Want to start trading but don’t know where to begin? Here are the top 10 tips for getting started in the stock market. Hang on, it’s starting!
Have a minimum of financial knowledge
To get started in the stock market, it is essential to have a strong knowledge base. To have a global vision of the market, to know all the products (stocks, bonds…) and to understand the links they have with each other. In order to get started in the stock market and to select the companies that will be profitable in the long term, as well as those that present the least risk, you must carefully analyze their accounts and understand their performance indicators.
Taking the long view to get started in the stock market
The best way to generate profitability is to invest for the long term and take advantage of the interest compounding. Short-term and long-term performance must be separated. It can happen that the market is down over 6 months/1 year and that it fluctuates but that the general trend over 10 years is upward. Theoretically, the growth in stock prices follows the growth of the real economy, but it increases over the long term.
Define your risk profile to start in the stock market
One very important thing to do to get started in the stock market is to define the maximum risk that you are willing to bear. This will allow you to choose products that are adapted to your situation. A risky profile can use products with leverage. On the other hand, if you have a low risk profile, it is in your best interest to invest in low risk products like bonds.
Choosing a trading platform to start trading
The choice of a trading platform is not insignificant for a good start in the stock market. You have to choose the one you are most comfortable with but also the one that offers the lowest possible fees! High fees reduce the performance of your investments. To start in the stock market, it is better to use platforms that provide personalized advice, so that they can accompany you throughout your investment.
Start trading with a virtual account
After the learning phase comes the practice! The safest way to start in the stock market is to practice without losing money… And it is possible! Thanks to virtual modes or demo mode that some platforms offer. This is a good way to start trading in real conditions and to help you identify your investor profile, as well as your weak points, before starting to invest your own money. We also advise you to familiarize yourself with the interface of your platform and to master its functioning before starting to invest.
Choosing the right investment medium to start trading
The investment supports like the share savings plan or the securities account are financial supports that allow you to buy financial products, like shares or bonds. They are suitable for starting out in the stock market. Each support has its advantages and disadvantages. The PEA can only contain OPC or European shares and benefits from a tax advantage but only after 5 years of holding. The securities account is a product which, of course, does not offer any tax advantage, but does not have any constraint on the length of holding or the type of product. As you can see, to get started in the stock market, compare the different investments and see which one suits you best.
Diversify your investments to start in the stock market
Now that you know the products and their supports, you still have to choose the right ones! The best way to limit the risk of losing money is to diversify your investment. In order to limit the risk, a portfolio should contain different products from different countries and sectors. This is not so simple… That’s why there are mutual funds that are managed by financial professionals and that create diversified portfolios for you.
Remain impartial in all circumstances
Affect is a threat that can impact the profitability of your investment. Sometimes an investor may become attached to an investment because he is a fan of the company or a sector. For example, a fashion fan might only buy stocks in the luxury sector like DIOR or LVMH. But by getting too attached to one type of product, you may be swayed and have a hard time selling it when profitability drops. So don’t forget that to start out in the stock market, you must remain totally objective!
Learn to manage your emotions
Managing emotions is essential for any investor. In order to get started in the stock market, it is important that you control your emotions in order to avoid making decisions that are not well thought out and that can lead to a financial loss. There is a science that uses physics to try to understand the behaviors observed in finance, it is called behavioral finance.
Investing your sleeping money
Investing in the stock market involves risks of capital loss. For some products, it takes a long time to recover the available capital. This is why you should only invest the money you do not need to live, because your money is not guaranteed and is not always available immediately in case of a hard blow!