The return on a stock market investment can be up to 10% per year. When compared to savings accounts, CDs, bonds, or other money-saving options – the difference is staggering! But unfortunately, many people don’t know how to make money investing in stocks.
Why? Because they either haven’t learned the truth about investments, or they’re not staying in the market long enough to see their investment(s) grow.
Success in the stock market largely depends on one simple thing: being in it consistently. (Even through the ups and downs.) The stock market is constantly fluctuating, which does make it difficult to know what to invest in, how much money to initially invest, and where, exactly to invest. However, analysts at Goldman Sachs predict that the global market heading towards $100 trillion – so the time to invest is right now.
Whether you’re just learning about the ins and outs of investments or you’re ready to take the leap, here is everything you need to know about making money with stocks (and why you need to start as soon as possible).
1. Open a Brokerage Account
You need a brokerage account to start investing. If you don’t have one, that’s your first step and it shouldn’t take more than 15-20 minutes to open. Make sure you do your research first to know that you’re opening an account that fits your financial goals.
A brokerage account is a way for you to purchase a variety of assets. This can be anything from mutual funds and CDs, to bonds and stocks. With this type of account, you’ll also be given the education and tools to help you select the right investments (while lowering your financial risk).
Trading through a brokerage account is similar to a retirement plan, or 401(K) for example. The only difference is that a retirement account is focused on saving you money during the retirement period in your life and allows you access to that money.
2. Go In With a Stay-Put Mentality
Investing in stocks can be a profitable venture; that is, if you’re willing to go in with a ‘stay-put’ mentality. That means once you invest and commit, you’re content to stay (even in the sometimes volatile market).
Although it might be scary, or even counterintuitive at times, the more time you invest, the more opportunity there is for your financial investment(s) to increase. The top companies that you’ve invested in will undoubtedly grow over time—this means that you’ll have a greater stock price and greater earnings in the long run.
If you stay, you also have the opportunity to collect dividends which won’t be available if you’re constantly moving in and out of the market. If you’re always moving, there’s also a high chance you won’t own the stock at the right time, and thus, you’ll miss potential payouts that you would have had if you stayed.
3. Stop Waiting for the Stock Market to Be ‘Safe’
One of the most important aspects of investing in stocks is realizing that the market will never be ‘safe.’ If you’re waiting for things to be ‘safer,’ you’re essentially waiting for prices to increase, which might not be the best strategy as it costs you more in the initial investment.
To invest successfully, you have to let go of the fear of your short-term loss and focus on the longer investment. Putting money into something that’s less ‘safe’ might help you reap benefits in the long run.
4. Calculate the Risk vs. the Reward
Every investment is a risk, so before jumping in, make sure to do your research so that you’re not going in blind. The most important component of investing is choosing the right investment, and this is something that varies from person to person. You also want to have proper asset allocation, meaning that you’re diversifying what you’re investing in so all your eggs aren’t in one proverbial basket.
Understand, though, that you can prepare as much as you possibly can—and you still might end up with a bad investment. That’s okay. Know that even a bit of money lost on a bad investment is better than sitting on money that’s not earning anything.
5. Start Right Now
How do you make money from stocks? You start.
It’s one thing to plan and prepare, but you can’t overthink yourself into stagnancy. The market is always changing, so the perfect time is right now.
To prepare yourself before jumping in, there are a wealth of resources to help with your research. One option is to watch the stock market news religiously and keep yourself up-to-date on the latest changes and trends. If you’re feeling adventurous, there’s also the option to invest in individual stocks. This can be a bit risky, though, so it’s best to start slow at first.
The Truth About How to Make Money Investing In Stocks
The truth about investing in stocks? It isn’t easy and may even be stressful at times, but it’s a profitable and smart way to build long-term financial success.
The biggest takeaways are to start small and start with a little. As you begin to understand how the market fluctuates and changes, you can be more risky with what and how you want to invest.
To learn more about how to make money investing in stocks, or for other useful business tips, keep reading our blog.