The two strategies that I am going to present to you here will no doubt be considered as heresies by more seasoned investors… and yet they work! They will allow you to answer the question that you will necessarily ask yourself when you buy your securities for the first time: how many shares to buy? Be careful, these methods only work if you are looking for dividend-based returns! But it is still possible to use them if you plan to speculate – “trade” – on the value of the securities.
Imagine: you have opened a securities account or a Pea for you launch on the stock market. Patiently, month after month, you have built up a little capital which will allow you to start investing. At the same time, you have selected a few titles on the financial markets in which you plan to invest.
And today is the big day! You will buy your first shares and start investing in the stock market! You take a big blow and go, let’s go.
You go to the interface of your broker, you check the quotation one of the titles… mystery… suspense… Miracle, its course is quite attractive! Better, the advice of the analysts of your broker have a consensus on “buy”. All the lights are therefore green!
So you decide to make the purchase … and then suddenly there is doubt and especially this question, in front of which you suddenly feel helpless: how many shares to buy din this company ? VShow much to invest in this stock title? How much should I put?
Do not panic. This question everyone asks themselves at the outset. So, today I am offering you two methods that will allow you to determine how much money you can put on securities on which you wish to withdraw dividends.
But, as I told you, the majority of investors will tell you that this is absolutely not the right thing to do… and yet it is a good way to start! So it’s up to you …
Why do we wonder how much to invest?
First of all, rest assured. Beyond the fact that indeed any investor asks this type of questions, especially when starting out, tell yourself that there will come a day when this question will no longer arise.
As’ investor beginner, you enter a world that you know very little about. So you don’t have the keys to knowing the “value” of things. But, with a little experience, it will come. Personally, it took me almost four years to establish strict rules on how much I invest per security. It’s part of the process.
Then there are the doubts and fears that one has of risking one’s money. And this is all the more true if your budget is reduced. In this case, the smallest euro matters.
Last point, if the question bothers you it’s that your investment strategy is not yet clear enough. The more you refine it, the more you will establish rules to follow, in particular on the amount of your investments, but also the number of lines of your wallet.
You will see that little by little everything will eventually become clearer. But in the meantime, the two strategies presented below will allow you to lay a foundation to get started.
However, before we put them into practice, we’re going to need a basic concept: the performance of the stocks that interest you.
How much is a share: the return per share
The yield is a ratio between the income obtained and the money you have invested. This notion will allow you to know how much is a share.
An action can engage two types of profits or income:
– The capital gains or capital losses realized when you resell the securities;
– The dividend which represents the share of the profits of the company of which the shareholder is part owner.
In stock market investments, the return is measured by the dividend. For each action, this is expressed in two ways:
– By an amount per share (the dividend itself). For example if a share pays a dividend of 1.50 Eur per share, if you have 10, you will receive € 15 in dividend.
– By a percentage (the yield) corresponding to the amount of the dividend divided by the share price of the share, all expressed as a percentage. The yield is the equivalent of the interest rates of a simple Passbook or Savings plan.
In both methods for defining how many shares to buy we will not need to calculate the surplus value. The only useful data will therefore be the dividend and the yield.
Finding this data is very simple: in general, on the interface of your vssecurities account or your Pea, just click on the title that interests you and you will find this information directly.
Investing in the stock market on a low budget
The two strategies presented here are, more specifically, oriented for those who wish to invest in the stock market with few means. It’s hard to give a fixed amount, but let’s say if you can only put in $ 200 to $ 500 per month you are the target of these methods.
Obviously, if your budget is greater than these amounts, these strategies are just as applicable! But in this case, use them as a basis and during this time, train yourself more rigorously in investment methods. bteddy bears.
More specifically, these techniques will allow you to answer the following questions:
– VShow many shares to buy on a stock market security (Which corresponds to almost position size at the traders professionals)?
– How many lines should you have in your wallet scholarship holder, or, in other words how many securities different shouldint feature your wallet?
– How much should you put in each time you buy securities scholarship holders
On the other hand if you want to know how much to start with on the stock market, I refer you to the article which details this point more specifically: how much to invest in the stock market to start?
Method 1: buy stocks on the stock market to build a virtuous circle
For this first method, the objective is very simple: to succeed in building a self-sustaining wallet. In other words, the investments in securities that you make should earn you as much as the amount of a certain number of shares in your line.
The method by example
For example, imagine an action A whose quotation (the value of a security) is 100 €. Let’s say that every month you can only invest € 200 on stock markets, which means that each month you buy the equivalent of two titles.
In this context, you will invest in the same security until the dividend yield reaches an amount of € 200. Thus, once this amount is reached, each time the company issuing the security pays you your dividends, you can buy a new share of this security. Your line is self-sustaining and empowering, allowing you to focus on another title in the stock market.
How much to invest to produce this autonomy?
The amount of your monthly investment (or failing a single action) is your profit target. To calculate it you just need to take the amount to reach then divide it by the amount of dividend per share . The result obtained corresponds to the number of securities you must own to reach your profitability objective.
Amount to be reached / Dividend per share = number of shares to be held
If you only have the yield and not the dividend per share in this case, the formula is:
Amount to be reached / (Yield X Share price / 100) = number of shares to be held
With this method your diversification will be quite slow but the lines obtained will work as a form of capitalization: with each payment of dividend you re-invest in the paying security.
Method 2: go public to cover expenses
The second method is based on your own expenses. Its objective is to obtain, in the long term, gains so that each line of placement Gives you the equivalent of an expense line.
For example, if you have insurance that costs you € 30 per month, so € 360 per year, you will invest in a value scholarship until its annual dividend yield is € 360. Once done, you move to another expense line with another value, and so on. In the long term, the gains obtained by your investments will cover all of your expenses.
In a strategy to obtain financial freedom, this tactic is placed in the stage of financial security of your journey.
How many stocks in a portfolio to achieve this result?
To implement this strategy, you must first make a list of your various expenses (fixed and variable) or budget items.
Then, indicate the monthly cost of each position then calculate by the amount over 12 months (in order to obtain the annual cost). Rank your list from the smallest expense to the highest.
In addition, you will need to select as many values mobiliaries as many expense lines on your list. You will then rank these different securities according to their performance, from smallest to highest.
As you can see, at that point you have an expense line that corresponds to a title and its yield.
To invest methodically and thus create an asset for each of the expense lines, you will start with the lowest expense and the corresponding title. When the latter provides, in dividends, the equivalent of the level of expenditure, you then invest in the following security by adding, possibly, the dividends obtained, and so on.
The advantage of this method is that over time you will increase snowball effect of each of your investments by having a concrete vision of the progress of your investments.
How many shares to buy when you start on the stock market?
Remember that the methods presented here are only there to give you a basis on how to invest especially how many shares to buy. Indeed, these two methods are very distantes of a good asset allocation which will cover you much better on the risks of the stock markets.
Indeed, the strategies presentedes in this article absolutely does not cover you on the volatility of your titles. It is therefore possible that you will quickly find yourself with many fluctuations on the value of your wallet.
Likewise, these systems work less well with Etf or some trackers due to the fact that they pay, in general, less dividends than the equity markets.
However, the two methods will allow you to set your basics or purchasing objectives as well as number of rows in an equity portfolio. Once you become more comfortable with the concepts of the stock market and establish clearer strategies for yourself, you will find that you will naturally detach yourself from these systems.
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