The crisis due to the coronavirus pandemic has not discouraged you on the contrary and you want to take your first steps on the stock markets? You are quite right ! It is better to ignore the context and invest in the stock market as early as possible and over time, in order to take advantage of the returns on this asset class and smooth out the risk inherent in the stock market as much as possible.

In this article, find out what you need to know before setting foot in the stock market, the tools at your disposal to analyze the financial markets, the procedure to follow to buy your stocks and then determine when is the right time to resell. Finally, we unveil the 5 tips to follow from the Café de la Bourse to put all the chances on your side when starting on the stock market.

What are the prerequisites before starting an investment in the stock market?

At time start on the stock market, it is better to be aware of the advantages and risks involved in this type of investment. Indeed, even if equities show the best performance over the long term (they return on average 8.3% over 30 years and 13.7% over 40 years each year according to a study at the end of 2018 of the Real Estate and Land Savings Institute), they are also risky since the capital is not guaranteed and you are therefore not sure at all times that you can recover your initial investment. It is therefore essential when one wishes to invest in the stock market to consider this investment for the long term and not to devote to it the sums that one might need in the immediate or short term. We can even consider that we should invest in the equity markets, at least to start on the stock market, only money that we are ready to lose. In addition, your investments in the stock markets should represent only a portion of your wealth, which varies according to your degree of risk aversion. The more you have a risk averse profile, the more the part in investments with guaranteed or low risk capital (bonds for example) must be important and risky investments, such as equities or alternative investments (gold for example), must be be weak. Conversely, if you are not averse to risk, you can then devote a significant portion of your wealth to equities and other risky investments, provided of course that you always diversify your portfolio.

How to analyze the financial markets for a beginner in the stock market?

To invest in the stock market successfully, it is necessary to master the basics of financial market analysis. Beginners in the stock market should therefore be keen to learn fundamental analysis in order to select the stocks that interest them according to the strategy they have chosen to adopt: value, growth or dividends strategy. By studying the quantitative fundamentals (evolution of turnover, profit, main financial ratios, etc.) and qualitative fundamentals (possible competitive advantages, patent holding, quality of management, etc.), the investor will even determine whether the company in which he plans to buy shares is a good investment or not.

To determine the best time to buy or sell a security, it will be a good idea to turn to technical analysis. By studying the prices and volumes of transactions in a given security, the investor will be able to determine whether or not it is appropriate to sell his stock at any given time.

Fundamental and technical analysis are two complementary approaches that any novice stock investor would do well to combine to make the best possible investments.

It is possible to train in these two types of analysis but also in stock market investment as a whole via the numerous articles in the specialized press but also thanks to the offer of educational content from the various stock brokers who make available to new customers for webinars, white papers and seminars.

How to buy stocks?

The procedure for buy stocks is relatively simple. First, you will first need to open a medium that will allow you to house your securities: PEA, securities account or even life insurance via unit-linked media. Then, you will have to choose the stock broker who offers both the product on which you want to hold your securities and a choice of securities that suits you. Indeed, not all brokers give access to all the shares of all companies in the world and if you want to invest in a specific market, it is better to take this into account. Also, of course, compare the tools and services offered by the broker and the prices charged. Finally, once your financial intermediary has been chosen, all you have to do is place the buy and sell stock market orders for each security you want to hold in your portfolio.

Be careful, this obviously requires being using the interface of your broker and above all being well aware of the different kinds of stock market orders that you can use (limit stock market orders, Market at the best limit, stock market orders, stock market trigger orders, stock market trigger range orders, etc.) in order to choose the type of order that will perfectly fit your investment scenario. We advise you to familiarize yourself with the placing of an order, open a demo account and carry out a few order passages on this educational support before actually going public with a classic account.

Should we focus on French or foreign stocks?

It is tempting, especially when starting out on the stock market, to want to stick to what you know and to invest exclusively in the French market. Thus, many French individuals limit themselves to the CAC 40 and only invest in large listed French groups such as Air Liquide, L’Oréal, Total, or BNP Paribas for example. However, it is recommended, with a view to diversifying one’s holdings, in order to reduce risk, to invest in several different companies, from different activity sectors, with different capitalization (world leaders but also small and medium-sized enterprises) and also from different geographic areas (France, Europe, US, Japan, China, emerging countries, etc.).

It certainly makes sense to focus to a certain extent on a sector of activity and a geographical area that one knows well. The great investor Warren Buffett indeed underlines that “the risk comes from not knowing what one is doing”. But it is nevertheless essential to have a diversified portfolio, including in terms of the location of the companies held in the portfolio. The novice stock market investor must therefore ensure, from his first steps on the stock market, to have sufficient lines (number of securities held in the portfolio) and that these relate to companies from various sectors of activity and geographical areas. .

How do you know when to sell when you start on the stock market?

If the first thing a newbie stock investor thinks about is how to know which security to buy and when, it will also be important, at the very moment you buy a security, to know how to sell it.

Two major difficulties will present themselves to you. First, be careful not to keep a stock that is inexorably declining in your portfolio, hoping that it will rise one day without being based on tangible and concrete elements by trying to convince yourself of the validity of the famous saying “not sold, not lost “. Be careful, because “it is better to lose a hand than an arm”. Finally, you should also not resell a title too early and miss out on a significant gain. The best thing is to set a precise rule in your trading or investment plan, in line with your investment horizon and investor profile and resell a security as soon as it has exceeded x% of capital gain and y% loss.

5 tips from Café de la Bourse for a beginner in stock market

First, only invest money that you are willing to lose, at least in part, and that you don’t need in the short or medium term. Then, to start on the stock market you will need to invest little and regularly to smooth the risk of entering a higher. When in the stock market, also keep your investor profile in mind and build your trading strategy according to your investment horizon, your risk aversion and your investment objectives. Whether you opt for a value, growth or dividend strategy, always take care to choose your securities according to concrete and tangible criteria. Investing in the stock market on a whim is rarely a guarantee of success! Finally, stay calm and keep your cool no matter what. There is nothing worse than succumbing to panic when in the markets although this is more common than you might think, especially if you are new to the stock market.