Currently, there are many ways to make your money grow in the long term, such as investing in the stock market, which allows you to support companies in promoting their activities and developing the national economy. It is advantageous because it prevents you from letting your money sleep in the bank and decreases its value due to inflation.
It is possible to start the investment with a very small amount and to grow little by little. In this article, discover the world of stock market investment, including the conditions of feasibility and how to earn maximum money.
What does investing in the stock market consist of?
The stock market involves buying or selling financial products (stocks, shares, securities, debts, bonds, etc.) on a financial market. The latter is defined as a virtual or physical platform of exchange between economic actors, which are individuals, private companies, and public institutions.
How to earn money through investing in the stock market?
There are 2 ways to earn money through investing in the stock market. On the one hand, there is capital gain, which works in a simple way. In the beginning, a company sells shares of its capital, through the issuance of shares, on the financial market as a way to raise funds to finance its growth. Then, an investor buys them and becomes a shareholder. After some time, he sells them to another investor at a higher price. The difference in price between the purchase and the resale that results is the capital gain.
On the other hand, there is the dividend and a sum paid periodically by a company to its shareholders in return for the funds invested. The payment is made at the end of the year, half-yearly or quarterly. It is calculated on the basis of the number of shares each shareholder owns in the company.
What are the risks of investing in the stock market?
As any type of investment has risks, investing in the stock market cannot escape them. The most frequent risk is the loss of capital which exists in 2 types. The first type is the fictitious loss of capital following a stock market crash that causes the value of your assets to fall by up to 50%, but the number remains the same.
The second type is the real capital loss which results in the cashing out of the loss through the sale of the assets that have lost value. The second type is the decrease in income, which means that the income received is lower than expected or than that received in previous years. The best-known risk is inflation, which is the depreciation of the value of money over the years, which damages the capital over time.
What are the conditions for investing in the stock market?
The conditions for investing in the stock market are its validity and reliability because it requires vigilance on your part. For that, you must:
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- Ensure that you have a minimum amount that amounts to 5,000 euros. Its transaction can be done at one time or several times in several activities.
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- Open an account in a traditional bank, an online bank, or an online broker.
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- Opt for investment support among the classic stock portfolio, the Plan d’Épargne en Actions (PEA), and the multi-support life insurance contract.
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- Diversify your investments. In other words, spread your investments according to the size of your assets so that they can be in shares of several companies, in stocks of different sectors of activity, and on various stock market investment platforms in other countries.
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- Invest a portion of your wealth or money you are willing to lose and gradually increase your capital. However, avoid investing all your money at once.
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- Invest in an area you are familiar with or have had the opportunity to learn about.
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- Invest for the long term, as short-term investments are too risky for a quick return. In principle, the longer the term, the less difficult the investment.
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