Plan your budget well
There are a few golden rules for investing well in the stock market. You must first make a summary of your monthly cash inflows and outflows in order to fully understand your financial management. To do this, plan your future projects and the value they represent.
It is important that you secure some of your assets (savings account) that you may need in the near future. You can then invest the remaining amount in a stock market product.
Investments in the stock market are divided into 3 families.
Separate stock securities
Individual shares are the most common investment in the stock market. When you buy shares, you own part of the company and, therefore, potentially receive a part of its profits, dividends. If the share price goes up, you also get a capital gain. The average rate of return on shares is 8% in the long run.
Individual bonds are securities that represent financial debt that earns its holder interest at a fixed rate. This is a great risk-free investment, but their returns are currently very low.
This is an investment that allows you to combine the savings of several investors within the framework of an investment fund managed by a management company. Collective investments allow you to have a diversified portfolio without the need to independently choose the securities included in it. There are two types: classic funds (such as SICAV) and exchange-traded funds (ETFs) that duplicate the stock market index.
Focus on the three most common derivative products.
An option is a contract that gives its holder the right (but not the obligation) to buy or sell the underlying asset on a date and at a predetermined price.
A warrant is a security that can be traded on a stock exchange and comes with an option right. This asset can be based on stocks, bonds, currency, goods, etc.
A futures contract is an obligation (for the buyer) to buy and (for the seller) to sell the underlying asset at a price set that same day for delivery later.
Have a long term vision
Investing in the stock market and increasing capital year after year are inseparable from a long-term vision. This allows you to invest money with less risk, which can potentially generate passive income.
The stock market offers many financial markets that allow its shareholders to earn an annual return of 8.7% over the long term. This is the most interesting investment support provided that you are well informed on the subject.
There are three key points to remember:
– Know how to identify trends using RSI (Price Velocity Monitoring Indicator),
– Do not trust any powerful people in the stock market,
– Focus on solid stocks that deliver long-term dividends.
Accept inventory fluctuations
Stock prices basically fluctuate based on supply and demand. In the event that several buyers wish to buy a security (creating demand) and not sell it (creating an offer), the price of the specified share increases. Conversely, if several people choose to sell rather than buy, the price of the stock falls.
Other criteria, such as macroeconomics, also play a role in stock fluctuations.
Some intermediaries immediately pay attention to the fact that their services are free, but this does not mean that your exchange orders will be free.
Before opening any contract for investing in the stock market, carefully read the general terms and conditions and prices in order to avoid unpleasant surprises.
Fees that may apply:
– brokerage fees,
– account maintenance fee,
– entrance fees for collective investments,
– transfer fee,
– Closing costs.