Investing in stock can be a great way to earn more money and to reach your goals faster. By investing the money you earned into a low-risk stock you can allow that money to make money for you. This will allow you to reach your goals quicker.
In this article, we are going to look at how you can use the stock market to earn more money and what you should never do.
Investing the money in the stock market can be low risk if you do it correctly but it will never be risk-free. There is always a small risk that you will lose money. This is especially true if you are going to need to money in the near future.
Not all stocks are made equal.
There are a lot of different stocks available on the stock market. These stocks are very different from each other. They belong to different companies in different industries. Companies with different economical conditions and with different prospects for the future. Some stocks are very low risk while others are more similar to a lottery ticket. You might win big but you will most likely lose.
If you are a passive investor who want to invest the money you earn and leave it there until you need it then you should only invest in low risk stock. If you want to make money by being an active trader then any stock might be a good option. The long term potential of a stock does not matter when you are day trading. You will sell your stock long before that. On this page I am going to focus on long term investments. If you want to know more about day trading then you can read more here.
High dividend stock
High dividend stocks are my personal favorite and I got the bulk of my money invest in these stocks.
Dividend stock gives you a regular cash payment that you can use to buy more stock or anything else you want to buy. On top of that you also get the increase in the value of stock. You earn money in two different ways.
Different stocks will pay different dividends. It is possible to build a diverse low risk portfolio that give you a 4-5% yearly dividend. This is a great way to build a passive income and my goal is to be able to invest enough money to be able to live from the dividends i receive. To be able to do this I need to save about 1 million in stock (preferable 2 or 3). This might sound very hard to do but compound interest makes it a lot easier than it sounds.
If you save 10 000 this year and earn a 10% interest you will have more then 25 000 in 10 years and more then 40 000 in 6 years. If you are able to get 15% a year then you will have more than 40 000 in 10 years and more than 80 000 in 15 years. Saving one million is very possible if you are willing to spend 15-20 years doings it. Time well spent considering that you can retire once it is done.
Penny stock
I recommend that you refrain from investing in penny stock. You can earn a lot of money if you are able to pick the right penny stock but the risk is very high. Most people lose money on penny stock. Only a few are able to make money trading penny stock.
Penny stock are often used in pump and dump scams as well as other scams.
A common myth is that all stocks have been penny stocks at one point and that companies like Apple used to be penny stock. The myth makes it seems like you could have bought a stock such as Apple when it was a penny stock and earned a fortune. This is not true. It is important that you understand that most quality stock has never been a penny stock. Most companies trade at USD 10 or higher when they first enter the stock market.
I might write an in-depth article about penny stock in the future. At the moment i will just tell you to avoid them.
Blue-chip stock
Blue-chip are the biggest most well-established companies of the stock market. Investing in blue-chip stock is generally very low risk and the stock tend to give a low but reliable return. Blue-chip stocks can be a very good option if you want your money to earn a return without assuming to much risk.
Blue-chip dividend stock is a very good option.