Does investing your money in stocks pay off? This guide answers that question and gives you some tips on how to get started in the stock market.
The best-performing companies generally record a 10% annual increase in the value of their shares. The results of the 40 best French companies listed on the stock exchange and grouped in the CAC 40 bear witness to this percentage. In 5 years and despite the health crisis, the index of this asset has risen from 4400 to 6900 points.
Owning a share in one of the companies that make up the CAC 40 is appealing to many investors. Are you one of them? Here is some relevant information that will help you take your first trading steps.
Simply put, investing in a company's stock means becoming a partial owner. Owning 100 shares of a company with 10,000 shares outstanding means owning 1% of it. You earn the right to receive a portion of the dividends when you want them.
According to the company's logic, your share of dividends is proportional to your shares, so 1%. But in reality, you will earn a little less or nothing at all for various reasons. This is what happens when the company's board of directors decides to reinvest everything.
Stock markets allow you to buy and sell stocks. The price of a share changes from one second to the next, according to the law of supply and demand. The value of a company's stock also changes over the medium term.
This evolution depends mainly on its overall performance and the dynamics of its sector. These multiple upward and downward variations lead to speculation by the various market players.
In reality, the stock market is not limited to company shares. Many financial securities are also traded, including bonds, currencies, commodities, and derivatives. However, it is best to stick to stocks when you are new to trading. This is because stocks are the essence of the stock market and are more accessible to beginners.
Only a few companies choose to be listed on the stock market. This option is neither an obligation nor a necessity for a company. Companies are free not to make their stocks available if they wish. Some companies still appeal to investors through traditional channels such as public announcements. Going public has several advantages, but also comes with risks.
Going public has various benefits, including the possibility of raising equity capital. At the same time, they can bring in liquidity. Being listed on the stock exchange also improves a company’s reputation with partners and customers, as it can be perceived as a guarantee of stability.
Disadvantages include the risk of losing control of the company through takeovers and public offers. Some companies also dislike having to make their accounts and business information public. In addition, IPOs can be costly for the company and end in failure. Many companies have ventured onto the stock market before withdrawing after a few months.
Bying stocks on the stock market is more difficult than it sounds. The number of shares issued by a company is usually lower than the number of potential buyers. For this reason, there are several ways to buy shares on the stock market. Here are the main three:
This is the most basic way to buy a company's shares.
Example : Shares in the company OVHcloud have been put up for sale and you have bought some. You have therefore just bought individual shares, making you a shareholder of the company. You can sell all or part of your shares at any time.
If you still own the shares when the company decides to share dividends, you will be among the beneficiaries.
Buying individual shares is easy. You're informed about what's going on and have better control over your investment. It is also easier to research and monitor the news of a single company. Finally, the percentages and management fees charged by brokers are generally lower for investments in these stocks.
From another point of view, better control of your investment also means better monitoring. Individual stocks generally take time to track. Similarly, this type of stock is often associated with more risk compared to other types of stock investments.
This type of stock is best suited for true professionals. If you don't think you're ready yet, it's best to look at other types of investments. Nevertheless, note that there are two types of companies listed on the stock market:
An investment fund is a collective holding of financial assets. This means that when you invest in a particular fund, it will invest your money in other assets. Let's make it clear from the outset that the ETFs we'll look at in the next paragraph are investment funds. It should be noted that they operate under a special regime, different from ordinary investment funds.
Generally speaking, investing in investment funds is profitable, even though there is always a risk involved. This is because these funds have experienced and successful professionals who will trade for you, as it were. Their objective is to beat the market, i.e. to post profits above the market average.
These experts have a double obligation: to make profits for themselves and to make profits to pass on to you. The main advantage of investment funds for the trader is therefore the possibility of working less to earn more.
The main disadvantage of mutual funds is that they are not as profitable as other equity investments. After all, profits have been split. You can earn much more by investing your money yourself, provided of course that you make the right investment.
This type of investment is reserved for those who want to invest but do not have the time to do so. They have to look for an efficient investment fund and entrust their money to it. They may only make small profits, but the risk of loss is controlled.
ETFs, or Exchange Traded Funds, are among the best known derivative products. These assets have grown considerably in recent years, mainly thanks to their ease of access.
ETFs are undertakings for collective investment in transferable securities or UCITS. They are associated with an asset or a group of assets traded on the stock exchange as a single share. The value of the CAC40 ETF for example reflects the value of the index in real time. This gives the various players in the market the opportunity to speculate.
For example, it is possible to trade ETFs that represent the stock of BNP Paribas. The investment firm in question holds several shares of BNP Paribas. It then puts them back on the market in the form of ETFs. The advantage of the system is that it makes the BNP Paribas share accessible to a retail investor.
The main advantage of ETFs is therefore the ease of access, especially compared to individual stocks. For a beginner, ETFs are the ideal option. Like any asset transaction, there are also fees associated with buying and selling them. However, these are lower compared to the fees associated with traditional stocks.
Most trading platforms charge you less than 0.5% in annual management fees. In addition, some ETFs can be associated with securities accounts and may be eligible for tax benefits.
The main drawback of ETFs is that not all assets are available in this form. Similarly, the trader will not always have access to the combination of assets they want. Indeed, the associated investment funds that decide to issue ETFs do not have access to all of these assets. There are some securities that will never be converted.
ETFs are interesting, but you need to understand how they work. ETFs are especially suitable for beginners, but you just have to be careful with the different combinations. First and foremost, you need to research the assets that make up the ETFs and keep a constant watch on the industry.
It can be difficult to choose between the available trading platforms. Whether eToro, AvaTrade, Lebertex or XTB, each one has its pros and cons. Here are some criteria you should look at before making your choice.
Note : On most trading platforms, you have the option of signing up, running simulations and going elsewhere if you are not satisfied.
You must make sure that the platform gives the right guarantees for the security of your funds. Opt for those that have the approval of organizations from reliable countries such as France, Germany, the United Kingdom, the USA, etc. In France, these are the AMF or Autorité des Marchés Financiers and the ACP or Autorité de Contrôle Prudentiel.
The more assets you have, the more choice you will have for diversification. In general, you should avoid platforms that offer few assets. This option is only sensible if you open accounts on several platforms to compensate. However, this means more work for you.
There are fees associated with trading and owning assets, such as commissions, transaction fees or spreads. This is how trading platforms make their profits. There are also other fees such as account maintenance fees or inactivity fees. You need to take all of these into consideration when choosing a platform.
Trading platforms are constantly offering new features to their customers. Copy trading, alerts, news and expert opinions are just some of the features that are becoming more common.
Before you decide, take a look at the different platforms. This will allow you to make a comparison, taking into account your own needs before making your choice.
This last point is very important. Make sure that the customer service of the platform you choose is efficient and satisfactory. The response time, the way of answering or the ability to solve problems are all criteria that you should consider.
Arya Trading is a software program, or more exactly an Expert Trader, that allows you to automate your trading. Arya Trading is neither a broker, nor is it associated with a particular broker. On the contrary, it allows you to connect to several trading platforms.
Arya Trading allows you to automate your trading while limiting the risks associated with markets and human errors. Arya Trading provides tools that can help you be more successful.
Among these tools, you have the possibility of keeping an eye on several assets at several brokers in order to have a better control of your investments.
There are obviously different strategies for investing in the stock market. However, if you are a beginner, you need to choose the right one for you. Here are four very simple strategies that a beginner can adopt.
This strategy consists of buying several shares of several companies and holding them over the long term. It is a strategy that almost always pays off, provided you choose the right company. Its effectiveness depends on the performance of the companies in question and their ability to grow. Indeed, the value of a company's shares is always higher in the long term. This is true even if the company has experienced less favourable periods during its history. This strategy is ideal for occasional traders who can't really devote much time to this activity.
This strategy consists of investing in assets that are in an upward trend. This can be effective in certain situations, but there is no guarantee that the trend will be permanent.
You may need to set some warning rules and consider selling if a downward trend starts to become more widespread, for example. You should also be on the lookout for any news about the company and its industry and watch for any signs. Your profits are based on the capital gains from the sale.
This strategy consists of using economic and other indicators to anticipate the slightest variations in the price of certain shares. This strategy is therefore based on speculative logic. You must buy and sell frequently, and sometimes take risks. Your profits are based on capital gains and losses on resales. This also implies that you have to spend time monitoring.
This strategy consists of investing in stocks in order to reap the dividends. This is a fairly standard strategy, similar to investment in an unlisted company. It just gives you a little more freedom because you can sell the stock at any time.
Investing in the stock market is an excellent idea, provided you understand how it works. You need to keep a close eye on stock market news in order to detect the possible risks and to react appropriately.
To give you a helping hand, here are 4 reasons to invest in stocks :
We are not talking about risky derivatives like binary options, but rather individual stocks and stock market ETFs. In general, these investments are profitable as long as you choose wisely which companies to invest in.
If you invest in a company like Amazon or Total, it is very unlikely that you will lose money. As we've already seen, there are a number of strategies you can adopt to maximize your gains.
A company's stock doesn't fall overnight for no reason. Usually, it is because of a trigger that you can anticipate. However, you need to keep a constant eye on the news and know how to anticipate any downfalls. The other advantage of investing in stocks is that you almost always win in the long run. Indeed, companies often know how to turn around after a decline in performance.
If you invest in real estate, you can't easily withdraw your money. You have to find a buyer and you're not even sure you're getting a good deal. But when it comes to stock market investments, you can withdraw your funds at any time. Your NAV or Net Asset Value is known in real time.