Despite their profitability, investing in ETFs requires mastering certain parameters. Focus on effective means for a successful investment.
Some useful tips for investing in ETFs
Little known to the public, ETFs or index funds are financial instruments. Interesting and easy to access, they are now a good way to invest in the stock market.
They allow you to invest money in hundreds or thousands of companies at a time.
In order to ensure the success of your investment in ETFs, it is important to understand the possibilities offered and to follow certain recommendations.
ETF investment possibilities
Investing in trackers is not only an advantageous operation, but also and above all very simple to carry out. Several alternatives are offered to individuals who wish to get into this field.
Go through a broker
In the stock market, brokers are financial intermediaries whose primary role is to support investors in creating an account. They also make it possible to carry out stock market orders at marketplace level.
To invest in Exchange-Traded Fund, going through a broker remains the first recommended option. These intermediaries remain accessible to the general public, especially beginners and individuals.
Many banks also play the role of broker, but the ones that remain the most competitive in the market are online brokers.
However, given their large number on the market, you have to be very careful in choosing the right one. This maximizes the chances of having a reliable and secure service, as well as low and attractive fees. It is therefore necessary to verify that the broker is not on the AMF’s blacklist.
Before choosing one, it is also important to learn about all the index funds it offers.
The choice of the tax envelope
To invest in trackers, the choice of the tax envelope to use remains a key point. Indeed, in addition to having a fiscal impact, this conditions the way in which investments will be managed, as well as the number of index funds available.
The investment of trackers in PEA: The investment in index funds can be carried out on a PEA. This option particularly improves the return on investments. With the PEA, the fees applied are more limited and the asset classes can be diversified. However, the number of eligible trackers with this envelope remains limited.
The placement of trackers in life insurance: Unlike PEA, life insurance allows you to invest money in all types of index funds. It is therefore an excellent alternative for investing. However, it is important to choose your life insurance carefully, because each of them has its limits.
Investment through the ordinary securities account: Since it does not offer tax advantages, the ordinary securities account is less suitable for investing in trackers. However, unlike other types of tax envelopes, it remains flexible and does not limit access to ETFs. More details here on what is an ordinary securities account.
Mistakes to avoid at all costs
Before venturing into index funds, it is important to know that like all stock market investments, they come with enormous risk. This page illustrates this well. However, the risks involved in this area may be limited. It is enough to avoid certain mistakes.
A poorly carried out diversification
The diversification of investments remains one of the first rules to respect to secure your investment in the stock market. Index funds today offer the possibility of doing this in a very simple and efficient way.
Of course, it is important to remain cautious so as not to affect the profitability of your investment. You must avoid dispersing your entire portfolio by purchasing many trackers and make sure you only invest in solid and reliable funds.
Sale in case of loss
In the stock market, prices are constantly fluctuating. Sometimes they can drop dramatically and at an incredible rate, which can generate great fears.
In this kind of scenario, you should avoid selling your assets. As long as the portfolio is diversified, you have to hang on for a long time.
Focus only on the recent performance of a segment to invest
A mistake most stock market investors make is to hang on to the current trend much more. When investing in ETFs, one should not rely entirely on those who have performed spectacularly in the previous year, as returns can change.