How to Invest in the Stock Market for Beginners

Investing in the stock market as a beginner requires following certain steps. If the stock market is a fertile ground for making your capital profitable. This is subject to certain conditions. So, before you start, inform yourself first because the stock market can also become the grave of your capital if they are badly managed.

What is Stock Market Investment?

The stock market is markets open to anyone who is looking for an idea in what to invest in. It is basically the (virtual) place where supply and demand for financial assets and other asset classes that can be listed (monetary, physical assets, etc.) meet. It is therefore a market, and we generally speak of a “financial market” to designate the stock market.

Thus, investing in the stock market for dummies means acting or intervening in this financial market.

In other words, stock market investment refers to the fact of buying, holding and/or selling listed assets (on the financial market), in order to make capital gains and/or receive remuneration. related to the sole holding of the acquired assets.

How are these added values ​​realized? The holding of what types of securities can make it possible to receive remuneration? How to do it ? How to invest in the stock market? All these questions and many more find their answers in this guide. Let's start by understanding how the stock market works.

The Stock Market: How Does It Work? How Do Financial Markets Work?

If you know how any other type of market works, then it will be easy for you to understand how the stock market or the financial market works.

• Indeed, like other markets (labour market, goods and services market, etc.), the financial market operates on the basis of the principle of supply and demand. Since it is the financial market in question, it is a question here of supply and demand for securities or financial instruments. Concretely, let's take the example of the financial instrument that everyone masters or at least that everyone has already heard of: shares. A company that until then was not listed on the stock exchange decides to enter it through an IPO (Initial Public Offering), or in French IPO or admission to listing of shares.
• This IPO goes through an exchange platform that is rightly called "stock market", since it is these exchange platforms that actually constitute the markets (meeting places between supply and demand for financial instruments) . In France, this platform is Euronext, and it actually manages several stock markets. You also have NYSE and Nasdaq in the United States, and plenty of other exchanges in different countries.
• The stock exchange or trading platform on which the shares of this company are listed is then responsible for following the movements of supply and demand for the shares of this company in order to vary the course or the price of these shares.

Who are the Stock Market Actors?

The stock exchange is the meeting platform allowing the meeting between the suppliers and the applicants. This market for financial instruments or assets nevertheless includes other players.

• Several Categories of Investors

1. Active investing investors are all those who place or use their funds to buy and sell financial assets in financial markets. These may be individuals, groups of these private individuals or institutional investors.
2. With regard to institutional investors, these are generally speculative funds (hedge funds), asset management companies, retirement pension funds (investing the funds of their clients), investment banks, or insurance companies (investing their cash). They are very important players in the financial markets, and the huge amounts of assets they own often allow them to influence price movements.

• Transmitters

1. By issuers, it is necessary to understand the issuers of financial securities. The issuers are therefore the companies that issue financial securities on the financial markets. They are at the origin of the presence of a financial instrument on the stock market.
2. An issuer can be an ordinary company that is listed on a stock exchange or is going public. The one that enters issues shares that it puts up for sale on the primary market, and the one that is already listed can “issue” new securities (shares) when it carries out a capital increase.
3. In addition, investment banks and other financial institutions issue financial instruments on the stock exchange. These (the instruments) are generally savings instruments, risk hedging instruments, or even speculative instruments such as certificates, warrants, turbos, etc.

• Several Categories of Intermediaries

1. Intermediaries serve as a liaison between investors and the financial market. These may be market companies, that is to say entities whose role is to organize and ensure the proper functioning of stock exchanges. Euronext, for example, is a market company, and itself is subject to surveillance. Among there are the best stock brokers.
2. The other category of intermediaries are the clearing houses, who are in charge of settling/delivering the securities on the financial markets. They ensure that the securities purchased are delivered to the buyers and that the corresponding sums are paid to the sellers.
3. Finally, as intermediaries, there are investment services providers (ISPs). These are the main banks and brokers through which investors go to intervene in the financial markets. They open accounts for their clients, receive and transmit orders from these clients on the markets. They can also act on their own behalf.

• Regulators

Regulators or market authorities are bodies that monitor the functioning of financial markets and the actions of the players who intervene there. There is at least one regulator in each country. In France, it is the AMF (Financial Markets Authority) which plays this role, and its missions go beyond the supervision of financial market players (investor information, protection of savings, authorization, sanction, etc.).

With which Assets / Markets can one Invest in the Stock Market?

There are more types of assets available on the exchange than you might think. Here is a list of the main assets in which it is possible to invest in the stock market. We will leave aside very complex assets in which a beginner on the stock market is unlikely to invest.

1. The actions - These are the most popular financial assets. A stock simply represents ownership (of the company issuing those shares). After purchasing shares you will be able to hold them. This holding gives the right to several rights: right to profits (dividends), management rights, information rights, etc.
2. The obligations - These are debt securities on the issuer (of the bond). The holder of a bond therefore has a claim on its issuer, and the latter has a debt on the holder. It is a mechanism similar to that of credit granted by banks.
3. Investment funds – Investment funds or UCITS (Undertakings for Collective Investment in Transferable Securities) make it possible to invest in several types of financial securities at the same time, without having to acquire/exchange these securities. This may be an FCP (mutual fund) or a SICAV (variable capital investment company).
4. Trackers or ETFs – Trackers or index funds or even ETFs (Exchange Traded Funds) constitute a sort of replication of an entire market or an asset category. They are comparable to index UCITS. This is the case of the CAC40 ETF, which replicates the performance of the CAC40. Investing in this ETF means investing in the stocks of all 40 companies in the index, which would be difficult if you decided to buy these stocks one by one. These ETFs are managed automatically, and their management fees are very low. It is also possible to trade with the iShares S&P 500 stock index.
5. Other assets – Many other assets are accessible on the financial markets, even if some are very speculative. You have in particular warrants, certificates, derivative products (CFDs in particular), options, currencies, commodities (gold, silver, gas, coffee, sugar, oil, etc.), Treasury bonds, etc.

What Causes Stock Prices to Fluctuate?

The course (price) of a share on the stock exchange is a function of supply and demand for this share, but this course, this supply and this demand are themselves influenced by many factors (related directly or not to the company issuing these shares). Here is a non-exhaustive list of these factors:

• The market trend, which itself is influenced by elements such as the economic situation, the monetary policies of central banks, the fiscal policies of States, political events (plans, elections, etc.) and geopolitics (beginnings / ends of conflicts , etc., etc.
• Publication of company activity reports (profits above forecasts / expectations may lead to a rise in the price)
• Announcements of company projects and strategies (listing on a foreign stock exchange, capital increase, purchase of another company, etc.)
• Publication of important company information in the press
• Analyzes and recommendations from renowned financial analysts
• Changes in currency and/or commodity prices
• The trend or changes in the company's industry
• Technological changes
• Natural disasters

Stock Market Investment and Trading: Are They the Same Thing?

In the definition of stock market investment given at the beginning of this guide, it appears that this activity consists of buying, holding and/or selling listed assets. The principle of trading is similar, since "trading" means "exchange" or "trade", that is to say buying and reselling.

• Stock market investment

The goal of stock market investing is to generate long-term profits by buying and holding different types of stock market assets. The profits generated by investing in the stock market are often even reinvested in new listed assets.

• Trading

The goal of trading is also to generate profits, but this time over the short term. A trader therefore carries out very frequent transactions (purchase and resale) on many assets, some of which are often not very linked to the real economy.

The trader is looking for daily or even monthly returns, but not annual ones. He uses several mechanisms that can allow him to take advantage of market movements over a short period of time (buying an asset at a low price and reselling it at a higher price, selling short and buying back).

How do you make money with stock market investing?

Investing in the stock market means taking a risk as with any investment, but it also means having the possibility (when done well, as you will see later in this guide) of making significant gains. Besides, there is not just one way to make money in the stock market.

Here are the different ways in which it is possible to make gains in the stock market (it is also possible to earn money by combining all these possibilities):

• Resell your assets while making a capital gain

The most obvious gain that can be made in the stock market is in capital. As for shares, for example, you can buy shares of a company that you believe, after analysis, that its value will increase over time. Once the price of these shares has risen compared to the price at which you bought them, you can sell them and thus realize a capital gain (purchase price – sale price).

• Benefit from income associated with the assets held

To earn money in this way, one must have acquired income-generating assets. The typical example here is shares of companies that regularly pay dividends. By holding shares in such a company, you therefore regularly receive dividends (understand basically that this is a part of the profits that the company shares with all its shareholders) as a shareholder.

• Short selling assets

Less recommended for beginners in the stock market, short selling consists of selling securities that you do not have in your portfolio. The decision to proceed with such a sale comes from the fact that you believe that the price of these securities will fall. So when you sell short and the price of the security goes down, then you make a profit. We can say that you sell these securities at €100 per unit, for example, to buy them back at €80 per unit. The price will have fallen (from 100 to 80 €), but you will have realized a capital gain of 20 € (100 – 80 €). On the other hand, if after such a sale the price increases, you lose money.

Furthermore, you can always try to take advantage of downward price movements by investing for example in CFDs (Contract For Differences), but this type of investment is not recommended for those who are new to investing in the stock market, and is closer more trading than investment in the stock market itself. You can still consult our guide to CFDs for beginners to find out more.

With Which Broker To Invest In The Stock Market When You Are A Newbie?

As you will see in the "how to buy stocks" part of this guide on how to invest in the stock market for beginners, it is not only through a broker that you can invest in the stock markets. However, we will be particularly interested in investing through online brokers.

• Regulation and reliability

A good broker is first and foremost a regulated and reliable broker, even for beginners. Opt for a broker acting under the authorization and control of one or more renowned regulatory authorities, such as the AMF in France. Also favor brokers who, in addition to being regulated, are members of organizations that protect client funds, combat bad practices on the stock market, etc. This type of information is available at the bottom of the broker's website, or in its information pages.

• Types of accounts offered

Do the accounts offered by the broker allow you to actually invest in the stock market? Do they allow you to invest in CFDs or real shares that you will own? What are the conditions associated with each type of account (accessible assets, minimum deposit, features offered, etc.)? Do these conditions meet your needs and objectives?

• Commissions and fees

It can be difficult to find a broker whose all fees and commissions are very low. Our advice here is to look for the broker that charges low fees and commissions for the assets you want to invest in. A broker may offer commissions that are not very competitive on the Forex market, for example, but 0% commission on the stock market; and if you want to invest in stocks, this broker will be right for you.

How to Learn to Invest Your Money in the Stock Market When You Are a Beginner in November?

Learning how to invest in the stock market when you are a beginner requires consulting various educational resources, as well as adopting habits that facilitate this learning. It actually helps to know where to put your money so that it earns.

• The guides

You're just checking out our guide on "how to invest in the stock market for beginners", which is one of the best things you can do to learn. Take the time to go through this guide from start to finish, and don't hesitate to check out our other stock market/trading beginner guides.

• Video tutorials

Brokers (as well as independent people) make video tutorials that are usually accessible for free from the broker's site or from platforms like YouTube. These tutorials cover elements similar to those in guides, files, books, glossaries, etc., as well as current events in the world of finance / stock market / trading.

• Tutorials on how investment/trading platforms work

Some tutorials are made specifically to show you how a stock market trading / investment platform works, and how to use it from A to Z. These tutorials are mainly available from brokers offering the platforms concerned, but also on platforms like YouTube.

• Webinars and seminars

Webinars and training seminars are also organized by online brokers especially, in order to educate investors and traders on particular aspects / subjects. They are accessible free of charge or by invitation, generally live, but recordings of the sessions can often be consulted afterwards (in replay).

Some Tips for Getting Well-Trained in Stock Market Investing

In addition to consulting the didactic content mentioned above, please follow these tips to master how to invest in the stock market and go from a beginner to an intermediate level, then an expert:

• Do not hesitate to subscribe to paid offers

Some educational content is not accessible free of charge, and this should not discourage investors who wish to learn. However, avoid paying for content offered by some individual investors to the fake performances they post on Twitter, YouTube, etc.

• Take advantage of demo accounts

Demo accounts are great tools for learning how to invest in the stock market. Also use them to apply what you learn without risking your money (this is called virtual trading or paper trading). It is usually enough to fill in some information about yourself with a broker to benefit from this type of account.

• Practice (small investment) while learning

Do not hesitate to invest in some assets even for a few euros while you consult the training contents. You will be able to increase your investments over time as you master how to invest in the stock market on the internet.

When is it possible to invest in the stock market?

When you already know how to invest in the stock market, you certainly know that it is not possible to intervene in the market at any time. This is because stock exchanges are not accessible or open all the time.

Therefore, in principle, one can only invest in the stock market during the opening hours of the stock markets on which one wishes to intervene. Concretely, here in the following table are the opening and closing hours (French time) of some popular exchanges, this being valid for working days (Monday to Friday).

Note, however, that the market for certain asset classes such as currencies (Forex) is open 5 days a week, 7 hours a day. Specifically, it is open from Sunday at 24 p.m. to Friday at 24:23 p.m. ( Paris hours). Moreover, the opening and closing hours are often also a function of the asset classes to be traded.

How much should you invest in the stock market?

There are no limits or scales imposed for investing in the stock market. You can invest 1000 euros, invest 5000 euros, invest 10000 euros, invest 20000 euros, invest 25000 euros, invest 30000 euros, invest 40000 euros, or even invest 50 euros depending on the capital you have. Here are some tips to avoid wasting your capital.

1. Define your investment goals
2. Plan your expenses
3. Invest a percentage of your income
4. Invest according to your risk profile

Which Stock Market Investment Strategy for Beginners Should You Adopt?

There are many strategies for investing in the stock market, and these generally indicate how to invest in the stock market, that is, the approach to be taken when buying / re(selling) financial assets on the stock market. Nevertheless, this guide on how to invest in the stock market being intended for beginners, we will simplify these strategies and generalize them to facilitate your understanding. We present strategies for investing in stocks on the stock exchange precisely, but you can make connections and apply them to invest in other assets.

Thus, investment strategies can be grouped into 3 main categories or strategies: value investing, growth investing, and index investing.

The A'svantages of Investing in the Stock Market

Before even wondering how to invest in the stock market, we often ask ourselves “why invest in the stock market?” ". Why the stock market and not another investment? Here are just a fewvantages to invest in the stock market:

• Increase your wealth
• Avoid suffering from inflation
• Be a real shareholder of certain companies
• Easily invest your capital 
• Get started even with small sums
• Earn money in many ways
• Be sure not to lose everything
• Make money without being a financial market genius

The Disadvantages of Investing in the Stock Market

To remain objective in this guide on how to invest in the stock market and avoid presenting you with only one side of this activity, we also present the disadvantages of investing in the stock market (thus you will also have to take these into account before you decide whether or not to invest in the stock market):

• Investing in the stock market still involves risks.
• It takes time to make big gains
• Market volatility does not always leave us psychologically indifferent

Pitfalls and Mistakes to Avoid When Starting on the Stock Market

Learning how to invest in the stock market and getting started is not that difficult, but investing in the stock market is not child's play either. There are certainly significant probable gains on the horizon, but there are also requirements to be respected, procedures to be followed, and risks to be avoided. Here are the 10 pitfalls and mistakes to avoid by beginners with investing in the stock market:

1. Get started without some basic knowledge
2. Investing by trusting your intuition
3. Panic over market fluctuations
4. Investing without logic / consistency
5. Put all your eggs in one basket
6. Wait for the right moment to start
7. Become emotionally attached to a company and end up trading 
8. Being afraid of regretting the decision to sell your assets
9. Transact too frequently
10. Choosing the wrong intermediary