Many of you want to diversify your investments and want to go public. Before doing so, we recommend these 6 tips co-written with Boris from Investir-a-la-bourse.com
1 – Invest only the money you are willing to lose
Investment advice is not to invest money for which you have an immediate need. In terms of stock market, the story is still different because it is an investment with higher risks.
Do not invest the savings for the studies of the youngest. The best way to be a good trader is to have an analytical and detached approach. If you are too focused on your losses you will make bad decisions especially guided by fear.
2- Think long term and invest yourself
Doubling your bet in a few weeks can happen, but will be more of a chance than an example of the performance you expect from your investment. The stock market is certainly volatile but over the long term trends are found and a balance always ends up being made.
In addition, the stock market requires a lot of time to train. It is a complex market in perpetual evolution. Throughout your life as an investor, you will have to continue to analyze, observe and train yourself. It is a key condition to become a winner.
You are therefore warned, do not invest in the stock market if you are looking for a short term investment or you have very little time to devote to it. Or choose an investment managed through mutual funds.
3- Keep a trading log
To be rigorous and make sure you only do thoughtful actions, create a trading book. What is it ? This is your investor diary. With each investment, you describe in detail why you make this investment and the plan to execute. Why did you buy this action? What is the expectation in terms of income and in what time frame? What are the risks and do you expect a stop-loss?
If you decide to change plans and sell earlier than expected, you will have to explain it. This methodology forces you to always think about your investment actions. It often puts the investor in the face of his own inconsistencies, such as when he reacts too quickly to a column he reads in an economic paper.
It forces you to rationally analyze each of your actions. Scrupulously keeping a trading log will make you a much better trader.
4 – Binary options and forex are not the stock market
It’s always good to remember, binary and forex options are extremely volatile. Unlike the stock market, where capital is invested in companies, forex and binary options are just speculated. That is, we try to estimate an upward or downward trend.
Many beginners have lost colossal sums thinking they can understand or detect these trends, especially with graphical analysis. If you put aside the brokers that will freeze your funds in the event of a withdrawal request, never turn to these markets and financial products at the risk of losing your entire investment at the speed of light.
5 – Diversify but stay in known markets
The whole game of stock market investing is to detect the intrinsic value of a company. That is to say, what it really is worth in terms of the estimate made by the market. If you notice a gap and you are right most of the time then it can certainly be exploited to your advantage and you turn into a winning investor.
Understanding a company’s interest and discovering its intrinsic value requires knowledge of its market in order to understand its value, strategy, positioning, etc. If you invest in all available markets then you will necessarily lose in finesse on your analysis.
However, it is important to diversify your portfolio because if you only invest in a market that turns out for example to be a cyclical market you risk a swing of several years.
Mix between different sectors and always have growth stocks in your portfolio as well as cyclical stocks. Keep in mind, however, that too much diversification will often be detrimental to your bottom line.
6 – Choose your broker
On the stock market it is very common to see rates multiplied by ten from one broker to another for the same investor profile. Each broker offers a variety of tools and specific options. The first step is to determine your investor profile:
- What will be my order frequency? What is the total amount I plan to invest?
- Will I invest in financial products?
- Which markets are I interested in? If I intend to invest on NASDAQ what will be the frequency?
- What is the tax envelope that interests me: CTO or PEA?
- Will I place orders over the phone?
- Is using a tool like Prorealtime Trading a real plus for me?
Once this grid is completed you can then firstly check that it meets all your criteria but you can also estimate your brokerage fees. This is an important step because a bad choice can cause a significant drop in your return on investment.