So, here I am sitting at my desk and I start to wonder, ‘how do you actually make money on the stock market?’
So, how do you actually make money from stocks?
Probably the best way to make money from stocks is to start Investing in index funds because index funds, in my opinion, can be one of the smartest and safest ways to invest long-term.
This means that you invest in the strongest companies in the world, and that you ALSO get automatic diversification.
Here’s a video on how you can start investing and what gave me the inspiration to start investing myself:
The basics: Make money on stocks
What exactly are shares?
When a company “becomes public” on the stock market, it agrees to sell its ownership to investors (like you). The individual holdings of a company are called shares.
The sum of all these shares of the company is the company’s share capital.
So when you trade in the stock market, you are in fact buying and selling individual holdings.
When you buy shares in a company, you become a partner, and the business leaders then work for you (they will not take care of your laundry, but they will try to make money for you!).
If you think it will work well for a business, you can buy some of it and take part in its successes (or failures).
This is called investing.
Two important factors that beginner traders need to know
How successful you are at making money on stocks depends on two things:
- The success of your business: The better your business, the more money you will make.
- Timing: Knowing when to buy, sell and wait is the key to managing your investments. To know which companies to invest in and when to carry out your trades, you need to do research.
First, you need to research different companies to find the ones that have the best chances of success.
Once you have made your choice and bought shares, you need to monitor your companies regularly to ensure that they make smart decisions that improve the share price.
As you can imagine, all this research can involve some work. Fortunately, there are some ways to help you make money on stocks without having to do so much research.
1. Hire a stock manager
Hire a stock manager: Do not know how to make money in the stock market? Go to your bank or to an investment company and hire someone who can manage your equity portfolio.
It’s their full time job to pick stocks and track data, giving you greater chances to make profits. But for this you have to pay a management fee, which can be expensive.
2. Use trading signals
Use Trading Signals: Trading signals show you when to buy and sell a stock at the right time to make a good profit and without risking that much money.
The trading information is based on algorithms and expert research, which means that you do not have to do this heavy work yourself.
3. Invest in your passion
Invest in your passion: You probably already know a lot of good companies to invest in. If you like cars, for example, you may be an expert on Ford, Fiat, BMW etc.
Use the knowledge you have to invest in companies you like. This also makes it more enjoyable to do research and to follow the news.
How to make money on stocks: How to trade stocks and make money on it – Top 5 Tips
There are several ways to make money on stocks.
Some are slow and stable (low risk) and others are fast and eventful (high risk).
I have divided our earnings strategies into high-risk and low-risk sections to make it easier for you to learn how to make money in the stock market.
1. Low risk strategies
Low-risk strategies involve buying shares and keeping them for a longer period of time. This is considered to be the smartest way to invest in stocks because the market always goes up over time.
If you have a diversified portfolio, you will almost certainly make money.
2. Index funds
As I mentioned before, investing in low-cost index funds is a great way to safely inqrease your wealth over time.
Because index funds are passive low-risk investments, you pay very low management costs (less than 0.5%) and very little tax.
In addition, index funds can in principle guarantee a profit of 5% or more per year.
Some examples of index funds are: The S&P 500.
3. Mutual funds
Mutual funds are similar to index funds, but they are much less passive.
When you invest in an mutual fund, you are investing in a diversified list of companies.
But this list can be changed without you having to do anything. The fund managers buy and sell shares (with your money) to try to maximize profits.
Investing in mutual funds means higher risk, but you have the opportunity to earn more. Some earn annual profits of close to 20%.
But in the long run, it is index funds that almost always prove to be the most profitable.
4. Hire a share manager
When you invest in mutual funds or index funds, you are not involved in the decision-making process at all. The managers do all the work for you.
If you would like to do some of your own research to be more involved while keeping the risk down, you can hire an equity manager to manage your portfolio.
Equity managers are investment experts who help you choose the best stocks.
They buy and sell what you want whenever you want. If you get a hot tip from a company that you know will work well for you, you can just call your share manager and buy this share for you.
They also keep an eye on your portfolio and inform you when they think it’s time to buy and sell.
You can decide whether your relationship with your share manager should be passive or active.
Hiring an asset manager is a good way to reduce your risks while you can take an active role in your investments.
But you will have to pay fees and commissions to your trustee. For example, a share manager charges an average of $150 per transaction (executed trading).
Compare this with $0-10 per trade performed if you use an online trading account.
To find a stock manager, talk to your bank or find an investment firm near you.
5. Buy safe stocks
If you want to buy individual stocks but do not like having to pay fees and commissions to a stock manager, you can reduce your risk by investing in secure companies.
Companies like Disney and Coca Cola for example will not disappear. They are solid parts of the global economy, and it is very likely that they will continue to be so.
These will almost certainly continue to grow, giving you a steady profit flow over time.
Daytrading is a high-risk profession where you make fast trades for quick profits.
Daytraders buys and sells shares every day.
Some days they earn tens of thousands of kronor. Other days they lose just as much.
It’s a stressful job, but it can be rewarding.
But, take a look at this video on what you can expect when daytrading:
If you do not want to do professional day trading, you can try it with just a few companies to see if you can make some money.
Buy shares when the market opens, monitor the price during the day and sell when it rises above your purchase price.
Of course, the value of your stock can also fall.
If you do proper research, you can make quick money on day trading. If you have a little extra money, it can also be an exciting hobby!
Is there an intermediate position between high-risk and low-risk trading?
Yes. There are a few ways you can use it to reduce risk and make it easier to make money in the short term.
- Do research and stay up to date: By doing proper research and keeping your stocks, you can significantly reduce the risks, but it can be time consuming.
- Follow trading signals: By using trading signals you benefit from expert research and top algorithms. Trading signals show you what to buy and when it’s convenient. All you need to do is watch your money grow.
Are you ready to start making money on stocks?
Making money on stocks has never been easier.
By using online resources to do research and trading, you can make smart stock decisions and start making money in no time.
To reduce your risks, I recommend that you do proper research or that you invest with expert help.
Some financial tips for making money on stocks:
For safe profits, choose low-risk strategies.
But if you have some extra money and a gut feeling… choose a few shares and just have fun!
You never know, you might be lucky!