How to Make Money with Stocks

Making money with stocks is not something that is only suitable for people who already have a lot of money. Nowadays anyone can start investing in stocks, and you can therefore also earn money with stocks. Due to the internet, there are more and more (cheap) ways to trade on the stock market, so that practically anyone with an internet connection can start investing.

Disclaimer: This is not financial advice. If you want to start investing, read carefully, and know that you can lose your money.

What are shares?

Shares are pieces of a company. Some companies have a stock exchange listing, with which the shares can be traded on the stock exchange. In this way, outsiders can buy a share in the company and thus become a shareholder.

If you own a share in a company, you are a shareholder of the company. This sometimes entitles you to the profit distribution of the company, which is done in the form of a dividend. That is a first way to make money with a stock.

A second is when the price rises. This can happen if the stock is in high demand. Then the price usually goes up.

How do you buy shares?

You cannot just buy shares yourself. You need some kind of intermediary for that. We call this a broker (or stockbroker). A broker has access to the market, and you have access to the broker. This way you can buy and sell the shares through the broker.

Brokers can be pure online brokers (such as DEGIRO or BinckBank) or your current bank (for example ING, ABN AMRO or Rabobank). Banks are usually a lot more expensive.

Which broker you choose can make a big difference on the money you earn. For example, do you only want to invest in Dutch companies, or worldwide. Do you want to actively invest in shares (perhaps as a day trader), or do you prefer to easily buy baskets of shares (also called ETFs). All choices that you can consider before choosing a broker.

What strategies are there for making money with stocks?

For the sake of convenience, let’s take a look at two strategies that you can use to make money with stocks.

• Short term strategy
• Long term strategy

A short term strategy is for a period of a few years, or maybe even less. Here you actively trade in stocks that you expect to rise in a short period of time. This is more towards day trading. You take more risk with this, and therefore also expect a higher return (or you like to be actively involved).

The long-term strategy obviously takes a little longer. Think 10 years or more. A much-discussed long-term strategy is, for example, investing in index funds. This allows you to invest in many different companies through a fund. With this you mainly anticipate the fact that the price on average goes up, and you are not actively looking for the best companies to invest in. You are more passive and are therefore satisfied with a market-average return.

Having a long horizon is something that many investors strive for. Even though they have an active strategy where they don’t hold stocks for too long. For example, several short-term strategies in succession.

Also Read: Earn Money with Apps – We show the Tricks

How to start investing

Starting investing doesn’t have to be that difficult. In any case, it is good to think about the following:

1. How much money do you invest

It is good to think about how much money you want to invest. It is unwise to invest with money you need, because you can lose your investments.

Maybe you have a piggy bank somewhere that you want to put to work, or you want to invest a fixed amount per month from your salary. It is good to think about this, because your starting amount certainly determines how much money you will eventually earn with it. After all, 10% return on 10,000 euros is a lot more than 10% return on 500 euros.

It is good to know that there is not really a minimum to start investing. With 100 euros you can go a long way.

2. What am I going to invest in

When you have decided how much money you want to start investing with, it is also good to think about what you are going to buy. After all, earning money with shares does not just happen, you actually have to do something for it.

Of course it is also good to think about this before you even think about how much money you are investing. The choice is yours.

Investing in equities is a profession in its own right, and a huge number of people are active in this worldwide. It is therefore questionable whether you can find the best investments yourself. But you can always try. If you don’t have any inspiration at all, or don’t dare to do it, you can also look at an ETF. With this you invest in many different stocks (for example everything in the Dutch AEX) and you are immediately well diversified.

How do you make money with stocks?

Earlier in the article, the ways to earn money with stocks were discussed briefly, but here’s just a clarification because perhaps not everyone reads the text equally well.

There are basically two ways to make money with stocks:

• The share price rises, so you can sell it for a profit and make money with it.
• The company pays out the profit as a dividend, and with that you receive money and you have therefore earned money.

Of course you can also combine them. A company can also rise in price and pay dividends.

The big advantage of dividend over just price gain, is that with dividend you get the money immediately and you still own the share. With only price gains, you only earn money if you sell the share.

Incidentally, you can also make money with a share if it falls. But that is still too difficult to explain everything in this article. In any case, it is about going short on a stock.

Other investment products

Investing in stocks is probably the best-known form of investing. It appeals to people, and people usually know what it means.

But there are many more different products that you can invest in. You can also earn money by investing in bonds, gold, options, or crypto trading .

If you’re first starting out with investing, it might be a good idea to delve into making money with stocks. Other products can be too complicated to understand, and you usually shouldn’t start with that.

Risks of investing in equities

Investing in stocks is not free of risks. You can lose (part of) your investment. This can have various causes. For example, think of:

• Unrest in the market , for example what we saw in 2020 with the coronavirus. Or the years before when political games were played between great powers such as America and China.
• Bad Results . A company can achieve poor results by, for example, making less profit or less turnover than the analysts had predicted. Or there may be poor results from unemployment figures (to name just a few) which have an effect on the market or a sector in the market.
• Changes in Exchange Rates . Today, practically every publicly traded company operates worldwide. Then you can deal with different currencies (euro, dollar, yen, etc.). They also fluctuate in value relative to each other. This can affect a company, but also your shares. For example, if you bought shares in America with dollars, you probably convert it to euros. But when the dollar/euro exchange rate changes, so does your value.

All in all, there are therefore plenty of risks to take into account. So read carefully before you just start investing.