Want to invest in the stock market but don't know where to start? Our 12 practical and simple tips for implementing, available on video and in the form of infographics, will help you invest well.
Also find our presentation of the different financial products for investing in the stock market for beginners, the different envelopes that allow you to do so, and the characteristics of investing in SME shares and investing in responsible finance (SRI).
The vocabulary you need to know to get started on the stock market and our comparison of the best stock brokers will also allow you to see things more clearly.
Also discover our recommendations for investing your money in times of crisis or when the markets are at their highest, the assets to consider for investing in the stock market in 2022, the solutions for investing in the stock market with few resources, and the different ways to protect your portfolio. scholarship holder, especially during his holidays.
Investing in the stock market, what is it?
Investing in the stock market means buying shares in listed companies, ie acquiring ownership shares in companies. In fact, each share represents a part of the capital of the company. The share that a partner holds in the company is proportional to the number of shares of this company that he owns. When you buy a share, you become a shareholder, which simply means that you become a partner in the company.
Why investing in the stock market is interesting for investors
There are two main reasons for investing in stocks. First, investing in the stock market means investing in the real economy to become an active member and participate in the development of societies.
A company that issues shares sells shares of its capital to investors to raise funds to finance its growth. This money could, for example, be used to develop internationally, to launch research and development (R&D) projects to create new products or improve products already marketed, to hire staff, etc.
Next, investing in the stock market is also, and above all taking advantage of the very attractive return that this asset class provides over the long term. The performance of 10- or 30-year equities makes them the most profitable asset class over the long term.
Thus, according to the Institute for Real Estate and Land Savings, at the end of 2018, shares have on average and each year returned 9.1% over 10 years and 6.5% over 15 years, performances which are rise to 8.3% over 30 years and 13.7% over 40 years.
Be careful, all the same, to succeed on the stock market and position yourself on the most attractive stocks, you should become familiar with the financial markets and follow a few tips to hope to hold and manage a portfolio delivering a good return with regard to the risk.
Investing in the stock market is experiencing a resurgence
The Autorité des Marchés Financiers (AMF), like stock brokers, noted the massive influx of investors during the Covid-19 crisis which allowed these neophytes to enter lows in 2020.
Since then, the success of the equity market has been undeniable with these new investors who took advantage of the continuous rise in the financial markets from mid-2020 to the beginning of 2022. Indeed, the number of individual investors active in the equity market gravitated around 550,000 per quarter in 2018 and 2019, and in the first quarter of 2022, nearly 800,000 investors bought or sold at least one share on the stock market!
These newcomers obviously need to train and learn the fundamentals that will allow them to build a long-term stock market investment strategy. This guide will certainly be of great help to them to invest well in the stock market in 2022.
The stock market for dummies: the essential vocabulary for getting started on the stock market
Bourse
The Stock Exchange is an intangible place where shares are bought and sold. We can therefore say that it is a marketplace where company shares are exchanged for money.
The Stock Exchange is open to all and everyone can buy or sell shares there: individuals, but also banks, insurance companies, pension funds, and also companies that can buy or sell their own shares. or shares of other companies.
Action
A stock is a share of the company that issued it. It is therefore a title of ownership of a fraction of a company.
When an investor buys a share of a company, he becomes a shareholder of the company. The shareholder thus owns a share of the company's equity. As a result, the investor has a right to the assets and the profits of the company in which he is a shareholder.
IPO (IPO)
A company makes its IPO when it issues shares and sells them to finance its development. Investors can buy shares directly from a company during its initial public offering or IPO (Initial Public Offering) – we then speak of the primary market – but the investor can also buy shares already listed on the stock exchange, this is then purchased on the secondary market, purchase directly on the Stock Exchange.
Dividend
The dividend is the payment to the shareholders by the company of a part of its profits. The company can choose to reinvest its profits in its development or to share them with the shareholders.
What is important to know is that when the dividend is paid, the amount is “detached” from the value of the share in order to prevent investors from benefiting only from the dividend payments.
ETF
ETFs are investment funds listed on the stock exchange (Exchange-Traded Fund). They are traded on the stock market like a stock, they can pay dividends (or not) and allow you to invest in several hundred stocks via a single stock market order.
Obligation
Bonds are corporate debt securities. A company issues a bond as we might apply for credit. The investor receives monthly interest (coupon) corresponding to the determined borrowing rate.
Stock index
A stock market index is an imaginary portfolio intended to evaluate the prices of a sector or a geographical area, for example. Most often, it is used to group together the most important shares of a given stock exchange such as the Nikkei in Japan, the S&P 500 in the United States, or the CAC 40 in France.
CAC 40
The CAC 40 is the Paris stock market index. The acronym CAC stands for "Cotation Assistée en Continu" and the number 40 comes from the fact that it brings together the 40 most important French stocks listed on the Paris market. These include the Air Liquide share, the BNP Paribas share, the LVMH share, etc.
DAX 40
The DAX 40 is the German stock market index. The acronym DAX stands for "Deutscher AktienindeX", which we could simply translate as "German Stock Exchange Index". And the number 40 comes from the fact that it includes the 40 most important German companies. Until 2021, the DAX only included 30 values.
S&P 500
The S&P500 is the American index of Standard and Poor’s. It brings together the 500 largest American companies. This is the benchmark index in the United States.
Nasdaq 100
The Nasdaq 100 is another American index, this one includes the 100 largest American companies in the technology sector. It includes Alphabet (Google), Amazon, Meta (Facebook), Microsoft, Apple, etc. We also find in this index foreign companies such as Baidu or JD.com, as well as companies that are not in the tech sector such as PepsiCo, Mondelez International, or Kraft Heinz.
What financial products to invest in the stock market?
And how does it actually work? Wondering how to invest in the stock market for dummies? Through what media? How to invest according to your level of knowledge? There are several ways to invest in the stock market, by positioning yourself on various financial instruments and on different envelopes. The investor, to make the best possible investment, will have to take into account his objectives, his skills, and his investment horizon.
Buy shares on the stock market directly
To invest in the stock market, and this is normally the first thing that comes to mind, it is possible to buy shares directly. This strategy, which concerns medium-long-term investments, can be implemented in different ways.
Bearer shares or registered shares: what to choose?
In fact, a shareholder can hold his shares directly in pure registered form, which allows him to save on any custody costs, but also to maintain a privileged relationship with the company whose shares he holds: personal invitations to general meetings, receipt of letters to shareholders and annual reports in their mailbox, possible double voting rights or increased dividends, etc.
However, since the management of the securities is entrusted to the financial intermediary of the listed company, the shareholder is obliged to open an account with each listed company in which he holds shares, which makes it impossible to collect all of its shares in a PEA or a securities account. However, to avoid this inconvenience, he can resort to administering registered shares. But this status, like that of pure registered shares, greatly complicates the declaration of income from its securities.
A shareholder can also hold bearer shares, the most common situation in France. The shareholder then remains anonymous to the company. Only the financial intermediary knows the identity of the holder, who can store his securities in a PEA or an ordinary securities account.
The fact of being able to collect all its securities in the same envelope and the fact of being able to complete a single tax form for all its securities, all companies combined, against a single tax form per line of the listed company in the event of registered ownership, constitute significant advantages for the shareholder.
Investing in the stock market with UCITS
In fact, you can position yourself on the stock market over the long term by buying funds or CIITS (Collective Investment in Transferable Securities). These envelopes are made up of a large number of securities and can also combine several asset classes (equities but also bonds for example) making it easy to diversify one's assets.
In addition, a manager takes care of the management of the securities and the management of the portfolio (he selects the securities and determines when is the best time to buy and sell them). He invoices you in return for management fees.
Position yourself on the stock market on indices with ETFs
Another possibility: use index and thematic funds, and more particularly trackers or ETFs, which replicate the performance of an index (stock market index such as the CAC 40 or the Nasdaq for example) or a sector index (banking sector, automobile, etc.) or even a geographic index (EU, Japan, US, etc.). Note that ETF management fees, given that it is passive management, are much lower than those of traditional investment funds.
Investing in the financial markets with derivatives
Another option to consider: investing in derivatives, most often involving leverage, allowing speculation on short-term security. It will then be more about trading than investing. Derivatives are, however, to be reserved for the most informed investors, able to understand the complex functioning of these products, often taking into account the time value, in addition to the variation in the price of the underlying, to which an effect applies. of leverage. But these derivatives are not only useful for short-term trading. They can also constitute portfolio hedging tools.
What envelopes to invest in the stock market?
The ordinary securities account (CTO) buys all securities
The securities account is the ideal envelope for investing in all financial markets, including and especially the most distant ones, or for setting up sophisticated investment strategies by using the DSS (Deferred Settlement System) or derivative products. It has no ceiling and therefore no restrictions. The freedom of the investor is total. In return, this envelope does not allow you to benefit from tax advantages and you will be taxed on your earnings at the flat tax (30%) or at the scale of income tax + 17.2% of social security contributions if this is more advantageous for you.
The PEA to benefit from tax advantages
The PEA, unlike the securities account, obeys strict constraints. Thus, for example, there is a payment ceiling set at 150,000 euros, and the securities eligible for this envelope are more restricted because they are limited to companies whose head office is located in the European Union. However, it is possible to circumvent this provision at least in part by investing in UCITS and in particular ETFs.
In return, the PEA or equity savings plan is a tax-efficient envelope for the shareholder who benefits, beyond 5 years of ownership, from an exemption from capital gains tax.
The PEA PME to invest in SMEs
The PEA PME is a savings plan in shares allowing to benefit from the same tax advantages as the PEA and on which can be accommodated investments in SMEs whose head office is located in the European Union.
Note: Its ceiling, if held alone, is set at 75,000 euros. On the other hand, if the investor holds a PEA and a PEA-PME, the cumulative ceiling of these 2 envelopes is set at €225,000 and the sums paid into the PEA PME may then exceed €75,000.
Subscribe to a youth PEA while waiting to leave the tax household of the parents
The youth PEA, intended for 18-25 year olds attached to the tax household of their parents, allows them to benefit from all the advantages of the PEA from the age of majority and thus to familiarize themselves very early with the equity markets. Its ceiling is set at 20,000 euros and is independent of any PEA accounts held by the parents.
Investing in shares via unit-linked life insurance
You should also know that an investor can also position himself on the equity market by holding shares directly, but also UCITS, ETFs, structured products, etc. via the units of account (UC) of his life insurance contract.
Investing in the stock market in SMEs
Even if as soon as we talk about the stock market, we immediately think of the heavyweights of the CAC 40 of the giants of American Tech such as the Apple share, Amazon share, or Microsoft share, investing in the stock market is is also investing in SMEs. It's even an even more concrete way to participate in the real economy and an effective way to support the local economic fabric.
Buy shares of small and medium-sized companies
First, it is possible to buy SME shares, either directly in registered form or in bearer form. In this case, the investor may place his securities in a PEA, a PEA-PME, or even a securities account.
If investing in small or medium-sized companies can be very profitable, remember that it is also very risky and that, more than ever, you will have to respect the essential rules of diversification.
Investing in the stock market is much broader than just investing in large caps. In reality, small and mid-caps represent the majority of companies, and small and mid-caps are present all over the globe and in all sectors. It would therefore be a shame to ignore this type of company in which you can also invest with trackers.
Invest in Private Equity
It is also possible to invest in unlisted companies by buying shares in companies that have not gone public. This is called investment capital or private equity. Given the fact that it often involves young companies that are not very mature at an early stage, investment in the unlisted is characterized by potentially very attractive returns, but the risk of capital loss is also very high, as is the risk of liquidity.
Finally, by its very nature and even if it is becoming more democratic, the Private Equity market is difficult to access for individual investors who can nevertheless turn to specialized funds for this type of investment.
Acquire units of FIP and FCPI
Do you want to invest in SMEs but do not want to take care of the management and do your own stock-picking, while having at heart to invest in local and/or innovative companies? You should consider investing in FIP and FCPI (Proximity Investment Funds and Mutual Funds for Innovation), these investment funds which allow you to invest in small unlisted companies with attractive potential in also benefiting from tax advantages, namely an exemption from tax on capital gains on the resale of shares and a tax reduction of 25% of the amount invested.
Opt for FCPR investment
Alongside FIPs and FCPIs, there are RMIFs (Risk Mutual Investment Funds) which also make it possible to invest in unlisted small and medium-sized companies, this time without geographical constraints (FIPs are invested in unlisted regional SMEs located nearby) or innovation (FCPIs are invested in innovative SMEs).
Here again, the investor benefits from tax advantages: exemption from capital gains tax and income tax reduction of 25% of the amount invested, tax advantages conditional on the fact that the taxpayer reinvests the sums distributed in the FCPR and respects the unavailability of 5 years.
SRI: investing in the stock market in sustainable and responsible companies
SRI to take ESG criteria into account in its financial investments
It is possible to invest in the stock market by opting for responsible finance. To simplify investment in sustainable finance, an SRI label(Socially Responsible Investment) was created. It indicates the investment funds whose selection is based, in addition to traditional financial criteria, on extra-financial criteria such as ESG criteria (for Environment, Social, Governance).
The range of SRI funds has evolved considerably in recent years. It has in fact greatly expanded, a sign of investors' interest in supporting virtuous companies. It should also be noted that the attention paid to the environment, social issues, and governance is also a factor in the outperformance of companies. It is therefore possible to combine business with pleasure for your investments! This type of investment is also available in the units of account of your life insurance policy.
Invest in companies with a mission to choose values that share yours
Direct investment in responsible companies is more difficult for the individual who does not necessarily have all the data allowing him to know if a company respects the ESG criteria and to what extent.
However, the creation of the status of a company with a mission could well facilitate the task in the future. Born with the Pacte law, this statute obliges a company, in order to benefit from it, to include social and environmental issues in its statutes. The company can then declare its raison d'être through several social and environmental objectives.
While Danone is currently the only large listed French company that has become a "mission-based company", other large French companies such as Atos or Michelin want to join the circle of companies with a mission and have started the process by integrating the raison d'être into their statutes.
Best stockbroker comparison
You now know the assets that it is possible to buy on the stock exchange and what envelopes can be used to accommodate them. You will then have to consider the choice of stock broker, this financial intermediary with whom you will open the envelopes allowing you to accommodate your assets.
For this, it will be necessary to take your investor profile into account. In particular, you will need to pay particular attention to the assets offered and accessible stock markets, but also to the trading tools made available, the educational materials provided, and of course, the prices charged.
Investing in the stock market: how much does it cost?
Different types of stock market fees that you should bear in mind will apply to your stock market investments.
Brokerage fees
Brokerage fees are fees related to the purchase and sale of financial securities (stocks, ETFs, etc.). Brokerage fees vary greatly from one stock broker to another and may even be free with some neobrokers. The market in which you wish to operate can also greatly vary brokerage fees.
It is essential to think carefully about the assets and markets in which you wish to invest in the stock market in order to choose the stock broker that will be best suited to your needs.
Custody rights
Although they have almost completely disappeared from the price lists of online brokers, they are still sometimes charged by traditional banks. In short, custody fees are annualized fees charged by the financial intermediary who holds your financial securities for you.
Exchange fees
If you decide to invest in foreign stocks, your stock broker will carry out currency conversion operations. So if you buy US stocks, your euros will be converted into US dollars. Although the operation is often done automatically by the Stock Broker, it involves costs that may be more or less significant depending on the financial intermediary.
Exchange product fees
When you buy an ETF or an exchange product such as a Warrant, a Turbo, or a Certificate, costs enter into the equation. These costs are more difficult to measure because they are integrated into the purchase/sale prices of the products.
They will therefore not be debited from your securities or PEA account. The only measurable impact will be a drain on the final performance. To find out the details of these fees, consult the KIID (Key Investor Document) that each issuer of financial products is required to make available to investors.
Other types of stock market fees
There may also be many other types of stock market fees in addition to those we have already detailed above. For example, there are inactivity fees which could have a strong impact on passive investors wishing to invest in the long term; but also the costs of real-time listing or access to a more sophisticated trading platform which may be essential for those who are going to make short-term investments or even trading.
We, therefore, advise you to take the time to list your needs, as well as the costs that this will generate, in order to direct you to the stock broker who offers the solutions adapted to your investor profile.
Twelve tips for investing in the stock market
Now that you know how to invest in the stock market in practice, we offer you a series of tips for making a successful start on the stock market and adopting good practices that will allow you to avoid many mistakes.
1. Invest money in the stock market that you are willing to lose
With the risks associated with investing in the stock market, there is no question of investing in shares on the PEA or the securities account all your savings made in order to finance the studies of your eldest child next year or your retirement which is fast approaching. Moreover, the longer the investment horizon, the more investment in the equity markets makes sense.
However, always keep in mind that investing in the stock market carries a risk of capital loss inherent in stocks. The primary objective is to earn money (via obtaining dividends or realizing capital gains ) but you can also lose money and, in the event of a loss, this should not impact your standard of living. . A novice stock market investor should therefore not invest all his money in the stock market and respect the basic rules of diversification, in particular by having security savings on guaranteed capital investments. Never invest all your wealth in transferable securities presenting a risk of capital loss such as shares.
READ: 5 Tips For Investing In Tech Companies.
2. Get informed and trained before investing in the stock market
Investing in the stock market cannot be improvised. Knowledge of the stock market and listed securities are essential elements to master. And monitoring economic and financial news is a particularly important element.
You will also need, to start on the stock market, to have solid notions in fundamental analysis and technical analysis to hope to perform effective stock-picking and determine the best time to buy and sell the securities you have selected in your portfolio. You should also be aware of the stock market orders that it is possible to place, ie know the different stock market orders and their characteristics in order to identify the most suitable order for the situation.
Are you far from mastering all this? Do not panic, many books exist such as Investing in the Stock Market for Dummies as well as many books on investment, but above all, you will find a wealth of information and training on the Internet to understand the Stock Market: webinars, white papers or ebooks, educational articles, etc. can help you improve your financial knowledge. You will also have very easy access to economic and financial news articles, usually free of charge, as well as company annual reports. All you have to do is train!
3. Keep your investor profile in mind before investing your money in the stock market
"Know thyself" teaches Socrates. This maxim, far from being reserved for philosophy, has its place in finance. Before investing in the stock market, it is better to know whether you have a prudent, balanced, or dynamic profile. By investing in derivative products on Asian securities with a high leverage effect when you have a cautious profile, disaster is not far away.
First, you will be freaked out. Then, the panic that would result from such a situation would undoubtedly push you to act in haste and, in matters of investment, composure and reflection are much better advisers than feelings in general and fear in particular.
4. Define a stock market investment strategy
Before investing in the stock market, define an investment strategy. You will rely for this on your investor profile, your investment horizon (the duration of the investment) as well as your profit objectives, but also on the maximum amount of losses that you can bear.
All of these elements will help you determine an optimal return-risk ratio and should guide you in the composition of your stock market portfolio to get off to a good start on the stock market and invest in securities with full knowledge of the facts.
5. On the stock market: keep calm and keep it simple in any situation
Anyone wishing to invest in the stock market should always remain calm and keep it simple. Hyperactive mousers who place 20 stock market orders a day on the basis of complicated mathematical indicators, generally only enrich their broker or stockbroker.
6. On the stock market, there is no miracle: making money is not systematic
If you have the idea of investing in stocks to get rich quickly, go your way. Unless you're extremely lucky, you won't double your stock market investment in the first year or even the second. You will even have to get used to taking losses.
Nevertheless, according to the Allianz study Equities: Real Medium-Term Potential, dating from January 2014, US equities since 1800 have generated positive real returns over every rolling thirty-year period.
By reducing the investment horizon to average sliding periods of ten years, we see that this asset class generated on average a maximum real performance of +16.84%. With regard to the French stock market, the CAC 40 with dividends reinvested has risen by an average of 8.5% per year since its creation in 1986. According to the study Stimulating long-term investment in shares published by the AMF in July 2017, the “average annualized return” of “diversified equity investments” held for a minimum of 20 years, the initial investments having thus been made between 1988 and 1997, is approximately 5.3%. Hard to find better!
But beware, although equities are the asset class that shows the best performance over the long term, don't expect crazy returns either. The stock market is not a miracle, even if investing in the stock market should allow you to significantly boost the return on your savings.
7. Be prepared to invest in the stock market for the long term
Equity performance is often accompanied by some volatility. Investing in the stock market must therefore be considered over the long term. If you have too short an investment horizon, you will be tempted to take excessive risks to earn money quickly. In the short term, stocks are volatile.
They react to all the mood swings in the market. Investing in the stock market, therefore, requires a long investment horizon. Seeing your stock market value increase can indeed take a little time.
Predicting short-term market movements is impossible. Point bar.
Ben Graham said on this subject: “in the short term, the market behaves like a voting machine, but in the long term, the market behaves like a balance”.
Unfortunately, too many investors still view the stock market as a beauty contest. To invest in the stock market successfully, be patient and stay attentive to the fundamentals of the company. Price always ends up reflecting intrinsic value.
8. Are you buying a share on the stock market? Think like a partner
Stocks are not just paper; they are a title deed to the company's assets. If you buy shares in a company, behave like a responsible partner. Follow the evolution of the offer of products and services as well as the results of the company closely, and study its annual reports. Investing in the stock market requires real involvement on your part in the management of your stock market portfolio.
9. Look for quality stocks on the stock market
Focus your efforts on identifying companies that have sustainable competitive advantages. A sustainable competitive advantage is a good guarantee that the company will maintain its profitability for many years to come, a challenge for anyone who wants to invest in the stock market successfully. This competitive advantage can for example take the form of a strong brand. Classic examples of such companies are Coca-Cola stock, McDonald's stock, Hermes stock, and Google stock.
10. Always consider the intrinsic value of the listed company
The difference between a great business and a great investment is the price you pay. During the dot-com bubble, there were many good companies on the stock market, but it was almost impossible to find cheap stocks.
Finding quality stocks is only half of your job as a novice stock market investor. The second half: wait for prices to drop enough to make the investment worthwhile.
To invest in the stock market effectively, you will therefore need to carry out many analyses, but also be patient.
11. When selecting a stock, always leave a margin of safety
Unless you have clairvoyant gifts, you cannot predict what will happen in the future. To hedge against inherent uncertainty in the future, be sure to buy your stocks at prices well below intrinsic value. This will provide you with a margin of safety in the event of a fall in the stock and will guarantee you to invest in the stock market by reducing the risks to a minimum.
12. On the stock market: think independently to invest well
Stay away from crowds. You will succeed in your investments by right reasoning, not because others think the same. If you manage to keep a cool enough head to buy during price declines, you will be well-positioned to take advantage of the upside when it comes.
As Warren Buffett says, "Be worried when others are greedy, and greedy when others are worried. "
Investing in the stock market is also a matter of timing!
How to invest in the stock market with a small budget?
You don't have to be very rich to invest in the stock market. You can position yourself on the stock markets with a few hundred euros. It will undoubtedly be more complicated to buy shares because many CAC 40 companies such as Hermès shares, LVMH shares, or Kering shares exceed - and sometimes by a lot - 500 euros. And that's also true for a lot of big US companies like tech giants Google (Alphabet stock), Amazon stock, and Facebook stock but also many capitalizations around the world.
Add to that that it is absolutely essential to reduce the risk to diversify your portfolio well and therefore to own many shares from different business sectors and geographical areas! Holding a portfolio of live securities, therefore, requires a fairly substantial amount invested in the stock market.
But there are many ways to be invested in stocks without spending tens or hundreds of thousands of dollars on them. For example, you can choose to invest in the stock market by buying fractional shares. You will then only hold a part of the action and not the action as a whole.
For example, if the Hermès title trades on the Paris Stock Exchange for 1,600 euros and you buy 1/10 of it, you will only have to pay 160 euros. However, this type of investment is not offered by all financial intermediaries. Only neo Stock Exchange brokers like Trade Republic or eToro provide access to fractional shares.
But you can also choose to invest in the stock market in traditional funds or in tracker-type index funds, also called ETFs. You can thus, with a few hundred euros, buy units of a fund invested in a large number of stocks.
Finally, if you have few means, the most important thing to remember is perhaps to invest in the stock market little and regularly. Fintechs like Yomoni or Trade Republic allow you to set up progressive investment plans via scheduled installments to invest a few tens or hundreds of euros every month. You can also set up an automatic transfer to the units of account of your PER or your life insurance.
How much to invest in the stock market?
It is indeed not necessary to have colossal sums to invest in the stock market. It is quite possible to invest in the stock market if you are able to put aside a few tens of euros per month.
Giving a figure or an amount that should be invested in the stock market makes little sense. The most important thing, in reality, is the part of your assets devoted to stock market investment. It must depend above all on your investor profile and the nature and investment horizon of the projects you wish to finance in this way.
A risk-averse profile, for its long-term projects, could consider investing about 25% to 50% of its savings in the stock market. A low-risk averse profile, to finance its long-term projects, could consider investing 75% to 100% of its savings in the stock market. Of course, remember that it is necessary to have precautionary savings and, in the case of a short-term project, capital-guaranteed supports.
When to invest in the stock market?
As we have seen, investing in the stock market is thought about in the long term. Therefore, the question of the entry point is not as crucial as it seems. It will be better to invest in the stock market little and regularly, in order to smooth the risk. By buying shares with a few tens of euros or a few hundred euros every month for several years, or even ideally over several decades, you are sure not to invest all your money in the stock market at a higher level.
What is important is not so much to be able to invest massively in one go as to invest regularly all the time. And if we add to this the attractive yield of shares over the very long term, the investor will understand that he has every interest in making the best investment by investing in the stock market as soon as possible, even for minimal sums. They will inflate fairly quickly anyway if dividends are systematically reinvested through the magic of compound interest.
And obviously, we cannot talk about timing on the stock market without going back to the right moment or rather the opportune moment to buy a security. In particular, care must be taken to buy a company's share when the company is not overvalued on the stock market, i.e. when its stock market price is not completely decorrelated from its intrinsic value (its real value heritage).
Should you invest in the stock market following a stock market crash or correction?
It may seem wise to position yourself on the financial markets when they experience a significant decline. The reasoning, rather logical, consists in entering a low point to realize beautiful capital gains then. But beware, market timing is dangerous because neither you nor anyone can say when the low point will be reached when the recovery will take place, nor whether the scenario will be a U-shaped or W-shaped recovery with very high volatility and recoveries immediately followed by falling prices, and above all when pre-crash levels are again reached.
A famous adage also says that you should not try to catch a falling knife. Caution is therefore called for and, in a period of crash, the investment horizon must be far enough away to cover all eventualities. It is unconscious to place on the stock market in times of crisis and economic recession the money you will need in the short and even the medium term.
Finally, even if the recovery will take place one day or another, the stock market cycles follow one another inexorably, this does not mean that the shares in which you have invested will necessarily do the same. Stock picking is essential, even more so during a stock market crisis followed by a recession.
You will have to focus on identifying the actions on the stock market that have been unfairly massacred or the companies that can take advantage of the crisis, but the surest solution is undoubtedly to take advantage of the fall in share prices to acquire the securities you dream of. to hold in the portfolio because of their good fundamentals but which you had not bought until now because the stock market price was too high. Be careful, however, to check that the crisis has not affected their fundamentals and that the competitive advantages, in particular, are still very much present.
How to invest in the stock market in times of crisis?
The wisest way to invest in times of crisis is to avoid wanting to take advantage of short-term market volatility. Acquiring leveraged derivatives to protect your stock market portfolio is an option to consider. But acquiring these same leveraged derivatives to play up or down the variations of an asset subject to high volatility is very risky and, more often than not, does not turn out to be a winning strategy for investors. investors, especially beginners, who are trying their hand at trading in troubled markets.
Stick to your investment strategy and trading plan and don't re-allocate assets on a massive scale. The best solution is often to wait for the storm to pass. However, you can get rid of the riskiest assets without upsetting your entire stock market portfolio.
One of the best reasons to buy or sell securities in turbulent times is to diversify your financial portfolio if it is too concentrated in terms of sectors, geographical areas, or types of capitalization.
How to invest in the stock market when the markets are at their highest?
With financial markets at their highest, the investor will have to be particularly attentive to his stock-picking. Let's not forget that “Trees don't reach the sky” as the stock market saying reminds us and, after the boom, comes the recession. To avoid seeing your portfolio melt like snow in the sun in the next cycle, it is advisable to carefully examine the solvency ratios since a company that is too indebted will not be able to withstand a fall in prices.
Also, make sure of the company's ability to generate profits over time. For this, you must be certain of the solidity of the business model. The most risk-averse will be able to favor leading companies in their sector,
With regard to securities already held in the portfolio, the first thing to do to avoid being taken by surprise by a sudden drop in prices is perhaps to raise your stop orders. Thus, in the event of a downward fluctuation, your securities will be resold and your capital gains secured. Finally, also know how to take your profits. If a title has reached the objective you had set and you now consider it overvalued, collect your capital gain!
What to invest in the stock market in 2022?
The year 2021 has undoubtedly been a very special year for the financial markets. First, the traces of the crisis have not faded uniformly in all geographical areas. Thus, China returned to economic growth from the start of 2021, the United States worked hard to catch up, while Europe, long penalized by a slow and sluggish vaccination campaign, returned to growth later while emerging countries were still very affected by the Covid epidemic did not rebound immediately.
In 2022, the invasion of Ukraine by Russia, triggering a war on the European continent, further increased volatility in the markets by upsetting the global economic order. The conflict between Russia and Ukraine has indeed led to indignation on the part of Western countries, which have responded by implementing a whole battery of economic sanctions against Russia.
This war is therefore also an economic war without precedent. It should also be noted that it fuels the inflation of agricultural raw materials and in particular wheat and Sunflower oil, Ukraine massively exports these foodstuffs, such as energy raw materials, and in particular the inflation of oil and gas, with Russia being a leading exporter.
If in this context, American equities are the ones that have resisted the best, European equities being weakened by the uncertainty linked to the war on its continent, in April 2022 we see a drop in equity markets across the world. This fall in the world stock markets is explained in particular by the persistence of inflation and the tightening of monetary policies in an attempt to counter it, but also the resurgence of the Covid-19 epidemic in certain regions and particularly in China, which continues to zero Covid strategies in the face of the epidemic and which confines hundreds of millions of people, shutting down its economy.
To invest in the stock market in 2022, it will therefore be necessary to carefully choose the stock exchanges on which to invest, via trackers or shares, favoring areas where economic growth is maintained and staying away from those which remain. very marked by the epidemic and the war.
Then, even within a geographical area, there is a very great disparity between sectors of activity. While some remain devastated, such as air traffic, hotels, restaurants, culture, and events, others are experiencing renewed attractiveness, such as DIY, indoor leisure, or Tech, for example.
On the equity market, in addition to the uncertainties linked to the new variant, inflation can also wreak havoc. We will be particularly vigilant with regard to companies that are unable to adjust their prices and see their margins shrink. We think, for example, of the automotive sector penalized by the shortage of semi-conductors which forces it to idle, air transport which sees the price of kerosene soar, and the food sector (excluding spirits) which has to deal with historical inflation the price of agricultural raw materials.
Some sectors, on the other hand, are relatively preserved: those whose pricing power is high, such as the luxury sector for example.
Inflation can also benefit certain sectors, notably the energy and basic resources sector which benefits from the rise in commodity prices.
Note also that the current situation is particularly favorable for banking stocks and financials as a whole. These values should in fact benefit from the gradual rise in interest rates and the quality of assets and the low default rate.
Still, on the side of the sectors to be favored, there is of course the health sector, resistant to inflation by nature, and which, given the nature of the current crisis, could really do well. Artificial respirators, vaccines, masks, gloves, and antiviral drugs are all products that have experienced a significant increase in demand with the health crisis.
Some sectors that are currently experiencing a recovery may present interesting growth prospects, such as the media sector, which is returning to growth.
Sectors that belong to a long-term megatrend will also be able to catch the eye of investors. This is for example the case of Tech companies that benefit from the digitization of society, not to mention that the pandemic has further accelerated this phenomenon. You only have to look at the significant growth of digital growth stocks to be convinced of this.
Finally, the year 2022 should see the continued deployment of recovery plans throughout the world. France has launched a France Relance plan of 100 billion euros. The European Union plans to devote 1,800 billion euros to its recovery plan, while the American recovery plan amounts to 2,300 billion dollars. It may be interesting for the investor to position himself, through live securities or ETFs, in the sectors most supported by the recovery plans such as digital, renewable energies, health, etc.
Also note that at the end of 2022, it may be wise to take an interest in interest rate products such as bonds. Indeed, monetary policies should indeed in the coming months, according to the Fed and the ECB, evolve in favor of an increase in rates, which would have a direct impact on the bond market. Bonds that currently only offer yields close to zero could then become more attractive with the issuance of new bonds at more generous rates for investors. We could then look at UCITS and ETFs invested in bonds when rates start to rise, but not before.
How to protect your wallet in his absence?
Whether it's a major vacation or two weeks in the heart of winter, it is relatively risky to go on vacation without protecting your stock market portfolio, especially if you are going far away and jet lag does not play a role. your favor (you sleep during the opening hours of the Paris Bourse) or, even worse, that we do not have an Internet connection to monitor prices and place stock market orders if necessary. If this is not your case but you still want to spend a peaceful family holiday without being glued to your trading screens and without regret in the middle of a regatta or a hike that you cannot monitor the course of such or such volatile value, the same precautions are necessary.
Discover 4 ways to protect your stock portfolio while on vacation. First, you can get rid of the riskiest companies. You will no longer be able to monitor them like milk on the fire, so it is better to resell the shares of companies that have too much debt, but also all stocks whose economic viability leaves something to be desired.
Then, do your best to diversify your portfolio: firstly, cash diversification (ideally at least 25 lines) but also sectoral diversification and geographical diversification will make your stock market portfolio more robust.
It will also be necessary, and in particular for the most volatile shares, to place stop orders or stop-loss orders to limit the damage in the event of a fall in prices (your position will be closed automatically at a threshold that you have defined), or even orders trailing stops if your stock broker offers them. They will allow you to limit the losses while letting the gains run because they accompany the evolution of the course while limiting the losses during possible reversals.
Finally, you can also use hedging derivatives such as ETFs, Turbos, or options, for example, to hedge your short-term buying positions.
You will thus spend a quiet vacation while taking a step back from your activities on the financial markets to start on a good basis when you return from vacation.
A few questions about investing in the stock market?
What is investing in the stock market?
Investing in the stock market is buying or selling securities in the financial markets. Most often, it will be company shares, that is to say, shares of listed companies. But investing in the stock market also concerns other types of financial products such as ETFs or other derivatives.
Why invest in the stock market?
Investing in the stock market allows you to enhance your assets and thus finance your projects. Equities represent the most profitable asset class over a period of more than 30 years. In addition, investing in the stock market means supporting the real economy and becoming a player in the economy.
How to start on the stock market?
To invest in the stock market, open an account with a stock broker (eg Degiro, Bourse Direct, etc.) then define your investor profile and your investment objectives. Then, determine the type of strategy you wish to implement, proceed with stock-picking and buy your securities after having first defined your investment vehicles (securities account, PEA, or PEA PME).
How to invest in the stock market in times of crisis?
A period of crisis can allow the investor to buy shares on the stock market that have been unfairly massacred. However, he will have to ensure that these stocks have good fundamentals, ie low debt, growing profits over the long term, and favor stocks of solid companies that have been in existence for many years. Be careful, do not seek to take advantage of stock market fluctuations. Only the most well-informed investors will be able to risk playing the volatility of shares.
When to buy a stock?
Before buying a share, it will be necessary to carry out a technical and/or fundamental analysis and to determine its investment strategy: growth (companies that see their profits increase rapidly), value (securities whose price is lower than the intrinsic value) or yield (company paying regular dividends).
How to make money on the stock market?
There are two main ways to make money on the stock market: on the one hand, by cashing in the dividends paid by the companies in which you hold securities (if they pay any); on the other hand, by reselling your securities at a higher price than you acquired them and therefore by realizing a capital gain.
Investing in the stock market, is it risky?
Investing in the stock market involves a risk of capital loss. The value of your securities fluctuates as the markets fluctuate. In theory, you can therefore lose everything. In fact, the longer your investment horizon, the lower this risk.
Disclaimer:
All of our information is, by nature, generic. They do not take into account your personal situation and do not in any way constitute personalized recommendations with a view to carrying out transactions and cannot be assimilated to a financial investment advisory service, nor to any incentive to buy or sell instruments.
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