Top 5 tips for investing in the stock market

Set your budget correctly

In order to invest well in the stock market, there are a few golden rules: you must first summarize your monthly income and cash outflows to fully understand your financial management. To do this, plan your future projects and the cost they represent.

It is important that you provide some of your assets (savings account) that you may need in the near future. You can then invest the remaining amount in the stock market product.

Diversification of investments:

Fund investments are divided into 3 families.

Individual stock securities

Individual stocks are the most common investment in the stock market. By buying shares, you own part of the company and, therefore, potentially receive part of its profits, dividends. If the stock price rises, 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 a financial debt that generates interest at a fixed rate for its owner. They are a great risk-free investment, but their profitability is now very low.

Collective investment

These are investments that allow you to combine the savings of several investors in an investment fund managed by a management company. Collective investment allows you to have a diversified portfolio without having to choose the constituent securities. There are two types: classic funds (SICAV type) and exchange traded funds (ETFs), which duplicate the stock market index.

Derivative products

Focus on the three most common derived products.

An option is a contract that gives its holder the right (but not the obligation) to buy or sell an underlying asset at a date and at a price set in advance.

A warrant is a security that can be traded on a stock exchange and to which an option right is attached. This asset can have a stock, bond, currency, commodity, and so on.

A futures contract is an obligation (for the buyer) to buy and (for the seller) to sell the underlying asset at a price fixed on the same day for delivery at a later date.

Have a long-term vision

Investing in the stock market and increasing your capital year after year is 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 8.7% of annual income in the long run. This is the most interesting investment support provided there is a clear awareness of this issue.

There are three key points to keep in mind:

– Know how to identify trends using RSI (price rate monitoring indicator),

– Do not trust any influence on the stock market,

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

Accept stock fluctuations

Stock prices vary, in principle, depending on supply and demand. If several buyers want to buy a security (creating demand) and not sell it (forming an offer), the price of the stock increases. Conversely, if several people choose to sell rather than buy, the stock price falls.

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

Limit costs

Some resellers are quick to point out that their services are free, but this does not mean that your stock market orders will be free.

Before opening any stock market investment contract, read the general terms and prices carefully to avoid unpleasant surprises.

Fees that may be charged:

– brokerage fees,

– account maintenance fee,

– entrance fees for collective investment,

– transfer fee,

– closing costs.