Invest regularly
“Is this the right time to invest?”.
This is
the
question that many savers ask themselves.
In a market that is falling or has fallen a lot - as is the case today - we are afraid of going too early.
Admittedly, since the beginning of the year the equity markets have lost between 15% and 30%, but who can tell us that this correction will not intensify in the months to come?
In a bullish context, it is not better.
We hesitate, then regret not having invested sooner.
And we are tempted to wait for a decline to find a better entry point.
In practice, even for experts, it is impossible to identify the bottom of the wave to always buy at the bottom.
Just as it is impossible to predict the tops, in order to systematically sell at the top.
In Franglais, it is impossible to
time
the market.
The technique which makes it possible to circumvent the
market timing
, is called the
dollar cost averaging,
or the method of the average of purchase.
It is a question of placing a predefined amount, at fixed deadlines.
For example, invest 100 euros every month, regardless of market conditions.
Thus, there will undoubtedly be times when you buy at high levels, but that should be compensated by other purchases, made in the bottom of the wave.
You average your investments.
The Cashbee application allows you to do this in a few clicks, and to automate your monthly payment, on the date and for the amount of your choice.
With the enormous advantage of making your savings effort painless.
Assess the motivations and credibility of advice givers
Here's what NOT to do
A few decades ago, the fashion (in finance) was for internet start-ups.
Hundreds of web entrepreneurs were getting started every month.
Young companies active on the net went public by the dozens.
Based on a detailed and hyper-enthusiastic analysis produced by a reputable investment bank, I decided to buy a few hundred shares of such a start-up.
Because the logic was implacable: traffic on the young shoot's website was growing rapidly, and the number of unique visitors was increasing exponentially.
When the internet bubble burst, it turned out that traffic to a site is only worth it if the company can monetize it.
Which was not the case with this start-up.
She therefore logically went to the mat.
My investment… too.
First lesson: critically analyze the source of recommendations
The moral of this anecdote is simple: when you receive investment advice, identify the motivations of the person giving it to you.
It is quite possible that your bank has asked you to present you with “fiscally advantageous” opportunities, such as Pinel Law investments.
For others, your bank provides you with free access to their analysts' research reports, extolling the merits of a particular listed company, recommended for purchase.
We are not suggesting that these propositions are systematically bad.
But before taking action, ask yourself why they are making these offers to you.
In our two examples, remember that these are advisers who are not perfectly neutral.
Banks make their living, among other things, by charging commissions on your transactions and investments.
They therefore have every interest in stimulating financial flows.
Moreover, it is very complex, even for experts, to regularly identify investment opportunities that others would not have identified.
What if you had this extraordinary gift, would you share your best ideas with others?
Second lesson: is the giver of advice, even well intentioned, credible?
Buddies who whisper the name of the latest crypto-currency to you that will “hopefully make a hundred times”, or who have a good stock market tip because they have identified the “next Google”, many of us have.
The intentions of these buddies may be the best in the world, but that's not reason enough to follow their advice blindly.
It's all about credibility.
A friend who has spent his entire career in marketing at L'Oréal and who praises the merits of Solana (a crypto-currency), whose returns are said to be higher than that of Ethereum (another crypto-currency) lacks credibility.
But if he tells you about an organic cosmetics company, founded by former experienced colleagues, which is a hit and is looking to raise funds, that's different.
Certainly, you still have a lot of information to collect and verify.
But this opportunity is brought to you by an expert in the field.
This is why the Cashbee application seeks to identify and cooperate with the best experts for each type of investment and why we work with many suppliers.
We have no exclusivity agreement with any bank or fund manager.
This gives us total freedom to select specialists such as Sofidy for real estate investments, Moneta and Sextant managers for Relance-labeled funds, or even Ixios for gold investments.
And therefore to offer a limited but complete choice to our customers.
Look for real diversification
Diversification is not as simple as that
It's one of our strong beliefs and it seems self-evident: don't put all your eggs in one basket.
To go further, beware of baskets that seem to you to be distinct from each other, but which in fact are very similar.
Let's take a simple example.
Shares of companies in a given industry sector tend to move in the same direction.
The correlation of the stock prices of Volkswagen, Toyota and General Motors follow each other in trend.
Having all three in your portfolio will not protect you if the automotive sector suffers.
OK, easy.
Take Amazon, Apple and Google.
Three companies with very different activities but all tech giants in the broad sense.
Since the beginning of the year, this sector as a whole has been much less appreciated by investors.
Result: the three behemoths saw their valuations corrected.
To go even further, you could have bought all the stocks listed on the Shanghai Stock Exchange.
And tell you that you have necessarily diversified your portfolio.
Because it would be structurally exposed to all possible and imaginable industrial and service sectors.
No luck, when the Chinese government decides to adopt the zero Covid rule and confines the country, all values drop.
In short, it is relatively complex to diversify well.
And to achieve this alone is extremely time-consuming.
“Turnkey” diversification
Fortunately, solutions exist for those who do not wish to devote their weekends to it.
In financial parlance, this is called driven management.
By adopting this management method, you delegate the management of your portfolio to experts.
Who are obliged to respect your guidelines, in terms of risk level and investment horizon in particular.
But whose job is to combine investments in order to build a well-diversified portfolio, by sector, by geography and by asset class.
Even better, the managers monitor this portfolio, in order to make tactical adjustments according to the evolution of market conditions.
At Cashbee, we have taken the concept a little further, in order to also allow you to choose themes.
And therefore to color your portfolio, managed by the experts of our partner Generali, according to your convictions.
If you choose Cashbee+ Climat for example, the managers will be obliged to allocate 15% of the portfolio to investments aimed at contributing to the fight against global warming.
To conclude, these three principles do not constitute a magic recipe for systematically delivering an attractive return.
But by adopting them, they will prevent you from making too big mistakes, while increasing the probability of maximizing your gains over the long term.