How to invest in the stock market online

Would you like to become a stock market investor? Investing is accessible to all, but requires some know-how and technical skills.

Becoming an investor in the stock market requires a lot of preparation. You must have a minimum of knowledge, since you will be risking your money. So, if you want to take your first steps in the stock market, here are some things you should know beforehand.

How to invest in the stock market ?

The stock market is no longer reserved for professionals. Even if the latter are still very present, there is far more space now for private individuals who do not make trading their main activity. To invest in the stock market, you no longer have to be physically present and  can do it at home in front of your computer. So, if you want to start investing in the stock market, you have to consider two essential elements : the right broker and the right assets.

How to choose your broker

There are currently a very large number of brokers, in France or in other countries. To choose a good broker, you must look at:

  • fees 
  • the security of your investments and funds 
  • the assets on offer

Comparisons are available on the web to help you make your choice.

Finally, you need to choose a broker that offers the assets you want to trade. Apart from the classic assets such as stocks, bonds or forex, derivatives like ETF, CFD, warrants or options can also be a good idea. There are even platforms that exclusively offer one asset class like Binance for crypto-currencies.

How to choose the right assets

A good investor should diversify their portfolio as much as possible in order to spread the risks and the chances of gains. But you can't track a thousand assets either: you'll be busy enough with 30 or 40 assets. So which ones should you choose ? We advise you to consider four criteria : your trading profile, your availability, your capital and your feeling.

What kind of trader are you ?

Knowing what kind of trader you are is important when choosing assets. If you are an occasional trader who wants to invest in a share savings plan for example, stocks or indexes are best suited for you.

What is your trading strategy ?

Day trading and position trading are two diametrically opposed strategies even though they are suitable for different assets. Day traders will focus on derivatives, for example, while the position trader will focus on stocks. The same will be true for any other trading strategy.

What is your capital ?

On some trading platforms, you can start trading with minimal capital, such as €100 or less. However, some assets, such as stocks, will only be accessible with substantial capital. This is why the amount of capital you have is crucial to your choice of assets.

The last criterion : instinct

After considering all these criteria, you still have to go by instinct. Between Google and Facebook stocks or between Dogecoin and Cardano for example, the choice is more subjective than logical. You can do your own analysis and draw your own conclusions or choose randomly.

How to invest in shares

As a beginner

Not having the time to devote to the stock market, or the skills to do so, is not a barrier to investing in stocks. We simply advise you to entrust your money to a professional. The easiest way to do this would be with a managed life insurance policy. In other words, you have an account where you will deposit your savings, and a manager will take care of making your money grow through investments in the stock market. The manager is generally a professional who does not take too many uncalculated risks. They are also remunerated according to the result or according to the volume treated.

As an intermediate trader

If you have some knowledge and if you have one or two hours per semester for stock market activities, you can opt for a share savings plan. You can also drop the idea of entrusting your money to a manager and decide on your investments yourself. Choose reputable companies to take advantage of the capital gains and possible dividends. But you can also diversify your investments, for example by investing in ETFs or leveraged derivatives. However, the latter may require a little more time on your part.

As someone who knows what they’re doing

If you have an advanced level in stock exchange management, invest directly on the stock exchange or directly via a brokerage site. Be aware that you must give time to this new activity if you really want to succeed. The time that you must devote to it depends, however, on the strategy that you will choose.

Four accounts for investing in the French stock market

The CTO, or Compte Titre Ordinaire

The CTO, or Ordinary Securities Account, is one of the best plans in France to invest in the stock market. It not only allows you to invest in stocks, but also in many assets like bonds, commodities, crypto-currencies, etc. On top of that, the CTO is very flexible. Your money is not blocked, which means you can make transfers to your current account at any time. Furthermore, the CTO has no geographical restrictions. You can invest in shares of companies all over the world.

Nevertheless, the CTO is excluded from tax reductions. Dividends and capital gains from shares and securities are indeed subject to the general regime, and therefore to the Flat Tax since 2018. Nevertheless, it is possible to opt for a progressive regime if your marginal tax bracket is low. Generally, it is also advisable to avoid dividends with CTOs, as they are subject to withholding taxes. Instead, you should opt for capital gains on shares.

The PEA, or Plan d'Epargne en Actions

The PEA or Plan d'Epargne en Actions is the best for tax advantages. Unlike CTOs, the PEA only gives investors access to European companies. In addition, the number of PEAs per person is limited to one. The PEA is only available to French residents. It is therefore inaccessible if you live outside France, unless you have your account when you were still a resident. Moreover, PEAs are limited to 150 000 €.

A PEA consists of an ordinary current account and a share portfolio. The current account serves as a deposit of funds prior to investment, as a purchase and disposal account and as a transfer of any dividends. The portfolio, on the other hand, contains the share and investment lines.

The PEA is also a tax niche that grants an exemption from income tax, provided that it is more than 5 years old. Before the 5 years, it is subject to the general regime and the Flat Tax. After that, withdrawals are subject to social security contributions of 17.2%.

The PEA-PME or Plan d'Épargne en Actions de PME

The PEA-PME or Plan d'Epargne en Actions de PME is similar to the classic PEA, but focuses on Small and Medium-sized Enterprises. The policy of introducing the PEA-PME was essentially aimed at the development of the economy through the financing of SMEs (Small and Medium-sized Enterprises) and ETIs (Intermediate-sized Enterprises). Like the PEA, it allows investors to invest in French or European companies. It is impossible to invest in other financial assets such as bonds or convertible shares. Unlike the PEA, the PEA-PME is limited to €75,000. Moreover, the taxation system is equivalent to that of the classic PEA.

Life insurance: a solution to avoid ?

Life insurance (assurance vie) is without doubt the least advantageous savings plan. Even if Life Insurance is not limited to shares, it offers far too low a return.

There are two types of life insurance:

  • euro funds, mainly invested in government bonds
  • shares, bonds or real estate.

With regard to management, there are also two types of Life Insurance: free management and controlled management. In the first case, you choose your own investments, and in the second case, you entrust your account to a paid manager.

The four rules of stock market investing

Clearly define your objectives, strategy and action plans and stick to them

For example, you should determine how much money you will invest before you start. According to the experts, you should only spend 10% of your savings on stock market activities if you are a beginner. Experienced traders, on the other hand, can go as high as 30%. If you're unlucky enough to lose everything, don't start dipping into your reserves again, telling yourself that the best is yet to come.

You should also decide, depending on your level and availability, which savings plan you should choose and which instruments you should use. By choosing certain strategies, you avoid, for example, regularly monitoring your account. For others, however, you are obliged to keep your eyes glued to the screen. Changing strategies along the way is possible, but it should be preceded by careful consideration.

Diversify your investments

"You shouldn't put all your eggs in one basket". This adage is still true in the field of stock market investment. Indeed, diversifying your assets allows you to protect yourself from important losses. Indeed, unless there is a stock market crash, several dozen assets cannot devaluate at the same time.

Having about 30 assets in several areas of activity is acceptable for a good investor. Also diversify the type of assets if your savings plan allows it. For example, you could hold a few stocks of several companies operating in different industries, then a few bonds, commodities and a cryptocurrency wallet.

Adopt an appropriate entry strategy

Even an expert cannot accurately predict the evolution of an asset price. Too many factors come into play, most of which are completely beyond our control. That's why you have to be careful when entering the stock market. There are methods that allow you to do just that, such as the DCA.

DCA or Dollar Cost Averaging is a method of spreading investment risk. DCA involves making regular purchases of the same asset at the same price without worrying about its value at each point in time. The frequency of purchases is generally between six months and one year.

Don't panic

In general, long-term investing is a winning strategy. If you have chosen this option, do not be influenced by temporary price drops. A share regularly experiences downward trends and corrections, but the average annual positive trend is still evident. Therefore, you should be patient.

Nevertheless, you must remain vigilant. Even if it has become rare, it can happen that companies listed on the stock exchange crash. If you don't react quickly enough, you can lose a lot of money. That's why it's best to invest in companies that can provide a certain guarantee, such as the CAC40 or other large companies on the international scene.

Is the stock market more profitable than real estate ?

Real estate investment is one of the top choices of investors, especially individuals. That is why this question is worth asking. In reality, if we consider only the criterion of profitability, the stock market, in a way, is largely profitable. However, real estate investment has other important arguments. In order to help you decide on the best investment, we will weigh the pros and cons of each type.

The advantages of real estate investment over the stock market

The main advantage of real estate investment over any other type of investment is security. Unless there is a war or a major natural disaster, real estate remains safe.

In addition, profitability is stable over the years. You can even expect rents to rise, and the value of the property to increase.

Real estate investing requires little knowledge of the business. Sometimes, a little common sense can be enough to determine whether a particular property is worth it. A stock market investment, on the other hand, requires expertise, time and effort. Less commitment on the part of the investor can make him lose a lot of money. Stock market investing requires constant monitoring and sometimes urgent decisions.

Finally, in France, most real estate investments give rise to tax benefits. It is even possible to invest in real estate without any contribution thanks to these advantages and the assistance of banks and financial institutions.

The advantages of investing in the stock market compared to real estate

To some extent, the stock market offers a much higher return than real estate. For comparison, real estate has a maximum return of 7% in France, a figure lower than the average return of the CAC40 index. Recall that in 2021, most cryptocurrencies have posted a value increase of over 1000%. Nevertheless, this high return hides another reality, that is the risk involved which is significant. Effectively, you can go broke in the stock market.

Moreover, the other advantage of the stock exchange investment is the availability of the funds. Indeed, in the stock market, at any time, it is possible to resell everything and to recover its liquidity. In comparison, selling a house or a building can be quite difficult. Finally, the return on a stock market investment is subject to taxes, except when it comes to the PEA.