The recent rise in financial markets has led to the arrival of a new generation of stock market investors, who tend to overestimate their knowledge of financial markets.
A good year for the CAC 40, which has gained almost 20% since the start of the year. A context of euphoria likely to attract new investors. According to a recent study published by the Financial Markets Authority (AMF), over the period 2019-2023, nearly 1.5 million new investors took their first steps on the stock market. Among them, there is a high proportion of individual shareholders under the age of 35.
Beware of beginner’s mistakes
However, even if, as Marie-Anne Barbat-Layani, the president of the AMF, reminds us, this new generation of individual investors constitutes an asset for the Paris market, the fact remains that it is not does not always have sufficient stock market culture to put all the chances on its side.
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Indeed, according to another OECD study, almost half of them make their investments on the basis of information, gleaned from social networks or from influencers, without turning, for example, to the specialized press. Overestimating their financial knowledge, they also tend not to sufficiently diversify their portfolio, with the desire to earn a lot of money quickly for a majority of them, despite a limited perception of risk, indicate OECD experts.
The stock market remains a long-term investment
However, the stock market remains a long-term investment. Investing in stocks requires accepting a dose of risk, with bearish periods often following more buoyant periods. However, this investment remains among the most profitable in the long term, if you know how to be patient.
Faced with this volatility in the financial markets, the preferred solution is to invest on a regular or scheduled basis rather than all at once because you will not necessarily know if you are buying during an up or down period. With this method, you limit the risk of investing all of your capital at the highest levels of the market. To do this, you need to smooth out your entry points by investing the same amount of money on a regular basis over time.
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Also consider diversifying
In the same logic, as indicated by Alexandre Hezez, strategist of the Richelieu group, it is also advisable to diversify your investments, in order not to put all your eggs in the same basket, as the adage goes. In practice, diversification can be done by investing in the shares of companies, present in different sectors of activity, but also in different geographic areas (France, Europe, USA, Asia, emerging countries, etc.).
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And conserve cash
Final advice: keep cash in order to take advantage of possible cheap purchases in the event of a stock market correction. Professionals advise to permanently hold an amount representing at least 5% of the overall valuation of your portfolio. To avoid any disappointment, remember that any investment in the stock market presents a risk of capital loss and should only be considered over time, due to the volatility inherent in the financial markets.
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