How to get started in the stock market: our tips in 2022

Things to do before investing in the stock market

Before going public (which will be the subject of the second part of our article), we have some recommendations for you:

1) Define your investment horizon

It is essential to know how much time do you have to invest. Typically, if your time horizon is long, you can afford to take on more risk (eg selecting stocks with part of your portfolio if you believe in certain companies, investing in more volatile sectors like the Nasdaq…). If your the investment horizon is less than five yearsthen there, you will have to limit your risk and choose large panels of shares (a global ETF, for example) and be vigilant by quickly taking your capital gains if they suddenly increase.

2) Define the risk you are willing to take

Logically, when you invest in the stock market, you are aware that there are risks. Thus, if you do not feel very comfortable with this, and if you define yourself more as a defensive or balanced-defensive profile, we advise you to invest a limited part of your capital through life insurance (for example, 30 or 40% ) in ETF-type funds, and the rest in funds in euros. And for those who, moreover, do not want to invest in the management of their portfolio because the stock market scares them, we recommend managed management: we have dedicated an entire article to the choice of mandated management.

3) Choose an investment technique

There are three ways to make money in the stock market:

  • Invest for the long term and recover all the added value at the end: This is a very good technique in our opinion for people who have many years ahead of them, for example those who want to invest for their retirement. Statistically, the stock market always goes up if you have an investment horizon of more than eight years. Therefore, by investing the same amount every year or every month, reinvesting the dividends and not withdrawing part of your investment, you will surely be a big winner in the end, despite the ups and downs of the market.
  • Focus on dividends : It is a slightly more controversial technique, but some people prefer to ensure a nest of savings on a regular basis and only buy shares with dividends (Total, for example, is known to separate a dividend every three months). But it should be noted that every time a company pays dividends, it does not use this money to invest in the future and its growth, so not everyone agrees with this technique.
  • Swing trading or short term investment : For those who have free time, they can try to beat the market by buying and reselling. The goal: buy low and sell high. This technique is the riskiest of the three, as even professionals fail. Remember, if it was that simple, everyone would be doing it! Short-term investors rely on technical analysis, which can sometimes be misleading: market movement is always unpredictable. And in the case of buying at the wrong time, it can be tempting to choose to sell at a loss in order to buy back down… at the risk of seeing the stock rise after you’ve sold.

Getting started in the stock market: the steps to follow in practice

Roadmap to investing in the stock market for beginners

Let’s get to the heart of the matter: how to start in the stock market, specifically? Here are the quick steps you’ll need to take before you get started:

  1. Choose the most appropriate fiscal envelope
  2. Choose the best broker and open an account
  3. Choose the type of stock to buy (ETF, securities, etc.)
  4. Place orders and schedule automated orders
  5. React in a crisis and know when to sell

To support you in the best possible way, we will go into detail about each part.

The different envelopes to invest

AEP (Equity Savings Plan), CTO (Ordinary Securities Account), FOR (Retirement Savings Plan) or life insurance : Surely you have already heard of these four fiscal envelopes. And for good reason: these are the four ways to access the stock market. Two points will allow you to make a choice:

  • Do you need your money to remain available? The PEA is blocked for five years, for example, and the PER, until retirement
  • What taxation do you want for your investments? For example, the CTO does not provide any advantage when the PEA, life insurance, and PER each offer different tax breaks.

There are also other details that come into play when choosing between PEA, life insurance, securities account and PER, so here is a summary table that will help you in your choice:

account titlesAEPLife insuranceFOR
how long money is locked

None

immediate availability

5 years

closure of the plan in case of
early retirement

None

but nothing

tax benefit
before the age of 8

until retirement

but early unlock possible
Under some conditions

Tax benefit

Do not

From 5 years,

tax exemption
on capital gains

(i.e. 12.8% in total
instead of 30%)

From 8 years,

tax exemption
on capital gains

within the limit of €4600/year
(i.e. 12.8% in total
instead of 30%)

deduction of sums
paid of the total taxable

accessible product

All the products

except funds in euros

Limited to European shares

Depending on the chosen broker

no by-products

Depending on the chosen broker

no by-products

recommended duration

Long term or short term

More than five years

more than eight years

more than ten years

Succession benefit

Do not

Do not

Yes

Yes

for PER insurance

Do not

for bank PER

Cost associated with the product.

Do not

in some corridors
otherwise cheap overall

little expensive

in some corridors

Between 1 and 2%/year

according to runners and profile

Between 1 and 2%/year

according to runners and profile

Piloted management possible

Very rare

Weird

Frequently

Frequently

Selection of the best brokers

eToro broker

BforBank PEA

Life Evolution Contract

by perlib

Which broker to choose?

The choice of broker obviously depends on the tax envelope you have chosen. There are brokers that only make securities accounts and not PEA, some that have started PER… Detailing everything that needs to be taken into account in a broker would take up too much space in this article, so to make your choice, we recommend our articles specialized:

For beginners in the stock market, the eToro platform can be ideal for investing: in fact, it is a social trading platform. Therefore, you can copy the investment strategies of the most famous traders whose investment strategies are similar to yours. Thus, on the screen, thanks to the “Copy People” button, eToro offers you various traders recognized and appreciated by the community. But beware, if this can teach you certain techniques and make you gradually enter the stock market toilet, the risk does not decrease as there is always the possibility that the copied trader will make mistakes!

Discover our analysis and our opinion on eToro.

What if you don’t want to manage your shares yourself? managed management

The people new to the stock market they may be afraid of having to manage an entire portfolio themselves and react to market prices. That is why there is directed managementideal for beginners in the stock market

Guided management is letting a manager take care of your investments. Thus, it is the professional who will choose the funds to invest in, who will carry out the arbitrations… You will not have to make any decisions! Before signing the arbitration mandate, you will answer a questionnaire so that the professional knows what risk you are willing to assume. Some even offer predefined profiles: cautious, balanced, bold, dynamic, offensiveor profile 1/10, 2/10, 3/10, etc.

But before choosing a managed broker, you have to check the costs : In fact, some take advantage of this to hide costs all over the place (envelope costs, managed management costs, fund costs, etc.), which hurts performance. We recommend brokers like Yomoni or Nalo, tested and approved by the team, where the fees are very clear and low. In addition, they invest in ETFs and not in funds, which drastically reduces the cost of the contract.

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