The CAC 40, the flagship index of the Paris Stock Exchange, has just crossed 8,000 points for the first time in its history. But, should we invest with our eyes closed? Decryption.
Despite the slowdown in economic growth, observed in recent months by INSEE, the Paris Stock Exchange is flying from record to record at the start of 2024. Since January 1, the CAC 40 index has thus progressed by more than 8%, now reaching its highest historical levels. On Friday, the flagship index gained another 2.93 points, 8164.35 points, its new record.
Solid results
This progression follows an increase of almost 17% recorded last year. To explain this, specialists point to the excellent results posted by the French companies making up the CAC 40 index, starting with the French flagships, such as LVMH, the giant of the luxury sector, or the oil group TotalEnergies, which have achieved record profits in 2023.
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A hope of lower interest rates
Added to these performances is also the hope of seeing the European Central Bank (ECB) lower its key interest rates in the coming months due to the slowdown in inflation according to the latest figures published by Eurostat. , the Community statistical authority.
However, any drop in the cost of money reduces the cost of debt, which is likely to inflate the profits of companies and, in turn, the dividends paid to shareholders. Given this environment, apart from an exogenous shock, the current situation remains favorable for businesses, according to Alexandre Hezez, strategist at the Richelieu Group.
Consider the risks
In this context, investors are regaining their appetite for the stock market. It must be said that, since the date of creation of the CAC 40, December 31, 1987, the annual return of the index has been more than 8%, taking into account capital gains and dividends. However, it is advisable not to invest with your eyes closed and to remain cautious, according to Dorian Abadie, UCITS & Stock Market analyst at Meilleurtaux.
Indeed, we must keep in mind 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. It remains to be seen when the best time to invest is.
Smooth your entry points
As it is difficult to answer this question with certainty, the simplest way is to invest on a regular or scheduled basis rather than all at once, adds Dorian Abadie. This way, you limit the risk of investing all of your capital at the highest levels of the market.
To the extent that you are purchasing different courses, purchases made at higher prices will be offset by purchases made at lower prices. Moreover, the Financial Markets Authority website strongly advises investors to use this technique.
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And also think about diversifying the risk
Moreover, to limit the risk of loss, specialists also recommend diversifying your investments, by not putting all your eggs in the same basket. In practice, diversification can be done by investing in the shares of companies present in different sectors of activity.
But you still need to have the time to regularly follow company news and, above all, have the necessary skills to be able to select the most promising securities.
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This is why Dorian Abadie advises individuals to turn to ETFs (Exchange Traded Funds), these funds which replicate the composition of a stock market index, like the CAC 40 for example, in order to follow its price as closely as possible. performance.
Easy to use and inexpensive in terms of management fees, these ETFs provide low-cost exposure to the dynamism of the Paris Stock Exchange. And the icing on the cake, these products are eligible for the Stock Savings Plan (PEA) but also often offered in the units of account of multi-support contracts.
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But keep cash
Finally, one last piece of advice before investing in the stock market. Don’t forget to keep cash in order to take advantage of possible cheap purchases in the event of a stock market correction. In this regard, professionals advise permanently holding an amount representing at least 5% of the overall valuation of your portfolio.
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