In this article we will see how to make money with the stock market in a totally passive way, without speculation and with less risk. We all know that we live in a time when the livret A pays only 0.75% and where the ELP caps at 1.5% before tax: it is not won to become rich! To give you an idea.
If you leave 10 000 euros for 10 years on your booklet without touching it, you will find yourself after a decade with …. 10 700 euros. It is very disappointing. Fortunately solutions exist and you can do much better, we will see how.
Make Money Using The Stock Market Smartly.
Before being a big machine for speculation with complex and risky false airs, the stock market is above all a very simple concept: companies quote on a market and pay you every 3 months, 6 months, or 12 months (this depends on the securities) dividends. To give you an idea, the dividend of a “quiet” stock such as Total is currently around 5%, which is 6 times the Livret A yield.
Stocks like Total that pay good dividends make it possible to have money paid every 3 months into your bank account without doing anything, and easily create a source of passive income. And I did not tell you everything.
Imagine if your Livret A pays you 2% the first year, 3% the second and 4% the third year? Does it sound too good to be true? But that’s what some actions do. That means that the passive income that you put in place today through the stock market will be bigger tomorrow, and even bigger in a few years (if you do well and you buy shares with increasing dividends) . This gradual increase in yield makes it possible to benefit from what is called a “double composition of interest”.
Have you ever heard of compound interest? It is the accelerating effect of your enrichment that occurs if you leave your invested capital without touching it. If you place 10,000 euros at 5% you will receive 500 euros of interest at the end of year 1, the following year you will receive 5% of 10,500 euros, so 525 euros, and so on: you will receive more and more because you will earn interest on your interests.
Here is what happens in time when you put money at a simple interest rate (in blue), and at a compound interest rate (in red). Now imagine if in addition to this phenomenon, the interest rate you touch increases itself each year. You benefit from what is known as a “double composition” of interests: you earn interest on interest AND you have an interest rate that increases each year. The result is that your speed of enrichment is doubly accelerated.
But The Stock Market Is Not Risky?
The stock market is often seen as risky because people focus on the bad thing: the price of the securities. Of course, nobody wants to end up with a title that was 100 euros and is worth only 50 (that’s why you have to make sure to buy quality companies), nevertheless if you are an investor who focuses on dividends and increases in our passive income, the price of an action becomes a very secondary element. What we want above all is that the stock pays us 100 today 105 tomorrow, and 110 after tomorrow, we care little about the value of its daily quotation.
An investor who focuses on yield and dividends and not on price is the only investor happy when the stock market drops! Because it will mean that he will be able to buy a lot of stocks with very attractive returns at a very low price. If a company pays you 2 euros of dividend per share, that it quotes 40 euros today and that it drops to 30 euros tomorrow, it simply means that you will be able to buy more dividends (and therefore more yield) to lower price!
For example, here is what happened to the dividend distributions of the L’Oréal share for 15 years. As you probably know, in 2008 with the financial crisis, the price of securities dropped. But not the dividend. He only increased. While the price of the share has risen from 100 to 60 euros during the crisis (before rising to 170 euros today), the dividend distributed in 2008 has increased. Here is a summary table of payments
And if the stock market still seems risky to you, remember that for decades it has been the best long-term investment you can make. The average annual returns of the US S & P 500 since 1928 are 10% per annum, so do not worry too much about the price of your securities, if you want to keep them for as long as possible and you invest in strong companies, things will probably go very well. Ok, but how to buy the right stock if you do not know anything on the stock market?
A problem then arises for you. Well,do not do that, it would probably be a bad idea (and again, as I mentioned in the article below, know that it is even possible to win the stock market by buying his shares at chance with a good method of buying!). If chance does not tempt you more than that, there is good news. The best securities on which to apply a dividend strategy are not obscure stocks that no one has ever heard of. These are securities that you all know, even if you are not an investor.
In Europe, for example, Danone, L’Oréal or Sanofi, to name but a few. However, you will need to make sure of one thing: the company’s history of dividend payments. You want it stable and constantly increasing. You also want the company to pay you a decent return (if you hit less than an ELP, it’s not worth it). Finally you ideally want the company to make profits, and that these benefits are increasing (thus ensuring you have bought a flourishing business and not on the decline!). If you’re interested in this kind of strategy, you can go to plus-riche.com, I regularly post useful resources on stock market investing that can help you select quality stocks!