Tops Trading Sites to invest your money
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We live in a market economy: companies, states and projects need to finance themselves and to do so they rely on private capital and private savings. In return for this risk, investors receive a remuneration, whether in the form of interest, dividends or simply the appreciation of their capital, which can then be sold at a higher price. Investment is therefore at the heart of the workings of our society, but it also plays a very important role in your daily life for the development and conservation of your assets.
- 1 Tops Trading Sites to invest your money
- 2 How much capital should be spent on investments?
- 3 Prepare an objective
- 4 Take stock of your assets
- 5 Optimize your wealth
- 6 Establish a budget
- 7 How to allocate your capital?
- 8 Which products should be preferred?
- 9 Some investment ideas
- 10 The Solution to invest at the Best rate
How much capital should be spent on investments?
You can’t invest the money you don’t have, of course. This is not an issue for Bill Gates or Warren Buffet, who have unlimited capital, but unfortunately the average person will have to make choices that will be dictated by the amount of capital devoted to investments.
Prepare an objective
Of course, money does not make you happy, but it can contribute to it. You probably have projects you want to carry out: buy a house, a car, travel around the world, get married or retire. These have a cost, for some it is possible to take out a credit, the purchase of a main residence comes first in mind, but for others you will have to save and set aside a certain amount for many months or even years. Instead of letting that money sleep, you can make an investment that will speed up your savings process.
Take stock of your assets
Before you start buying shares or learning about investment funds, you should first take a look at your financial situation and assess your budget. To do this, you can start by taking stock of your assets by drawing two columns. In the first column you will enter your assets and the second column the liabilities, in other words your debts:
- current account
- life insurance
- real estate
- company savings plan
- bank books
- livret A booklet
- share savings plan
- mortgage loan
- consumer credit
- personal loans
Assets Liabilities and shareholders’ equity Current account: €3,000 Consumer credit: €1,800 Livret A booklet: €10,000 Car credit: €6,000 Sustainable Development Booklet: €5,000 Real estate loan: 80 000 € Life insurance: €25,000 Retirement savings plan: €8,000 Real estate: 145 000 €
Optimize your wealth
The table above can already help you a lot. First of all, you will be able to calculate the net value of your assets (deduct your debts from what you own): 3,000€ 10,000€ 5,000€ 25,000€ 8,000€ 145,000€ – 1,800€ – 6,000€ – 80,000€ = 108,200 €.
Then there are a few operations to carry out, first of all the immediate repayment of your consumer credit. These loans are often granted at prohibitive rates of up to 30%, which means that the money invested in the sustainable development booklet pays you less than 1%.
You should therefore immediately settle this debt, even if it means disinvesting part of the amounts in the passbooks. The same question may apply to your car loan depending on its rate.
It is not necessarily necessary to prepay your mortgage by unlocking your life insurance, especially if the rate you receive on life insurance is higher than the rate you pay on the mortgage. This should be the case if you have recently renegotiated the rate of your loan with your bank.
However, it is not recommended to lock all your assets in long-term products. You should also keep a certain amount available immediately in a bankbook in order to be able to cope with a hard blow involving exceptional and unexpected expenses.
This will typically allow you to buy a new car or pay for health expenses without having to take out a credit. The amount of these precautionary savings will vary according to your standard of living, but should ideally be between 3 and 6 months’ salary at least.
Establish a budget
Once your assets have been established, you must identify and estimate your cash inflows and outflows: salaries, shopping, rent, gas. A monthly budget may be sufficient in some cases, but we recommend an annual budget that should include all events that may affect your finances on a seasonal basis: taxes, vacations, school fees.
The balance of income minus expenses is your gross savings capacity. If it is negative, you should tighten your budget because you live beyond your means (unless it is an exceptional situation in the short term). Remove a margin of safety from this balance to protect yourself against the unexpected, you should get your savings rate.
For information, the average savings rate of French households is around 15%, including 6% in financial savings and 9% in housing (typically in repayment of mortgage loans).
How to allocate your capital?
Diversify your assets
Diversification is simply not putting all your eggs in the same basket. You might think that the biggest stock market winners have bet everything on a few stocks whose price has been multiplied by 50 or 100, but that is not true, because modern portfolio theory, the basis of asset management, developed since the 1950s by Harry Markowitz, shows that statistically the best gains are obtained by investing in all markets.
Apart from the mathematical demonstration of the superiority of this method, you can reason instinctively to understand your intuition. If you invest equally in five companies and one of them goes bankrupt, you will lose 20% of your capital overnight.
Worse still, if these five companies are in the same industry, such as oil, the damage could spread to the entire industry and lead to a drop in the value of your portfolio.
On the other hand, if you have diversified your investments, the underperformance of one sector will be offset by the underperformance of other sectors. The majority of portfolio managers fail to beat stock market indices that are diversified by making different choices.
This should not prevent you from focusing on one stock over another, but never concentrate more than 10% of your portfolio on a particular stock.
Adopt a long-term approach
In terms of investment, a long-term approach is based on a horizon of several decades. Many financial products have a maturity of more than 10 or even 30 years, some so-called perpetual debt securities do not even have maturity. The horizon of your product is very important and should correspond more or less to that of your financial project.
If you want to save for your retirement in 20 years, it is counterproductive to invest this money in unlockable booklets at any time that don’t pay much.
Choose equities and long-term bonds over life insurance, for example, as their returns are much higher. Banks offer you structured funds (for example, for retirement between 2030 and 2035) where the proportion of equities is high at the beginning and decreases as you get closer to your investment horizon.
If you keep this objective in the long term, you won’t have to worry about small fluctuations in daily life. You will inevitably experience bad days when some securities in your portfolio may lose 5% or more, but these variations are acceptable as long as you reach your long-term objective, i.e. the completion of your project.
On the other hand, if you are building up precautionary savings or for a period of less than five years, reduce your risk taking. Indeed, changes in the values of short-term financial products could lead to a situation where, when you unlock your savings, they are less than your initial savings.
For real estate projects there are suitable products (PEL, CEL), you can also use term accounts, short-term bonds or certificates of deposit and structured funds. In addition, the release of long-term invested funds is generally more expensive than the release of the most liquid investments.
Invest reasonable amounts on a regular basis
It is recommended to invest (or divest) as you go along in order to smooth the acquisition and sale prices of your assets. This will reduce the risk of buying at the highest or selling at the lowest. This approach can also be considered as a diversification in terms of entry prices.
If you have calculated a budget and know your monthly savings capacity, you will know how much you can save each month. On the other hand, do not systematically buy back more shares when they have performed poorly, this is the trap of smoothing the purchase price downwards.
It is dangerous to run after your losses in the investment field, it is possible for a product to lose its entire value and it is sometimes better to step back and exit losing positions.
Some investments have a minimum entry cost, it is unthinkable if you save 500 euros per month to rigorously invest 100 euros in real estate, 200 euros in bonds and 200 euros in shares every month. However, to avoid paying too many fees, you can invest in equities for the first two months, then in bonds for the next two months and then repeat this cycle.
Set aside an amount in a home savings account or booklet in order to make an acquisition in the stone once your assets have grown a little. Some banks offer to automate the purchase of fund units every month without a minimum. You can also take the initiative to analyze the markets yourself and give your orders to your bankers for this you will need to know a minimum of the basics of the exchange.
Which products should be preferred?
Monitor costs and be wary of scams
La rentabilité d’un investissement doit se calculer nette des coûts qu’il engendre. Or, en matière financière, les coûts d’un produit peuvent intervenir à n’importe quel moment : à l’achat, durant la vie du produit et à la revente de celui-ci, sans oublier les impôts sur les plus-values et les charges sociales.
Between two equivalent products, compare the costs of setting up the support (life insurance, PEA, securities account), purchase and sales commissions and annual custody fees. As French taxation is complicated, make sure you use the most appropriate medium for your wealth, age and personal situation.
The performance of an investment must also be weighted according to its risks. Between a high-risk product that pays 6% per year and a product with a lower risk and a return closer to 3% per year, risk-adjusted performance can be the same.
It is up to you to balance your portfolio between risky high-yield products and less risky products with lower returns depending on your risk aversion. Beware of high yields that can exceed 10% per year, these products necessarily carry very high risks when they are not simply “Ponzi scheme” type scams.
Use only intermediaries approved by the competent authorities: the Autorité des marchés financiers plays a role in protecting savers in France.
You should also know that past performance is no guarantee of future performance: just because the price of a share has doubled in the last month does not mean that it will be the least next case.
When selecting investment funds, you should favour asset managers with at least ten years’ experience: they have experienced at least one or two major crises and have survived them.
Stay in touch with financial and tax news
Without going so far as to examine the value of your portfolio minute by minute, information is essential in terms of investment. It is not necessary to be kept informed in real time of the current status of your values, but it should influence your choices in the long term.
A stake in a company in a declining sector should only be retained if it opens up new opportunities and rebound opportunities. Learn to identify the risks for the securities you have in your portfolio and reduce your positions if negative scenarios start to materialize.
Finance is a constantly evolving field. Who could have predicted a few years ago, for example, the rise of crowdfunding? Competition between banks and other players (insurers, credit institutions, brokers, etc.) encourages them to innovate and remain competitive.
Keep up to date with the latest news in the sector without being plastered by risky product launches either, do not rely on any uncertain innovation.
Product taxation can also bring surprises, whether it is the interpretation of tax law by the courts or new laws passed by parliamentarians. For example, life insurance, the preferred product of the French, is undergoing reforms almost every year.
In most cases, you will find other investors in your situation and these topics are widely discussed on the Internet investor forums. In case of doubt and for important issues, do not hesitate to contact your financial intermediary, a wealth management advisor or a tax lawyer.
Some investment ideas
Hedge funds are characterized by an unorthodox approach to reducing the risk of your portfolio by proposing concepts that are not correlated to the rest of the market.
In other words, a stock market crash should not be passed on to a hedge fund in the same proportions, while an investment fund investing in “traditional” equities will be hit hard by this crisis.
If you already have a good knowledge of finance and asset portfolio management you can always start trading on your own account. Becoming a trader requires seriousness and a consideration of the risks inherent in trading and speculation.
With these few basic concepts, you will be equipped to build and manage your investment portfolio. This is an area of almost infinite possibilities, the more capital you have, the more doors you will have open to you. In an uncertain world, it is essential to start investing and saving as soon as possible to cope with the vagaries of life. Continue your learning as you go to optimize your wealth and maximize your income.
We recommend eToro if you want to limit your risks and portfolio management fees.
Among the most commonly used strategies is the Long-Short concept, which consists of taking buying and selling positions for similar proportions on a set of stocks in order to play on performance gaps.
For example, a fund using this technique will buy shares from renewable energy suppliers and sell shares from oil producers if it believes in ecological transition. Other funds invest in commodities, take advantage of arbitrage between convertible bonds and equities or specialise in mergers and acquisitions.
Investment does not necessarily have to be financial, we mentioned the case of real estate above, but other supports exist. Whether it is art objects, vintage cars, wine or antiques, these require a thorough knowledge of the field that cannot be acquired overnight.
Their liquidity (your ability to resell them at market price) is very low and it is very difficult to get an idea of the fair price because sentimental value is added to the intrinsic value of the products. It is more a question of combining an investment with uncertain profitability and a pre-existing passion.
The Solution to invest at the Best rate
Find our files on different investment methods: