Investing in stocks can seem like a complex science, the fundamentals of which were not taught to us in school. But there must be ways to make money on stocks without being experts in economics, current geopolitics, or psychology. How can you avoid the typical mistakes of novice investors and not lose money on stocks?
How to Make Money on Stocks in Different Ways?
When you buy shares in a company, you become the owner of a piece of that company and provide it with funds for its activities. If you buy common stock, you also gain voting rights, which give you the opportunity to participate in decisions about the company’s operations, although this has a relatively small impact proportional to your investment.
Most often, people want to make money on stocks simply by buying them for less than they will then
sell them for. Although the stock market may experience declines, it has historically shown a tendency to grow.
If you are prepared to run an ultramarathon with stocks, you will see a return at the end of the race.
But that’s not all. Stocks can also provide you with regular income in the form of dividends. Some
companies pay stock dividends once a year, others once a quarter. How do we know when we will receive this amount as shareholders? We follow the so-called record date, which the company announces in advance.
If you hold the shares on this date, the dividends are yours.
PRO TIP: Filter Promises of Advantageous Deals
A hot tip from a financial influencer on TikTok, presented as almost exclusive, is often less helpful than facts about the company whose shares have caught your attention: the stability of its income, low debt levels, etc. Such a company will be more resistant to market fluctuations. Influencers can make us feel euphoric or fearful, artificially hyping up some stocks and condemning others. But we will not be guided by emotions, but rather by objective data.
When to Invest?
Who do you imagine when you hear the words “ideal investor” or “stock trader”? Is it more likely to be a
middle-aged person than a high school student? We should not be guided by these ingrained associations. After all, you can invest from the age of 18.
The best long-term strategy for making money on stocks is to start with smaller amounts and invest
them regularly and patiently. So don’t put off investing until you are older, more experienced, or
wealthier. Your total earnings on stocks will not automatically be higher because of this.
Are you 18 or older? Then you are now at the best age to earn money on stocks.
PRO TIP: Ignore Short-Term Stock Market Fluctuations
The average person invests in stocks amounts that they can survive without in the near future and that they can afford not to withdraw, but rather to let grow slowly but surely. However, you can go a step further. Promise yourself that you will add the same amount to your stocks on a regular basis. Don’t be tempted to increase the amount dramatically when you hear about a rise in the markets. Don’t stop investing money during temporary market downturns either. It is useful to monitor fleeting market fluctuations, but don’t let them unsettle you.
How to Diversify Your Investments?
If you get carried away by individual stock opportunities, you won’t see the forest for the trees.
Instead, look at all your investments as a whole. They should form a diversified portfolio
that is diverse not only in terms of industry and trade sectors, but also in terms of geographical areas. This will minimize the risk of unpredictable geopolitical developments in a particular region affecting your overall earnings.
Portfolio diversification can also mean horizontal diversification: investing not only in stocks, but also in
other types of assets, such as bonds—but we’ll talk about that another time. Get free unique
tips from the world of investing.
PRO TIP: Trust Stock ETFs
You are more likely to make money if you don’t just hunt for individual stocks, but bet on a stock
Exchange Traded Fund. This replicates the performance of a selected stock index. If you come across an ETF
called Vanguard S&P 500, you can easily see that it tracks the S&P 500 index. The 500 in the name means
that the index includes the stocks of the 500 largest publicly traded companies, in the case of
S&P, these are companies in the US. Investing in ETFs is less risky, but no less attractive. For
illustration: In 2024, most globally specialized stock funds appreciated their investors’
assets by an average of 20-30%. You can learn everything about ETFs here.
How to Uncover Hidden Fees?
If you want to make a profit on stocks in the end, you must also take into account the associated expenses. Your profits from stocks as such do not remain yours; they are taxed, specifically with capital gains tax. You should also take into account various fees charged by brokers for currency conversion, deposits, etc. If you deposit your local currency into the investment platform, you will then have to convert them into dollars or euros – and you will usually pay a fee for this. At the trendy online broker Trading 212, the 0.15% fee is relatively low. The fee for trading stocks is zero for investment apps such as XTB (here, if you do not exceed a nominal investment of EUR 100,000 per month), eToro, and Trading 212.
PRO TIP: Look Beyond the Investment Horizon
Among novice investors, who typically chase quick profits, be the exception who is able to let their stock investments grow steadily over the long term. This is the only way to increase your earnings using tactics such as dollar-cost averaging. This is a cost averaging technique where you invest the same amount in selected stocks over the long term, regardless of their current price. This allows you to buy more investment units when they are cheap and fewer when they are expensive, which on average reduces your costs and the impact of market volatility on your earnings.
