Money – So you want to start investing in the stock market?

The following article does not constitute financial advice. Please always consult a regulated financial advisor before taking investment decision. I am not qualified to tell you what investments are relevant to your personal situation.

Following March 2020 stock market correction, I received record number of messages from people interested in starting to invest in the stock market. I was genuinely surprised as I tend to receive such kind of requests when markets are at record high and mainstream media project and upward-forever trend.

My first answer is usually “considering your savings, if you remove 6 months worth of your current spending, how much are you left with?”. If positive (usually 50% of the time), next question is “out of this remaining amount, how much can you afford not to use for the next 5 years?”.
My opinion is that your very first stock market portfolio shall only be a fraction of the last figure.

Then, I encourage people to read this article.

Considering the previously mentioned article is digested, let’s look at a few considerations regarding investment timing.

Is this a good time to invest?” That is a million dollar question that is almost impossible to answer because you need to take into consideration so many variables such as investment horizon and risk appetite. From historical perspective, the “good time” to invest was yesterday (or years ago) and if you read the recommended books, that won’t come as a surprise.

Markets dropped so much already, they have to come back up” Well, yes & no, that’s again a matter of other variables such as time horizon and stock valuation prior to the market correction. Let’s take the example of Citigroup. Before the 2008 Financial Crisis, it was trading above 500 USD but it never crossed 85 USD since then.

My final answer is simple: investments are a complex topic that need study as well as experience (lots of trial and error). Instead of rushing to the stock market, you may want to spend time to ponder the ressources available to you (books, websites, podcasts…) and speak to professionals advisors. Once you are ready to invest, before you reinvent the wheel, you may want to consider replicating some of the strategies & portfolios recommended by a professional advisor. To me, nothing beats experience when it come to investing.

 

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