How much should you invest in the stock market ?

Before investing in the stock market, refine your strategy. Being thorough and professional will help you grow your investments.

The volatility of the stock market dissuades many investors, who find out too late that assets lose value as fast as they gain it. Other traders, however, take advantage of fluctuations to optimize their investments. With the right strategies, they are able to make huge profits. Read this article for our tips for successful stock market investments ! 

When it comes to the stock market, invest money you are willing to lose!

Keep in mind that investing in the stock market is not always rosy. This type of investment is risky by nature. The odds of success and failure are on a par in this environment.  

The solution is to minimize risk by investing only money you are willing to lose. Avoid investing funds destined to your education, or even your entire savings. If you do, you risk being left out in the cold if your attempts fail. 

The 4 rules of investing in the stock market

Despite the risk of loss, the stock market can give you much higher returns than savings books or traditional investments. This is possible if you apply the right strategies.

Allocate a reasonable budget

Before you start trading, determine the budget you want to invest, which should remain below 30% if you want more security.

The capital that you will invest in the stock market depends on the objectives that you will set for yourself and therefore on your profile. If you are looking for strong performance and therefore very high percentage gains, a small capital can do the trick. Nevertheless, remember that you will have to increase your risk.

With a large capital, you don't have to aim for impossible performances to be satisfied. For example, in order to generate $5,000 in gains over a year, you would only need to achieve +5% performance with $100,000 invested. Say that with 1000€ of capital, it would be necessary to make +500%!

Of course, we do not all have 100 000€ to invest in the stock market, but understand that a small capital will not be appropriate in the long term, it is important to increase it.

Diversify your portfolio

Do you want to limit the risks of the stock market ? Think about diversifying your portfolio by:

  • Avoiding investing only in one company, because its financial health does not depend on your will,
  • Investing your fund in different financial assets (e.g. 1 or 3 trackers, 1 to 5 crypto-currencies, 2 managed life insurance policies...).

For example, diversification allows you to take profits from one asset when you have losses from another.

Apply the DCA method (progressive and programmed investment)

Appreciated by wealth management professionals, this method protects you from the volatility of the stock market. It encourages you to spread your investment out every month (or two months), instead of doing it all at once. 

During a downward trend, this method protects your savings from market fluctuations. During an upward trend, on the other hand, you continue to enjoy the benefits.  

Stay calm

In the stock market, downward trends are pessimistic, but not impossible. In this case, don't get carried away or even discouraged. The key is to remain patient in order to avoid making bad decisions.

Get informed and train up before you invest!

Long considered inaccessible, the stock market is now within reach of everyone. However, before investing in it, you must first educate yourself.

Many sites offer training courses according to your level of experience (beginners, intermediate or expert) that support you throughout your journey. And above all, they advise you on the ideal amount to invest in the stock market, the choice of broker, or what to take into account when investing in stocks. 

As a trader or investor in the stock market, remember to stay informed about the news. Focus specifically on factors (celebrity statement, fuel prices, etc.) that can influence the price of a particular stock or asset. By doing so, you reduce the risk of losing your investment in the financial market.

Why is it a good idea to invest in the stock market?

It’s good way to grow your capital

As risky as it may be, the stock market allows you to grow your money. Moreover, you don't need to have a huge investment fund to get started! Even with 100 euros, you can start your trading journey. There are two investment options available to you:

  • Investing in shares which you can then use to earn dividends or capital gains
  • Buy bonds to earn interest

In both cases, investing in the stock market helps you to optimize your assets, or to better prepare for your retirement for example.

It’s an excellent way to profit from the performance of an index or a financial asset

The stock market offers various investment options, as you can quickly buy and sell financial assets.

You can also invest for the long term on the stock market. You can do this by buying a tracker. This is a fund that mimics the performance of a stock market index such as the CAC 40. According to the figures, the CAC 40 has an annual return of 8.5%. A percentage that represents an investment potential not to be neglected!

Obviously, you also have the choice to bet on other markets, such as Forex, commodities, cryptocurrencies...