People get rich from stocks by buying a stock at a lower price and then turning around and selling it for a higher price. This is a very simple explanation that requires more explication but that’s the gist of it.
Of course predicting when the stock is going to go up or down is a game in of itself. To get started doing this I recommend looking at this starting post on exactly how to invest in the market.
Now let’s jump in on the different ways you can become rich by investing in the market.
Getting Rich by Buying ETF’s That Track Index Funds.
Ok so you opened a brokerage account and deposited your first funds. Now the next step is to find a stock that you want to buy.
Obviously the goal here is to make money so I recommend grabbing either VTI or SPY. These ETF’s will net you between 8-10% per year. That might not sound like much now, but that 8-10% will compound. Before you know it you will be rich!
As you can see from the above image if you invested $200,000 in SPY in 2007 you would have an amazing $579,000! This just from sitting your savings in SPY.
Assuming you didn’t pull your investment out at any point that represents an average of $29,000 a year. The compounding here is astounding and if you let your investment ride for another 12 years then you could expect to see over $1 million from that initial $200,000.
As we can see investing in these ETF’s are an amazing way to grow wealth passively over time. Everyone should have an investing account as it is a nice way to compound your wealth over time to make yourself rich.
Getting Rich by Buying Dividend Stocks
There are companies out there that pay people who hold their shares. Think of this as collecting a paycheck for just holding shares of a company. These dividends can either be drawn for you to spend or can be reinvested back into the company.
If you chose to reinvest then you will find that your next dividend paycheck will be slightly higher because you hold more shares! This can quickly turn into a snowball and before you know it you will be making $10,000+ per month just from dividends.
Dividends can either be paid out yearly, quarterly (3-4 months), or my favorite monthly. When you invest in a dividend company make sure to check when you should be getting your first paycheck!
These dividends will quickly add up and before you know it you will be filthy rich just from passively holding the stock. Further, if the stock’s price goes up you will also make money off the shares so its a win, win.
Getting Rich by Value Investing
Value investing is when you look into a companies fundamentals and financial reports. The purpose here is to find a company that you feel is undervalued currently in the market. This is a more advanced strategy but with proper dedication you can master it.
The worlds most famous investor, Warren Buffet, is a value investor. He made his billions by finding undervalued companies with a solid track record for growing year over year and just invested. If he can do it then you can to!
The trick to value investing is to learn how to read the financial reports. To a novice investor these reports can seem incredibly hard to read but just keep at it. You will eventually be breezing through the documents with time to spare.
If you would like some pointers then check out this post we did on the 3 steps for making consistent returns in the market. It covers fundamental analysis and reading financial documents pretty well.
Being a value investor is all about time and effort. You will be looking sifting through lots of financial reports to find that one company that is undervalued in the market. When you find it however then you can pump money into it and get a 100% return on investment in a couple months.
Imagine dropping that $100,000 on a good value play and in 6 months you pull out $200,000. Obviously this would mean you made a whopping $100,000 in a 6 month time frame, which is insane!
This is why value investing is so powerful. It just takes a lot of time and energy.
Getting Rich by Trading Options
Yes, trading option contracts can make you incredibly rich.
The basics of this is that people are trading contracts instead of shares. These contracts have the ability to 10x their investment if everything works out, but the investor risks losing 100% of their investment if everything goes wrong.
That being said, options are incredibly lucrative when put in the right hands. This is an advanced trading strategy that I don’t recommend for new investors. You need to work up to options.
This is because with options you can actually end up owing money to the stock broker. You lost over 100% of your investment and now you must pay into your account or risk a margin call, which you don’t want to happen.
An example of just how lucrative options can be is showed in the following screenshot.
As we can see this above image demonstrates that I made close to a 200% gain on an investment. That’s pretty good and it happened in about one day.
That’s the power of options. But you need to work up to it and not just jump into the fray as you could lose the shirt off your back.
The Number 1 Rule of Investing
The number 1 rule of investing is time. You need to give your investment time to work. This is true for all of the above ways people get rich in the market.
If you invested in an ETF and only waited a day then you would maybe have received $0.50. Hardly worth the time and energy.
If your not going to give your investments time to work then they cant work for you. The average successful investment length is between 4-6 months. Most people are impatient and don’t wait, which one of the ways they lose money.
If you guys are interested in the other main reasons you or other people lose money in the market check out this post on the 5 reasons people lose money in the market.
That’s the super simple way that other people become rich in the stock market. You to can become filthy rich by sticking to one of the above trading strategies.
If your a first time investor I highly recommend buying large ETF’s such as SPY or VTI. This will give you a little bit of everything and will give you a steady stream of growth.
After that work your way into buying dividend stocks. These guys will give you a steady paycheck over time. This will add up fast.
Finally look at learning how to value invest. This will be a major hurdle but if you stick with it you will be making huge returns on investments consistently.
Options trading can be sprinkled in but be careful. Here is when things start getting wild, you will either become a millionaire overnight or be broke/worse.
As always if you like content like this then you should share on social media and subscribe to our newsletter! The purpose of this sight is to provide investment research and help others grow wealth in the market.
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Until next time, I wish you the best of luck in your investments.