When investing in stocks, most investors imagine that their priority is primarily choosing suitable financial securities and investing at the right time. However, our most helpful trading tips are far from these preconceived ideas!
Choose the proper management method
To invest in stocks, an investor chooses between two different management methods.
- On the one hand, active management comprises choosing certain stocks over others (stock selection) or finding the best entry and exit points (market timing). All with the goal of “beating the market”.
- And, on the other hand, passive management’s goal is simply to diversify the investment portfolio and possibly optimize its risk/return ratio.
You can find plenty of evidence, including the Nobel laureate Eugène Fama`s research, that passive management is more effective than active management.
Diversification at a lower cost
Another one in our stock market tips is diversification. Because of the high volatility of each stock that makes it up, the stock market scares many investors. Nevertheless, it is possible to decimate investment volatility by implementing an adapted diversification strategy. The specific risks of each stock in the portfolio can then offset each other. Furthermore, then financial investment schemes, such as Undertakings for Collective Investment in Transferable Securities (UCITS) and Index Funds (ETFs), which can be held under life insurance, can achieve optimal diversification at a lower cost.
Maximize your time in the market
If a stock is showing high returns, it means that time spent outside that market has a significant opportunity cost. Seeking to bet on price evolution in the short term is futile, so it is better to seek to maximize your time in the market first, that is, the time you spend in the market to make your money work. In this way, you will benefit from the power of compound interest.
Rebalance your portfolio regularly
To maintain an optimal risk/return ratio based on an investor’s profile and personal goals, you may need to periodically rebalance your investment portfolio.
Potentially complex and costly for the amateur, your agent will perform this operation as part of the investments made under management as mandated. Suppose your projects require all or part of your funds to be available and guaranteed within specifically, especially specified time frames. In that case, it is also possible to adjust the diversification of your portfolio to provide it gradually.
Consider the tax factor
The final point in stock investment tips, despite introducing the “flat tax,” the tax criterion remains essential to maximize the net return on your investment. So you should make sure you choose the right tax envelope, especially for transferring your assets.