The stock market: how to invest in your first shares

2022 is marked by high price volatility, between the war in Ukraine, health restrictions in China, recession fears, runaway inflation, and monetary tightening by central banks to try to stop prices rising. Enough to dissuade the less reckless from publicity. Although stocks remain a risky investment, simple rules nonetheless allow you to reduce your exposure to risk and invest more calmly.

To begin with, it is important not to buy any shares, not to engage in complex transactions, subscribing, for example, to derivative products. “For its stock market debut, you should always try to do the simple things that you understand,” explains Stefan Van Haffel, managing director of wealth management advisory site Netinvestment. He mentions, in particular, the emergence of marketplaces open to the general public, which may encourage some profit-seeking investors to take disproportionate risks compared to their level of market knowledge.

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Take different entry points

Stefan Van Haffel’s advice is to “invest wisely”. An investor should not get emotional and sell everything when prices start to fall. Neither buy everything once they go up. Also, when the markets have already crashed and prices are low, it is possible to buy at a good price as the stock has lost most of its value. When prices rise, capital gains can be realized.

“An investor can invest on a regular basis using different entry points,” Stefan Van Haffel also emphasizes. Therefore, he recommends investing your savings gradually, rather than betting all your money at once. For example, if you have 5,000 euros to invest, you can spread the payments over a quarter. Gradually investing money is a way to limit the impact of volatility on your investment and smooth out market fluctuations. It is also a way to play it safe by investing all your money at the most inopportune moment, just before a crash and a sudden drop in prices.

Diversify your investments

In the stock market, it’s also important to “don’t put all your eggs in one basket.” This expression means that it is extremely important to diversify your investments, not by investing your money in one company or a very limited number of securities, but rather by integrating several activities into your portfolio.

Diversification is carried out by changing sectors of activity, from healthcare to aeronautics, through energy, agri-food, financial companies (banks, insurance, land, etc.), automotive or even technology and telecommunications. If one sector experiences a downturn in the stock market, others may perform better at the same time.

You can also use geographic diversification by investing in companies from different territories and listed on different stock exchanges, from Paris to New York, via Frankfurt, London, Milan and others.

Finally, it is advisable to vary the size of companies and invest not only in the largest capitalizations such as LVMH, Hermès, TotalEnergies and Sanofi within the CAC 40 index. But also invest your money in more modest, medium (medium caps) and small caps ( small caps) such as Neoen, Vallourec and Genfit. “Invest primarily in companies that speak to you and whose business you understand,” recommends Stefan Van Haffel of NetInvestissement.

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Choose the right investment package

Finally, you need to choose the right envelope for buying your shares according to your profile, your projects and your desires. A securities account will allow you to invest in a wide variety of securities, bonds in addition to shares and obligations under collective investments in transferable securities (UCITS). All this in different territories and continents (Europe, USA, Asia, etc.).

A share accumulation plan will allow you to benefit from income tax exemption after five years of holding your investment. But your profits (capital gains and dividends) will be exempt from tax, provided that you do not withdraw funds during these five years. And the variety of acceptable securities will be more limited, in particular, you will only be able to invest in European stocks.

Finally, the units of account (UC) of multipurpose life insurance contracts allow you to invest in several equity funds, and sometimes directly in the company’s shares. In addition, you can also invest your money in bond funds and part of your money in a capital guaranteed euro fund to limit the risk of loss. After eight years of contract work, you will benefit from preferential taxation and an annual allowance of 4,600 euros on your income.

In any case, it is recommended to invest in the stock market for the long term. In the short term, from one year to the next, you can easily take losses when over 5 years, 10 years or more your chances of making a profit are higher as stock markets tend to progress in the long term.

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