Investing in the stock market is not innate. Individuals often express some reluctance to position themselves on the stock markets. It must be said that investing in shares, often little known to the general public, is scary. However, it would be wrong to stay away from this particularly profitable asset class.
To get started on the stock market and succeed in your investments, some precautions are necessary.
Here are some Valuable tips from SPV Mortgages for getting started on the stock market by putting the odds on your side:
The first thing to do when you want to invest in the stock market is to determine how much you can devote to this type of investment.
Do not, therefore, place the money on the stock market that is required for the renovation of the building planned for next year or the money you intend to pay the rent.
If the investment must relate to a portion of your capital that you do not need, this does not mean that you must necessarily be rich to invest in the stock market. Indeed, you can invest relatively small amounts in shares.
The most interesting thing is to regularly invest small amounts to smooth out the risk linked to the timing of the financial markets. Thus, even if you have to start on the stock market on highs, by spreading the payments over a long period (several years), you will be only slightly impacted by an entry point at the highest.
Once you have defined the sums you can invest, it remains to know where to place them. There are several options: the different geographic sectors, and the different sectors of activity are all possibilities to explore.
However, you must respect a golden rule: invest only in markets and in sectors that are familiar to you. It is absurd to position yourself in the Southeast Asian markets if you do not understand anything about them, just as it is not wise to invest in the Tech sector if you do not have a smartphone and do not know how this type of device works.
It will also be relevant to take into account your investment horizon and your risk profile. Indeed, there is no need to position yourself on small stocks in the Biotech sector if you are risk-averse and have a medium-term investment period in mind.
Investing in the stock market in listed heavyweights will make more sense. On the other hand, if you accept the risk well and your investment period is long-term, you can then consider looking at small and mid-caps to boost the performance of your portfolio.
In the stock market, zero risk does not exist. There is a risk of capital loss and you may therefore end up with a smaller sum than that initially invested. Earning money is not systematic.
The price of shares constantly fluctuates in the financial markets. The investor will therefore see his capital appreciate or depreciate in correlation with these fluctuations. The macro-economic context and the company’s outlook are vectors that sometimes have a considerable influence on share prices.
However, there are several solutions to minimize the risk. First, as you have seen previously, you can invest regularly and gradually.
Secondly, you will take care to respect the basic rules of diversification. It will therefore be appropriate to invest in companies from different sectors of activity, from different geographical areas, with different capitalization sizes.
It will also be in the investor’s interest not to invest only in equities but to also position themselves in other asset classes such as real estate, bonds, commodities (gold in particular), and to keep some cash in the portfolio.
The objective is to diversify your portfolio as much as possible so that there is the least possible correlation between the different elements that make it up.
Finally, it is better to invest in the stock market to master the various stock market orders and know how to protect your positions by means of stop orders and trailing stop orders.
The most seasoned investors can also use stock market products or derivatives to hedge their portfolios in the event of an anticipated fall in the markets.
It would therefore be wrong to deprive yourselves of the return offered by the equity market. You can find a lot of bad excuses not to invest in the stock market, it’s too complicated, it’s a waste of time, and it takes too much time. In reality, it is quite simple and has never been so simple.
The rise of online brokers that simplify investment and make it more affordable, and specialized online media providing advice to individuals wishing to start on the stock market has facilitated access to equity markets for everyone.
The Buy & Hold strategy, the simplest to implement, is also effective. Ideal for getting started on the stock market, it consists of acquiring securities with a view to holding them for a long time.
It is, therefore, necessary to carefully select these assets and buy them at the right price. This practice also prevents you from devoting too much time to your investments and from enriching your broker or bank unduly by multiplying the orders.
Since you know how to dare to invest, you also have to know how to get out of your positions. Be careful, you will not sell your shares as soon as the price drops.
You should get rid of an asset when the fundamentals are no longer good. If the security reasons you acquired no longer exist, it’s time to sell.
Too many novice investors believe in the saying “not sold, not lost” and bet on a hypothetical rise. Be careful, know how to recognize that you made a mistake or that the company has evolved unfavorably.
It no longer has the competitive advantages on which you bet, its international growth has been a fiasco, etc. The reasons for a trend reversal can be many. Identify them and sell them where appropriate.
Knowing how to get out of your investments also means knowing how to take profits and sell when the objectives have been reached. Beware, however, of the shortfall caused by the premature exit of a good investment.
Name – Jonathan Veers
Bio – Jonathan is Founder of SPV Mortgages. SPV Mortgages can help you find the best limited company mortgage options to push your property investment dreams forward. We can help you unlock the door to more profitable buy-to-lets via the tax-efficient route of limited company mortgage products. SPV Mortgages offer holiday let mortgages for limited companies with affordable, flexible and high-LTV holiday buy-to-let mortgage solutions.