How to Make money in Stocks?

Invest in blue-chip stocks that have a history of stable dividend payouts, around 3-5% annually.

Open an Investment Account

A good way to begin investing in the stock market is, naturally, by opening an investment account. Your first move should be to choose a reliable brokerage firm whose style of operation and fees would be most suitable for your long-term or short-term investment goals. You can check and compare the features of such firms as Charles Schwab, TD Ameritrade, Fidelity, and many others, which include user-friendly interfaces, customer support quality, balance requirements, and access to research tools . Once you have made your choice and your mind up about the sort of account you would like to open, you will have to complete an application, which will typically require you to provide some personal information, select and specify the methods by which you are going to fund your account, and choose the type of account you want to start – either a taxable account, or a tax-qualified account, such as an IRA.

Learn Everything You Can about the Subject

An obligatory prerequisite to making any decision in the sphere of investing is comprehensive education and understanding of the stock market. Make sure to learn about the different types of stocks, such as blue-chip stocks, growth stocks, and dividend stocks, as well as about the forces, which determine stock prices . Resources that you can use for this purpose include books such as ‘Investing for Dummies’ by Eric Tyson and online courses available on Coursera, Udemy, and elsewhere. Finally, make sure that you are aware of the meaning and implications of the most important financial metrics and indicators, such as P/E ratios, EBITDA, and market cap. Making decisions based on solid knowledge is the best way to minimize the risks.

The first thing to mention is that I do not have any information on what you should do for investing, but I can give some recommendations on the matter.

• use analytical tools and software. With information being the new gold, there is a piece of data to be applied. A lot of platforms such as Bloomberg Terminal or TradingView provide in-depth analysis, real-time data, and charting applications that will help you make a more informed decision . Also, many brokers have their own software that can analyze your portfolio, suggest rebalancing, suggest other investment opportunities, and even simulate portfolio performance and different investment scenarios based on historical data.

• you need to know your market. This is the biggest rule in investments. Watch the market trend and market participants’ behavior. To get input, follow the news on CNBC or Bloomberg. Try to understand what geopolitical events or economic indicators can make an impact. Also, set alerts for your stocks in Yahoo Finance application or subscribe to some feed to get all the news on the matter.

• diversify your portfolio. This is another rule: do not but one asset. Why so? Since you put all your money to a certain entity, if this company goes off the market, you lose all your assets. Try to spread your investment across several assets, and even several asset classes such as stocks, bonds, or real estate. This is similar to the age-old wisdom not to put all your eggs in one basket. For instance, if you want to invest $10,000 and you are eager to invest in tech stocks, try investing $2,500 this sector, buying $2,500 of energy, $2,500 of healthcare, and $2,500 of consumer goods stocks.

Pick Stock Funds Instead of Individual Stocks

Choosing stock funds instead of individual stocks is a strategic decision that provides you with diversified exposure at less risk. Namely, when you buy shares of mutual funds or exchange-traded funds , you buy into a pool of stocks that are managed by financial experts. As a new investor, stock funds are especially beneficial because you don’t have to qualitatively analyze individual stocks, which allows you to save time. The most important information to be aware of concerning stock funds include their types, performance evaluation , diversification benefits, reinvestment, and ease of investment.

First, it is crucial to differentiate between different types of stock funds . Index funds follow the performance of a specific index, for example, S&P 500. The most prominent features include low fees and consistent returns. Active funds are managed by professional portfolio manages who aim at achieving the greatest possible return. They have higher fees relative to the previously mentioned type of funds. As for the performance evaluation, it is vital to carefully check the fund’s returns for the last five or ten years. What is more, it is crucial to compare these returns against the benchmark index as well as peer funds. Additionally, the analysis of the expense ratio and management fees is of special importance because they are subtracted from your returns each year. For example, a fund with an 8% return per annum and an expense ratio of 1.5% yields an effective 6.5% return.

Stock funds are beneficial in terms of diversification because they inherently spread the risk. It means that mutual funds and ETFs hold a broad range of investments, usually from 50 to 200 different stocks of various companies and from different sectors and industries. Even if two or three stocks perform poorly, the rest of the stocks usually maintain the relatively stable portfolio growth. Besides, many stock funds automatically reinvestment dividends, as a result of which the dividends you are entitled to are used to buy more shares of the given fund. This relatively small amount is significant for the compound growth of your money. Finally, investors find stock funds beneficial because they can simplify investment. You don’t have to follow each one of the 200 stocks within the fund. Instead, these funds are managed by professionals who choose stocks for you and balance your portfolio. However, even if your money is being managed by experts, it is vital to periodically review your holdings. Namely, review your fund performance in compliance with your financial goals at least once a year. If your investment does not meet your expectations or if there are significant changes in the market or your goals, consider rebalancing your portfolio.

Stay Invested with the “Buy and Hold” Strategy

The ‘buy and hold’ stock market investment strategy is one of the oldest ones and is also considered one of the best ones as well. Buy and hold refers to the following approach: you buy some stock, and then hold on to it for long periods of time. The good example of this strategy is the following: considering that historically, the value of the stock market grows up, it does not matter that there will be some downfalls or raising when you are an owner of the stock on a long-term perspective. .

But what are the main benefits of holding on stocks for a hoped period? The originally reason is the maximization of the capital gain. Stock of strong companies tends to grow over time, Apple or Amazon in poor examples of two companies, which stocks may be more expensive twenty yyears later.

The second reason to hold on stocks is the minimization of the transaction costs. Buying and selling the stock is always connected with extra fees, so in order to save your money, you need to trade seldom. The third reason to hold the stock is that it allows you to use the power of the compound. You can reinvest the dividends you gain and this way you will gain more investments, from which you can also gather dividends, creating a circle.

The last advantage of holding on stocks is decreasing of their volatility. Stock market is extremely volatile in short periods, while the value of stock tends to raise over long time itensity. By holding on to investment when the downfall of stock exchange happens, you will never sell it out of panic. At the same time, I still think that in some situations, stocks, in which you are relying on a should be sold. I am talking about the situation when a company that issued the stocks is going down, and even the point of no return is almost reached. The second reason you should sell any of your investments is that you no long term find it viable. Relatively to all your requirements, the chapter may need be rebalanced.

Explore Dividend-Paying Stocks for Steady Income

It is known that investing in dividend-paying stocks is a good strategy since it ensures stable income, in addition, such stocks can generate price appreciations. Companies that pay dividends are a sign of their stability and reliability. The following are some common ways to invest in dividend stocks and key parameters to consider when selecting these investments.

High Dividend Yield Stocks

To receive the profit, one should focus on stocks with a high dividend yield, whereas it should be relatively sustainable, which is 3-6%. One is also advised to explore the company’s previous behavior with regard to the payment shares over time, which would reflect their consistency without a drastic decrease.

Dividend Payout Ratio

To assess how sustainable the payments are, one should calculate the dividend payout ratio, which is as follows: Dividend Payout Ratio . Payout ratios should preferably be lower and it is good to choose stocks with proportion less than 60% to ensure they do not pay too much relative to their revenues .

Dividend Growth

It would also be effective to buy shares in the company where not only the payments are made but they increase. Explore the proportion of payments of the last years, and if it is growing regularly, it is a sign that the firm has been experiencing financial success. This filtering criterion excludes companies who try to adjust their costs by reducing the payments.

Sectors

Further, one is encouraged to apply comprehensive investing strategies to minimize possible risks, such as company-specific problems and factors related to the entire industry. Accordingly, one may select enterprises from various sectors such as utilities, consumer, or technology stocks .

DRIPs

If a person decides to opt for a certain stock, it is possible to find out whether DRIPs are available so that every time there is a payment, the amount of the dividend is reinvested in the firm. It also is possible to reinvest more of one’s money.

Explore New Industries

One of the regular moves you can make in the investment process is venturing into new industries. This type of investors’ shift in priorities and goals might be beneficial to you since the world is constantly changing. Thanks to the fast technological pace and the increased resources for the technological research that we constantly observe, new industries are born, and the ones that exist start proposing things that they had never offered before. Try to find the proper tools to identify new industries and assess some trends now while the industry is extremely young. Below are some strategies with the help of which you can master this challenge.

• Identify emerging industries. Some industries are about to grow bigger in the current investment period than ever before. For instance, clean and renewable energy, artificial intelligence, biotechnology, and cybersecurity have offered wonderful investment opportunities to those people who managed to see the first signs of benefits in those industries. Such signs include access to private and governmental funding, regulatory platforms, or emerging important technological devices. Consider investigating any industry site and the forecast to see what industries new experts bet on.

• Assess market trends and innovations. Attend as many conferences and specialized exhibition events dedicated to the industry of your interest. Subscribe to specialized trade journals and follow influencers who clearly understand what is happening in the industry and regularly write their comments on it in social media. Try to get the idea of what is the industry’s technology and what products, companies, and clients are involved there.

• Evaluate companies subordinated to the industry. Try to find other companies that are leaders in the market or the best innovators. They would also benefit if the industry grew. Offer to assess a company’s market share and growth figures. Remember that start-ups are wonderful but also risky investments. Consider reading about the company’s financing, what products it is developing, and who the management of the company is.

Another tip to give is remember that the industries that have recently appeared are always riskier than the well-known ones. The most volatile and fragile industries are usually new ones, as are the stocks of their companies. That said, it is better to maintain an investment balance and buy shares in well-known and well-proven industries in addition to the new ones. Some significant long-term gains can be delivered by the stocks of the newest industries, only if shortened gains are not something you prioritize. Also, remember to follow all legislative changes, including potential changes that might affect the industry.