Working jobs, running a business, and everything that you do in your daily life are related to earning money. But have you ever thought of venturing into the share market to earn money?
The share market is like an ocean full of waves. And every wave can be compared to stock. Just like how sailors understand the pattern of waves and sail through them, if you can understand the pattern of a stock’s performance, you will be able to make a profit out of it.
The great thing about investing in stocks is that you can earn passively without even lifting a finger. Passive income sources are essential for your short-term and long-term goals. Whereas most people relied on fixed deposits, real estate, and gold, lately, the trend has shifted towards investing in stocks.
This brings us to a question…
How To Make Money On Stocks?
Investing money in the stock market has always been the priority for people on how inflation affects the economy. However, with time, more and more people are learning about the stock market and how it can help attain financial freedom. As a result, the stock market, which was previously perceived as taboo, has now flourished into a full-scale industry.
The popularity of stock market investment is rising. People want to invest in the market with the hope of making money. But how do they do that?
Let’s find out.
Buy And Hold
One of the best ways to earn money from the stock market is to buy and hold them long-term. According to experts, buying a good stock and holding it for a couple of years will give you better returns than any other investment.
Now how does this buy-and-hold strategy work?
The buy-and-hold strategy is simple. You buy stocks at an undervalued price and hold them to yourself for a couple of years. When the price increases, you can take this opportunity to sell the stock, making a hefty profit.
The only drawback of this method is that you need to know the best buying price of tech stocks. This needs careful evaluation of the stock’s past performance and accurate future predictions. Only when you are sure that it will reach a certain height must you go for the purchase.
Funds Over Individual Stocks
You must always invest in multiple funds over an individual stock. The key to making a profit out of the stock market is diversification. This helps you mitigate the loss and keep your capital investment alive. If you invest everything in one stock, you risk losing all the investment in full scoop with that stock’s bad performance.
Although most investors gravitate towards the two investment types – individual stocks and stock funds, experts typically recommend the latter to maximize diversification.
While you can buy several individual stocks and diversify your investment, this usually requires time and market knowledge. But with the funds, you get access to hundreds of individual investments with a single share.
This is why most experts advise people to invest in funds that track major stocks in the market with a strong track record.
Reinvest The Dividend
Finally, reinvest your dividend.
When you invest in stocks, you get a dividend at the end of the financial year. You take the dividends as the interest for holding onto the stock for at least a year. You can use these dividends to make more money.
Reinvest the dividend back into the stocks you are holding. This will increase the number of stocks you have now. This further helps you eat more dividends next year.
This enhanced compounding is why most investors advise beginners to invest long-term and take advantage of compound investing.
The Bottom Line
If you want to invest in stocks, you don’t have to be an expert. You can simply start by investing in low funds stocks and hold them for several years (just like you do for fixed deposits) and see them only when you need money.