Buying stocks: When to buy stocks for beginners

Any saver can benefit from access to the financial markets. Indeed, it is now possible to invest in shares, in particular via an online trading platform or an online broker.



What is the point of buying stocks?

Buying shares is a way to diversify savings for investors looking for a more profitable investment than regulated savings accounts. Buying stocks can be a wise choice for savers looking for diversification and whose investment horizon is long. Namely 5 years minimum, in order not to be too exposed to stock market fluctuations. Even so, buying shares is not without risk and it is advisable, before starting, to master the functioning of the stock market and understand its vagaries. Moreover, as in the context of any investment, the rule of prudence imposes on investment only the sums of money that one is ready to lose.

Also read: How do stocks and investing work?

Who can buy shares?

Anyone can buy shares. Listed securities are acquired in two markets: 

• the primary market, on which a company is listed on the stock exchange and offers shares for the first time at an issue price established in agreement with the authorities responsible for regulating the market
• the secondary market, where investors trade shares at a price that fluctuates with supply and demand

The investor has two means at his disposal to buy the shares of a company: invest directly, via a PEA or a securities account, or go through collective investment, through a manager who is responsible for setting up and managing a portfolio within the framework of a UCITS (undertaking for collective investment in transferable securities).

Buy shares live

If he chooses to buy shares directly, the investor will manage his stock market portfolio himself, deciding alone which securities to buy or sell. This strategy is time-consuming and involves keeping informed on economic activity in the broad sense and on that of the targeted companies in particular. A share being nothing but a part of the capital of a company, buying shares amounts to investing in a company and therefore receiving dividends it makes a profit. This is why financial guru Warren Buffett recommends investing only in what you know. In terms of the envelope, the investor wishing to buy shares directly must have an account opened with a financial institution (bank, broker, etc.).

It should be noted that, like life insurance, securities accounts and PEAs involve account maintenance costs which must be taken into account, precisely, to choose the best offer among those offered by the establishments. Similarly, brokerage fees are charged to the investor for each stock market order placed with the intermediary, ie each request to buy or sell for a specific share. But the collective investment also induces costs since the investor must then pay entry fees and ongoing costs.

Also read: Why US Stock Market Crashing

Buy stocks through a low-cost broker

The rise of the Internet has allowed the emergence of low-cost online brokers. The latter offer to execute all trading orders placed online from a computer, tablet, or smartphone. Most low-cost brokers have very low commissions, usually less than 10 euros. Some even offer to carry out the acquisition of shares without additional costs, under certain conditions.

Indeed, other transactions may prove to be profitable, the treatment of dividends for example. Low-cost online brokers allow individuals to manage their portfolios while benefiting from advice and tools to help with speculation and securities research. However, it is necessary to open a PEA and to make a deposit that the broker will invest in the securities chosen by his client. The minimum amount of this deposit varies between 500 and 3,000 euros.

Please note: the chosen intermediary must have a license and be authorized to operate in France. Before subscribing to an offer with a low-cost broker, make sure that it is not on the AMF blacklist and that it is listed on the Regafi registers.

Buy shares through a full-service broker

Full-service brokers offer the same services as their low-cost counterparts. However, remunerated by the commission, they have every interest in encouraging their clients to buy, as well as sell, shares, even if this is not necessarily in their interest. 

It is therefore necessary to exercise extreme vigilance, despite the advantages presented by the offers of full-service brokers (market analysis, paid streaming tools allowing you to see the evolution of shares in real-time, etc.). 

Beginning shareholders, in particular, are advised to exercise the greatest caution.