What do you think is the best way of making lots of money? A popular opinion on this subject is that playing the stock market is perfect for earning a fortune very easily. Is this true or is it simply a widespread myth?
The truth is that many people have made money in this way, while many more have lost out by buying stock.
So, what do you need to know about how investing in the stock market and how much money can you make from stocks?
How Much Can You Expect to Earn?
There is no definitive answer here. With numerous stocks available on different markets all over the planet, there is a huge amount of diversity to choose from. This means that everyone is likely to choose their own, unique mixture of investments.
These markets are constantly in movement. Even if two people choose exactly the same portfolio, their profits or losses will differ unless they also make exactly the same moves at the same time.
Is there an average stock market profit that we could use? The fact is that profits vary so widely between investors that this would an essentially useless figure, even if it existed.
What about the average increase in the market? This might seem like a decent indicator but is it? We need to bear in mind that very few investors beat the market. Most people will earn significantly less in profits than the overall rise in the market suggests.
In fact, it is far more common for investors to lose money from stocks than to earn it.
People Who Have Made a Fortune from the Stock Market
Perhaps the strongest reason that stock market investing is seen as a gateway to untold riches is the list of investors who have made a fortune in this way. How did they do it and is it possible to emulate their success?
For a start, the most successful stock market investors in history include the likes of Warren Buffett, George Soros and John Templeton. There are plenty of books, videos and blogs around on how to follow their advice and techniques.
So, is it easy to invest wisely in the way that they have done in the past? The answer is a bit more complicated than a simple yes or no. Perhaps the biggest drawback is that famous investors have access to far more capital and resources than most of us can muster.
If you follow their advice with a small amount of capital you may be successful. However, you are unlikely to earn anywhere near their returns, as they can afford to invest far bigger sums of money. They also have the cash needed to be able to deal with any setbacks without it being a disaster.
People Who Have Lost a Fortune
On the other hand, there are also numerous investors around the planet who have lost fortunes on the stock market. The most spectacular examples have come with stock market crashes such as the Wall Street Crash of 1929 and the Dot-com bubble at the start of this century.
It is clear that many investors were ruined due to these events. The image of investors who had lost everything leaping from buildings over Wall Street losses still lingers even today. However, it is common for investors to lose money in far more mundane ways.
A poor investment, chasing losses, and choosing the wrong moment to cash out are some of the mistakes that can lead to huge losses on the stock market. Even if you start off with a relatively modest amount, you need to make sure that you could cope if you lost it all.
For many people, rather than the question ‘how much money can you make from stocks?’ it is better to ask, ‘how much money can you afford to lose?’
What Approach Should You Take?
All of this leads us to consider what type of approach you should take. The starting point for any stock market investment should be considering whether you want to aim for huge profits or a steady return.
Certain types of stock are ideal for different types of investors. For instance, if you are hoping to turn a small starting amount into a far bigger amount you might be interested in penny stocks.
These are extremely cheap stocks that may or may not increase greatly in value. Some will disappear without trace while others may go on to become highly valued, earning big profits for investors. This is a popular way of trading and many investors put a lot of effort into finding the best penny stocks.
The opposite approach is to invest in established, blue chip stocks. These are typically from big-name companies whose market value tends to be relatively stable. This kind of investment can produce good dividends but the stock price may not increase much over time.
Clearly, the higher-risk strategy is more attractive to someone who wants to earn as much as possible. If it works and you buy cheap stock that sky-rockets then you could find yourself earning a lot of money.
What Other Money-making Options are There?
Having seen the information so far, you may be wondering whether stock market investing is really the best option for you. Certainly, if you are hoping to avoid risk then you are probably having second thoughts about it.
So, what other money-making methods are there you to consider? A smart idea is to look at passive income ideas, such as those covered on Auto Tweets. These methods are designed to bring in money for the rest of your life, without any ongoing work or risk on your behalf.
The big advantage of passive income is that it gives you a reliable source of money that you can just leave running. This is very different from stock market investments. Successful stock investors need to keep a close eye on their portfolio at all times in order to choose the perfect moment to buy and sell.
As we have seen, making moves in the stock market is no guarantee of big profits. There are people who have famously made fortunes in this way, but many more investors have lost money or only made modest profits.
Checking out the passive income ideas on Auto Tweets is a smarter way to earn money that is more suitable for far more people than stock market investing.