How to start investing in the stock market?

 While investing in the stock market may seem intimidating at first, it could be the key to achieving your financial goals. Unless you win the lottery or create a successful business that you can sell, buying stocks that increase in value over time is usually the easiest path to wealth.

After all, the Livret A yields a paltry 0.5% per year while the average stock market return is about 10% per year before inflation is taken into account.

Unless you want your money to languish in a savings account where it loses value every year, learning to invest in the stock market should be at the top of your to-do list.

6 Steps to Start Investing withinside the Stock Market

But how do you get started with investments that seem complicated and likely to leave you with less money than you started with? Here are some important steps to follow to get started.

1. List your goals

  • Ask yourself what you hope to achieve by investing in the stock market. Here are some examples of investment goals:
  • Make a quick buck by investing for the short term and selling the shares at a higher price,
  • Create a passive source of income that you can use later,
  • Increase your investment income to cover your retirement, or
  • Save money for a specific goal.

When you list your goals, make sure you have the money to invest regularly, while also setting aside money for emergencies. If you have a lot of credit or other high-interest debt, you might even consider paying it off before you start investing. After all, the average interest rate on a car or consumer loan is 2.40% and this will give you more cash to invest later.

2. Start by opening a life insurance policy to prepare for your retirement

Before investing in the stock market and after having created precautionary savings, I recommend you open life insurance.

You can invest your money securely or more dynamically depending on your age and character. Life coverage is a long-time period investment. It allows you to make your capital grow and to benefit from tax advantages. Do not forget that if you invest dynamically thanks to the units of account, you have a risk of loss in capital. If you do not want any risk, choose the euro fund which is secure.

You have different actors who offer good life insurance. Fortuneo if you want to manage your investments alone ( 100€ offered with the code 12580163 ), Nalo if you want to delegate the management or Goodvest for ethical savings.

3. Open an account with a broker

In addition to investing for retirement, you can also open a brokerage account. You won't get immediate tax benefits by opening a brokerage account, but you will have the opportunity to shop for and promote shares and different securities or purchase and maintain them for the lengthy term. 

There are some great brokers for beginners or experienced investors, many of which allow you to invest to some extent without fees. I recommend 2 of them:


4. Compare costs and fees

After choosing your broker, you need to decide what to buy. If you choose to buy investment funds or ETFs, you will need to compare the fees and costs associated with these different investment vehicles. The fees and costs to watch out for are:

  • Investment management fees. These fees can be nonexistent or as much as 1% of your account balance (or more).
  • Expense ratios. Specific funds, such as index funds or mutual funds, may have these fees.
  • Transaction fees. You may pay a transaction fee when you buy or sell a stock or other security.
  • Front-end load. This fee may be charged upfront on some investments.
  • Annual account fee. These are fees that are simply added to the use of your brokerage account.
These are just a few of the major fees to be wary of, but there are many others.

5. Start with easy investments

You've probably heard about the "hot stocks" of recent years, and how investors who got in on the act got rich by being in the right place at the right time. Unfortunately, most "ordinary" investors don't hear about the hot stocks until it's too late.

As a beginner investor, it's usually best to keep your trading strategy simple by investing in what you understand. Exchange-traded funds (ETFs), which are made up of various investments that track an index or focus on a specific industry, are investments to consider for beginners. You can even stick with index funds, which are another type of investment that tracks an index and requires no input from the investor.

6. Do your research before jumping into complex strategies

If you are curious about more complex investment options, you will need to learn more about how and when to invest. Resources to check out include books on investing, such as:
  • The Stock Market for Dummies by Gerard Horny
  • The Magic of Dividends by Raphael Carter
You can also consult investment forums and take the time to read the questions and answers from investors. Be careful, sort out the answers.

In summary

Investing in the stock market can be scary, but starting with common sense investments (e.g. life insurance) and simple investments (such as ETFs) will allow you to slowly learn the process.

Over time and with more experience, you'll have a better sense of when - and when not - to steer clear of the risks of the stock market.

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