How to Make Money Investing in Stock

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The stock market can be a great place to make money. With some investment capital you can get started on your way to financial freedom. Learn how to Make Money Investing in Stock

Things You'll Need

  • money to invest
  • time
  • effort
  • a brokerage account
  • Open a stock trading brokerage account if you do not already have one. You can do this online, over the phone or by mail.

  • Know your risk tolerance.
    You can make money in the stock market with any level of risk aversion. Knowing your comfort level is going to help you sleep at night when you picks the right stocks for you.
    If you don't like risk, stick to the Blue Chips.
    If you're up for some risk go for the emerging technology penny stocks.

  • Set goals.
    Having specific goals will help you pick the correct stocks for you. Are you investing for retirement, college, a house, etc?
    These goals all have different time lines. You wouldn't pick the same stocks to achieve these different goals.

    For a long term goal like retirement, think large cap dividend stocks like utilities. And then make sure to enroll them in a DRIP.

    For shorter term goals like a house, you'll want to focus on more risky growth stocks like the technology sector.

  • Allocate funds.
    Whether it a lump sum or a monthly amount, you need money in your brokerage account. This makes the money available to invest the moment you want it.

    You can set up an automatic electronic transfer if you're going to invest the same amount every month.

  • Diversify.
    Protect yourself from losing your entire investment by diversifying. This is like buying insurance within the stock market. To truly diversify you'll want to invest in at least 5 different industries or sectors.

    Auto, retail, food, health care, banks, technology, utilities are all examples of different sectors.

  • Have an exit strategy-- you don't actually make money unless you sell above what you paid.
    Knowing when to get out is the most important step to making money in the stock market.
    Whether your exit strategy is based on time, like for retirement or college, or based on profit-- like having enough for a house mortgage down payment -- you need a plan.

  • Take the money and run.
    Once you've achieved your goals, take the money and use it for your lifestyle.

Tips & Warnings

  • enroll your dividend stocks in a Dividend Reinvestment Plan (DRIP). Your cash dividends will be reinvested in that stock for you.
  • Use Dollar Cost Averaging to smooth out the market bumps and take advantage of the market lows
  • the stock market is risky, you can lose your investment. Do not invest what you can't afford to lose.
  • Photo Credit clkr.com
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