It does not have to be hard to make money on the stock market and many who fail do so because they are too greedy and try too hard. Anyone can make money on the stock market if they use a long term investment strategy.
2 ways to make money
There are two main ways that you can earn money when investing in stocks. You can:
- Buy stocks and then sell them at a higher price later.
- Buy stocks and earn money by collecting the dividends.
Both methods have benefits and drawbacks. In an ideal world you should try to invest in stocks that allows you to earn money in both these ways. However this is not always possible. Dividend stocks are usually mature stocks that are unlikely to appreciate in value as much as stock in a smaller upstart might do. Some investors will therefore opt to invest in stocks that doesn’t pay any dividends in the hope that the share will go up a lot in value and earn them more money than a dividend share would. It can generally be said that dividend investing is the safest way to earn money on the stock market.
Buy low, Sell high
To buy stocks today in the hope of being able to to sell them later is the technique that most people associate with stock trading. It can be a good way to earn money and there is no limit to how much money you can earn by investing in stock in this way. It all depends on how good you are at picking stocks and how often you buy and sell stock. It can be very hard to know which stocks to invest in to get the best return on your investments and it can be hard to know when to buy and sell a certain stock to maximize your earnings. You risk losing money if you chose the wrong stocks at the wrong price.
Some stocks are a lot more risky to invest in than others. More risky stocks include stocks in developing companies and companies that are dependent on one or a few products for their revenue. Start ups and penny stocks are two examples of types of high risk stock. A high risk stock usually have a lot of potential as well. Investing in high risk stock can therefore be very profitable if you choose the right stock but can cost you a lot of money if you choose the wrong stock.
It is important to remember that a stock does not necessary have large potential just because they have a large risk. Some high risk stocks offer very little upside. Other stocks offer a lot of potential and very little risk. But these companies are very rare and are usually very good investments if you can find one.
A beginner is usually better of by simple ignoring trying to find the stock that will give the best return and instead choosing good low risk long term stocks. These stocks are a lot easier to find and is very likely to give you a good return if you are a long term investor. The return will not be as high as the return you can get from investing in high risk stocks but you are a lot less likely to lose money. Low risk stocks are usually the best strategy to use for long term success on the stock market. It is a strategy that is favored by successful investors such as Warren Buffet, Benjamin Grahamn and Peter Lynch.
Buy dividend stocks
Investing in dividend stock can be a very good strategy for beginner and expert traders alike. If you invest in dividend stock you get a yearly income that is paid to you as cash. This means that you get money from your stock without having to sell the stock. You will often have a good idea of how much money you are going to get each year from the dividends. This is true regardless of how the stock market develops. It is possible to build a dividend portfolio that gives you 5% or more in yearly return. Your stock will hopefully also go up in value each year which will bring your total yearly return a lot higher.
You can use your dividends to buy whatever you want. You can use it for personal consumption or to buy more stock.
A dividend portfolio is usually the best options if you want to invest in stocks without having to spend a lot of time learning about stocks and analyzing different companies. There is plenty of lists of high quality dividend stocks online that you can use to build a dividend portfolio with very little effort. Your goal should be to invest long term and in an ideally situation you should never sell the shares in you dividend portfolio. Your goal should instead be to benefit from ever higher dividend payments.
Dividend stocks are a very good way to invest for your retirement. You can build a portfolio that gives you a good annual return without the need to sell stock to get money for your retirement. That way you never have to worry that your retirement money will run out. Your portfolio will only increase in value and give you more and more money year after year.