Investing in ETFs: how to increase your chances of success?

Highly esteemed by investors, ETF (Exchange Traded Fund) Or trackers are very interesting financial tools. Also called index funds, they offer passive management by responding to variations in a stock market index. In addition, the ETFs allowinvest instantly and simultaneously in several companies. If you want to put all the chances on your side to succeed in your investment on ETFs, you must follow the rules below. \n

Start by acquiring knowledge before investing in ETFs

\nBefore making your first investment in ETFs, you must have a minimum of knowledge in the field. Being in the 21st century, you won't have trouble having access to all the data you need. Indeed, with search tools like Google, access to information has never been easier. However, almost all of the information relating to ETFs is English speaking. \n\nIn addition, you will find more than 2,000 books on index funds on online libraries. However, if you do not have a good command of the language of Shakespeare, you can take a look at the websites of the broadcasters.ETFs French, because these develop the subject in French. \n\n \n

Define an investment strategy

\nOnce you have a better understanding of ETFs, you will then need to define an investment strategy. There are several types of strategies that you can adopt and even combine to make your investment in trackers successful. Buy & Hold is the simplest technique you can implement. Quantitative, it consists of buying 1 to 10 ETFs varied and to preserve them for many years. \n\nTo increase your chances of success, you can also adopt a quantitative strategy like Momentum. It consists of choosing a pool made up of several index funds with the aim of investing every x month in those which have had excellent performance in previous months. \n\nIn addition to this, you can opt for the Value strategy. Particularly time-consuming, this involves analyzing company balance sheets and observing their decisions with the aim of targeting undervalued companies or sectors and investing there. \n\nConsisting of exploiting macroeconomic data in order to spot large-scale trends and make an investment in promising sectors in terms of growth, the Macro strategy is the one we recommend in last place. Just like the Value strategy, it is also time-consuming. \n\n \n

Diversify your investments in ETFs

\nTrackers are excellent diversification tools because they integrate dozens and even hundreds of stocks and bonds. For example, the STOXX Europe 50 includes 50 stocks, while MSCI Europe includes around 430 stocks. Diversification is a factor that allows you to reduce risk. So, whatever strategy you adopt, invest in several companies, sectors of activity, asset classes and geographies. \n\n \n

Place trailing stop orders to invest in ETFs

\nOffered free of charge by the majority of online brokers, the trailing stop order is little used and little known. Called again stop loss Or trailing stop, this order associates itself with an index fund and automatically resells it when it loses x% since its highest previous price. It thus allows you to limit the risks of loss that could be caused by the drastic fall in theETFs. The percentage x and the determination of the level of the sharp drop remain at your discretion. \n\nAlthough this tool does not allow you to take advantage of the rebound of theETFs, since it resells it, it allows you to protect yourself against the effects of Bear tendencies that are too strong and unpredictable. In addition, trailing stop orders give you peace of mind because you know in advance that losses will be limited to around 15%, whatever happens. \n\n \n

Consider ETF taxation

\nIn addition to purely stock market aspects, you must also take into account the tax envelope in order to maximize your chances of success. To benefit from a tax exemption, you can choose the Action Savings Plan (PEA) or life insurance. Regarding the PEA, it allows you to benefit from an exemption from capital gains tax after 5 years of holding. As part of the ETFs, it is also the most privileged tax envelope. \n\nIn fact, more than 180 ETFs grouping together more than 60 billion euros are eligible for the PEA. As for life insurance, it grants you a reduced tax rate of 24.7%, after 8 years of holding the contract. However, your outstanding amounts must not exceed 150,000 euros and if you are a couple, they must not exceed 300,000 euros. \n\n \n\n\n\nRead also: 10 techniques to earn money easily on the internet\n