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, fears of a recession, galloping inflation, and tightening of monetary policy by central banks to try to stop rising prices. Enough to dissuade the less reckless from speaking in public. Although stocks remain a risky investment, simple rules can still reduce risk and make investing more secure.

First, it is important not to buy any shares and not to engage in complex operations by subscribing, for example, to derivative products. “To debut in the stock market, you should always try to do simple things that you understand,” explains Stephan Van Huffel, managing director of wealth management consultancy Netinvestment. In particular, he mentions the emergence of trading platforms open to the general public, which can lead certain investors, due to the temptation of profit, to take risks that are disproportionate to their level of knowledge of the market.

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Choose different entry points

Stefan van Hafel advises to “invest wisely”. An investor should not get carried away with his emotions and sell everything when prices start to fall. Don’t buy full price as soon as they go up in price. Also, when the markets have already fallen and prices are low, it is possible to buy at a good price because the stock has lost much of its value. When prices rise, capital gains can be realized.

“An investor can invest on a regular basis, choosing different entry points,” Stefan Van Huffel also emphasizes. Therefore, he recommends investing your savings gradually and not investing all the money at once. For example, if you have €5,000 to invest, you can spread your payments into quarters. Investing your money gradually is a way to limit the impact of volatility on your investments and “smooth out” market swings. It is also a way not to risk investing all your money at the worst moment, right before the crash and sudden drop in prices.

Diversify your investments

In the stock market, it is also important not to put all your eggs in one basket. This saying means that you need to diversify your investments by not investing money in one company or a very limited number of securities, but rather by integrating several actions into your portfolio.

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

You can also manage 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 not invest 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 as a priority in companies that communicate with you, whose business you understand,” recommends Stephane Van Huffel of NetInvestissement.

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Choose the right investment envelope

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

A stock accumulation plan will allow you to benefit from income tax exemption after five years of holding your investment. But your earnings (capital gains and dividends) will be tax free provided you don’t make any withdrawals during those five years. And the variety of relevant securities will be more limited, in particular you will be able to invest only in European shares.

Finally, the units of account (UC) of life insurance contracts with multiple supports allow you to invest in several equity funds and sometimes directly in the company’s shares. Alternatively, you can also invest your money in bond funds and some of your money in a capital-guaranteed Eurofund to limit your risk of loss. After eight years of contract, you will benefit from tax relief and an annual bonus of €4,600 on top of your earnings.

In any case, investing in the stock market is recommended for the long term. In the short term, from one year to the next, you can easily post a loss, while over the course of 5 years, 10 years, or more, your chances of profit will be higher because stock markets tend to progress over the long term.

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