How to Create Wealth Through Stock Investing

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Over the long haul, investing in the stock market produces more wealth than investing in other assets. Many millionaires -- even billionaires -- have made their money, at least in part, through astute stock trading and investing. It's not difficult to learn how stock investing can create wealth.

Research stocks that fit your investment style. If you don't have time to monitor the market, choose stocks that have long-term potential and high dividend yields. If you want to trade stocks actively, look for stocks that have the highest potential of capital gains (the profit from selling a stock).

Select a low-fee, low-commission broker. Paying high fees can cut into your profit. Discount brokers are the best choice for independent but active investors.

Pay yourself first. Make sure a portion of your earnings from your regular job is used to fund your investing accounts.

Diversify. Not all the money you save should be placed in your trading or stock account. Spread a portion of the money in cash, bonds, real estate and other forms of investment. Diversifying your account should help you survive any deep downturns.

Establish an investing discipline and stick to it. If you don't have a lot of time, manage a buy-and-hold strategy by selecting the best stocks for long-term performance. If you want to actively trade stocks, pick a trend-following or day-trading discipline.

Check your emotions at the door. No matter what investing philosophy you choose, remember to keep your emotions in check. Fear and greed cause irrational investment decisions.

Reinvest your profits. You can compound your returns by reinvesting dividends and taking profits off the table and investing in other stocks that are demonstrating higher potential.

Tips & Warnings

  • Remember that investing is not gambling, although risk is certainly involved. Make sure you are making sound decisions based on your risk tolerance level.

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