Top 5 tips for investing in the stock market

Set your budget correctly

There are a few golden rules for investing well in the stock market: to fully understand your financial management, you must first create an overview of your monthly inflows and outflows. To do this, you need to plan your future projects and the costs they represent.

It is important that you secure a part of your wealth (savings account) that you will need in the near future. You can then invest the remaining amount in a stock exchange product.

Diversification of investments:

Stock market investments are divided into 3 families.

Individual Effects

Individual stocks are the most common investment in the stock market. By buying a stock, you own a portion of a company and therefore may receive a fraction of the profits, the dividends. If the share price rises, you will also receive a capital gain. The average long-term return on a stock is 8%.

Individual bonds are securities that represent a financial debt that yields interest to its holder at a fixed rate. They are an excellent risk-free investment, but their profitability is currently very low.

Collective investments

These are investments that allow the savings of multiple investors to be pooled in a mutual fund managed by a management company. Collective investments make it possible to have a diversified portfolio without the obligation to choose the constituent securities yourself. There are two types, classic funds (of the SICAV type) and Exchange Traded Funds (ETFs) that duplicate a stock market index.

The derivatives

Focus on three of the most common derivatives.

An option is a contract that gives its holder the right (but not the obligation) to acquire or sell an underlying asset on a date and at a predetermined price.

A warrant is a security that can be traded on the stock exchange to which an option right is attached. This asset can have a stock, a bond, a currency, a commodity, etc. as its underlying asset.

A futures contract is the commitment (to the buyer) to buy and sell (to the seller) an underlying asset at the price set on the same day for a delivery to be made later.

Have a long-term vision

Investing in the stock market and growing your capital year after year is inseparable from a long-term vision. This allows you to invest money at a lower risk that can potentially generate passive income.

The stock market offers many financial markets that allow shareholders to earn an annual return of 8.7% over the long term. It is the most interesting investment aid on the express condition of being well informed about the subject.

Three important points must be remembered:

– Knows to identify trends through the RSI (price indicator for monitoring speed),

– Do not trust any stock market influencer,

– Focus on solid stocks that pay long-term dividends.

Accept stock fluctuations

Share prices basically vary depending on supply and demand. In the event that multiple buyers want to buy a security (create demand) and not sell it (generate supply), the price of that stock rises. On the contrary, if several people choose to sell instead of buy, the price of the stock falls.

Other criteria such as macroeconomics also play a role in stock fluctuations.

Limit costs

Some brokers are quick to draw attention to the fact that their services are free, but this does not mean that your exchange orders will be free.

Before opening a contract to invest in the stock market, read the terms and conditions and prices carefully to avoid unpleasant surprises.

Costs that can be charged:

– brokerage fees,

– account maintenance commission,

– entry costs for collective investments,

– transfer fee,

– closing costs.

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