To start investing in the stock market, you must first have an account that allows you to carry out transactions, such as a securities account, a PEA or an online trading account. Then deposit your investment capital into this account to access a platform where you can place your orders. You will then need to learn how to perform analysis and implement strategies to make your investments profitable.
How much to start trading?
One of the most frequent questions that new investors ask themselves in the stock market is, of course, the amount to invest. In other words, what is the necessary or ideal amount for such an investment? However, in reality, the question that you must ask yourself is above all that of the risk for your capital and the sum that you are going to invest should not risk to put you in a complicated financial situation in case of loss. Because the stock markets are uncertain and thus risky and you can sometimes lose a lot of money. Here are some explanations and information to know before deciding the amount that you are going to invest.
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What you need to know about evaluating the capital to be invested in the stock market :
New investors generally have different ways of evaluating the amount needed for their investment in the stock market. Most often, certain mistakes are made such as not taking into account certain fees such as brokerage fees or spreads.
It is also important to remember here that success in the stock market does not depend at all on the amount invested but on the knowledge and the strategy put in place. The important thing is to carry out actions in relation to the amount of capital available.
Depending on the broker or organization offering investment products, a minimum deposit is often required to open an investment account. But there is no upper limit, which does not mean, of course, that you have to put all your savings into the account.
In the end, when deciding how much to invest in the stock market, you have to take into account both the risks involved and the costs that you will have to face in the context of a trading or investment activity.
Taking into account the risks when choosing the capital to be invested in the stock market:
The first element we would like to talk about here is of course the risks associated with investing in the stock market. Although this is a relatively rare occurrence, it is possible that you could lose your entire investment due to a fall in the markets or a bad strategy.
This is why you should think twice before injecting money into your trading account. In order for you to have peace of mind when placing orders, the money you bet should never be money you might need. The stakes would be too high and the stress would make you make bad decisions anyway.
But then how do you evaluate what you can invest and what you should keep? The answer to this question is complex and will depend on each person's profile, personal and professional life and specific projects and needs. Indeed, it is always preferable to keep some precautionary savings in case of a hard blow. If you have been saving for years, invest your savings in the stock market and lose everything, you could face serious problems.
This is why many stock market investors decide to invest only a small portion of their savings in the stock market.
The risks of leveraging your capital in the stock market :
Another risk that we would like to inform you about is the one linked to the use of leverage. If you invest in the stock market using specific products or instruments such as CFDs or SRDs, this leverage is advertised as a way to invest more money than you actually have in your trading account. Here, your cash is only used as a hedge. According to European regulations, this leverage can allow you to invest up to 5 times the amount you have. It can be tempting for an investor with little capital to use this leverage in the hope of generating more income on small trades. However, as we will see here, this leverage actually represents a very high risk and can make you lose your entire capital very quickly.
Indeed, leverage is a double-edged sword. It can multiply your gains if you are right, but it can also multiply your losses. Thus, a minimal variation of 10 in the price of the stock on which we invest can have dramatic consequences on our portfolio.
The danger of leverage is all the greater because it is often investors with a small amount of money invested in the stock market who use it. These traders are also often the least experienced and therefore the most likely to make losing trades on the markets.
Consider the impact of brokerage fees before deciding how much to invest:
Another mistake that is frequently made by investors who are new to the stock market is not taking brokerage fees into account when calculating the amount to invest.
Indeed, whatever the way you wish to invest in the stock market (CFD, securities account etc.), it is normal that your intermediary, broker or bank, should be paid.
For traditional investments made through a bank investment product such a securities account, a stock market order costs an average of 0.1% of the amount invested with a minimum of €5 on average. It should also be noted here that when you buy and then sell securities, you are actually placing two orders and these fees are therefore charged twice, whether you win or lose.
If you use a CFD trading platform, it is the spread - a small difference in price between the actual price and the price at which you are going to buy or sell - that is taken into account.
In conclusion, never invest in the stock market more than you need or all your savings and remember to take into consideration the fees that will be added to your transactions.
Frequently Asked Questions
How to make your money grow in the stock market?
The stock market is a volatile and fluctuating market and it is not possible to make 100% secure investments. It is therefore necessary to take care to put in place real strategies to invest your money on the stock market and to apply strict money management aimed at limiting losses. Of course, you also need experience to become a profitable investor and this is why many beginners give up before they reach a sufficient level.
What are the ways to deposit money in the stock market?
To invest money in the stock market, everything can now be done online. However, the minimum amount to be credited to your investment account will depend on your broker and the type of account you choose, as will the means available to you to make the deposit. In most cases, it is possible to fund your account by bank transfer, credit card or online payment solutions.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail CFD accounts lose money. You should consider whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy trading is a portfolio management service, provided by eToro (Europe) Ltd., which is authorised and regulated by the Cyprus Securities and Exchange Commission.
Cryptoasset investing is unregulated in some EU countries and the UK. No consumer protection. Your capital is at risk.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.
