If you want to learn how to make money in the stock market, start with one of these beginner friendly strategies:
- Buy and hold stock in reputable companies for 20+ years
- Find the next big trend and invest in it
- Buy dividend paying stocks and get paid every quarter
- Learn how to trade stocks
- Trade stock options
The basic concept is to buy low, sell high.
“But how do you know if a stock is going to rise or fall?
And what happens when there’s a stock market crash?
Do you have to know how to read those crazy charts to make money in the stock market?”
Let’s slow it down and start with the simple answer…
How to make money in the stock market by simply buying stock
Find a reliable, well-established company that is profitable year after year. Buy shares in that company each year for the next 20+ years and watch your wealth grow reliably.
This is a boring way to make money in the stock market, but it’s the most reliable way.
This is also the least stressful of all your options. When the stock falls, you will actually be happy to pick up more stock at a cheaper price. Then, when you’re ready to retire, you can start to slowly sell your stock and live off the profits.
If you already have a portfolio of rental properties, this may not be as attractive. Your rental properties are positioned to provide your retirement income.
And if you’re looking for an income-generating side hustle, this isn’t going to satisfy the money-making itch.
How to lose your shirt investing in the next big thing
On the opposite end of the spectrum from the buy and hold strategy is investing in companies that you think will explode in the next year or two.
Speculative “investing” like this is extremely risky and rarely works for anyone.
Those who made money on GME got lucky. Nobody could have predicted the manic behaviour that sent it’s stock price soaring (and then crashing back down).
Be careful with anyone who claims to know what the next big thing will be. You’re more likely to lose your shirt with stock tips like that.
How to collect quarterly, or even monthly payments with dividend stocks
Many regular, everyday Canadians have retired comfortably with dividend stocks. What is a dividend stock? Some companies pay their shareholders a small amount per share every quarter (some companies pay out monthly). This payout is called a dividend.
This is another version of the buy-and-hold strategy. It takes time to work wonders. When you first start buying dividend stocks, the payouts aren’t that significant. But the beauty of dividends is that you can start to buy shares with dividend payouts.
At that point, you’re buying stock and growing your portfolio for free.
That feels pretty good!
Now, if you have several rental properties, dividend investing won’t be very attractive. Although you might like collecting monthly payments without worrying about property maintenance and tenants.
This may not be the greatest cash flow side hustle, but it is a reliable way to make money in the stock market.
How to make money trading stocks
This is definitely a side hustle; buy stocks when they’re low, sell when the price pops a few weeks later.
If you are good at recognizing patterns and holding your emotions in check, stock trading could work out well for you.
It requires some education upfront. You need to learn to read stock charts, recognize price patterns, and understand who business cycles work in various industries.
The idea is to make a bunch of small wins that add up to big gains at the end of the year.
The trick is, you have to be right about which way the stock price is going to move. If you’re wrong, you instantly start losing money.
Although this has the potential to be a lucrative side hustle, it’s not a forgiving one. If you own rental properties, it’s almost less stressful to manage tenants than trade stocks.
How to make money trading stock options
Stock options are weird.
They have the potential to completely ruin someone financially if they don’t know what they’re doing. But with the right strategies, they can actually be a great income-generating side hustle.
There are two different types of options, calls and puts. It takes a bit to wrap your head around how calls and puts work, so we’ll save that for a future post. But they let you buy or sell stocks with room for error.
Selling puts specifically will also create cash flow for you. This is one of the “stock hacking” strategies we talk about all the time.
Although the learning curve is tough, anyone can learn. It’s particularly attractive to real estate investors. It doesn’t have to take a lot of time out of your day to use these strategies. You can be wrong and still make money. And you don’t have to worry about maintenance or tenants.
If you want to learn how to make money in the stock market, and you’re willing to put some time and effort into learning new strategies, stock hacking can be worth it. It has been good to us and our friends.
Building wealth together,
Erwin and Cherry Szeto
P.S. If you’re interested in finding a new side hustle, we’ve put together a new case study that examines the four most popular side hustles for passive income in Canada. You can download this case study for FREE right now if you sign up for our email newsletter.