, your investment objectives, and, last but not least, the comfort you feel with the investment risk.

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What is investment in value?

You want to buy low and sell high, right? Unfortunately, it is not that simple. An old motto in investing is that it pays to buy a stock that is well below its “fair” value (true market value) at a low price and wait for its price to rise once the market takes notice. that the asset is undervalued. What does this mean?

An undervalued stock means that this stock is trading for less than its true value, which is determined by fundamental analysis. The reasons can be negative news about a company, poor finances, negative industry events affecting a company, and other issues.

This strategy is called value investing and is reputed to be one of the effective strategies of Warren Buffet, who is considered one of the most successful investors of all time. Investing in value is based on a detailed analysis of the fundamentals of a company, buying its shares at a low price and holding them as a long-term investment.

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Could it turn out to be a value trap?

However, this strategy can backfire, especially if you’re just starting out and don’t have Warren Buffet’s expertise. Why? Your undervalued stock could become a value trap, so you must carefully analyze the performance of the company in which you plan to invest.

Some stocks can look like value investments with attractive dividend yields. A company may appear to be heading for a change of course from the events that led to its low price and valuation, but only at first glance, ultimately turning that investment into a “value trap.”

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All a show and nothing at all

On the inside, the company’s margins, profits and reserves may be adversely affected, which could indicate that the dividend payment will not be distributed to shareholders. It is also possible for a company to be highly dependent on the special effects caused by economic developments affecting its industry and only make high profits every now and then, causing the share price to rise and fall again. Let’s look at some of those effects.

The specific effects on an income balance are another factor that can distort perception. For example, if a company sells land for a high amount, this can be a big profit this time, as can deferrals of major orders or special write-offs. Also, remember what Benjamin Graham, the “father of value investing,” said about safety and earnings:

“An investment operation is one that, after a thorough analysis, guarantees the security of capital and an adequate return.”

Experienced investors draw on their long experience and know that value traps cannot always be easily identified. Investors new to investing may find it even more difficult to identify value traps. Bottom line: we can’t stress enough that research is paramount. To do this, getting the results report of a company is only the first step. Be sure to also read our article on how to get information on stocks.

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What is quality investment?

Now that you know the basics, let’s move on to quality investing.

Based on investing in value, the name of this investment strategy already says it: the focus of an investment decision should be the quality of an asset rather than its growth or price.

Quality investing, traditionally applied to the appraisal of bonds and real estate, determines the quality of an investment based on a specific set of criteria and groups stocks into the quality and low-quality stocks. Let’s look at this criterion in more detail.

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Financial strength

Begin your investigation by evaluating the financial strength of a company from its balance sheet in the results report. Key performance indicators such as price/earnings ratio, cash flow considerations, debt/equity ratio, and other ratios, indicate how well a company is meeting its business goals and illustrate its progress on that path. They are also indicators for the valuation of an action.

It is also wise to take a look at management and investor relations – the stability of board members and extensive communication with stakeholders are often positive signs.

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The economic moat

With competitive advantage, companies take the lead in more ways than one, and it’s even better if they can sustain them over the long term, what Warren Buffet calls the ” economic moat .” As competitive advantages, we can mention, for example, factors such as a strong brand, low production costs, trademarks and network effects. Only a few companies around the world meet all of these criteria.

Looking at the market environment, a strong brand and trademarks based on a strong business model can contribute to a company’s pricing power to stay ahead of its competitors. We all know these brands: they are the ones that their users are in love with and would never leave. If your users think that you are the only company that offers that product, even better.

Low production costs favor the manufacture of large quantities of products and allow the company to offer volume discounts and low prices to a large number of customers, making it difficult for competitors to enter. Ultimately, network effects will attract additional users and customers to a product or service and add value to the product and brand in this way.

Don’t forget that this is a learning process, and remember Benjamin Graham, the father of value investing. He was also the first to observe that the biggest losses are not the result of buying quality stocks at too high a price, but rather of buying low-quality stocks at seemingly low prices. Who could argue with it?

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