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How to Make Money in the Stock Market for Beginners [Without a Broker]

The stock market is replete with opportunities to make money. This is by far the easiest way to lock in maximum profit. The rate of return is decidedly higher than most other asset classes.

However, the biggest problem with stock market investment is that it is not the ideal destination for everyone. Especially for beginners with no exposure to stocks, it can be a potential trap. So the question is how to make money in the stock market, especially if you are a beginner?

One basic factor you must remember that you can make money in stocks depending on the exact amount of time and money that you are ready to spend. In short, if you are considering how to make money in stocks, you need to, first of all, decide the kind of risk exposure that you are comfortable with.

Another factor that has posed a challenge in recent times for beginners in the stock market is the volatility. Not only does it make risk assessment tricky but your overall extent of investment tends to remain uncertain. Perhaps, this is the aspect that makes many beginners unsure about ways to make money in stocks. Well, we decided to address this problem and get you a handy guide that makes an investment in stock markets rather simple.

How to Make Money in the Stock Market as a Beginner

So, if you are a beginner stock trader, this is what you have to do to make money in the stock market:

  1. Decide on Your Investment Target
  2. Research, Research & Research
  3. Assess Your Risk Exposure to Make Money
  4. Investment Timeframe
  5. A Beginner’s Portfolio
  6. Continue Adding to Stocks
  7. Undertake Smart Stock Investment Options
  8. Never Be Too Emotional in Your Stock Market Transactions
  9. Better to Limit Investment to Surplus Funds
  10. Disciplined Approach to Investment

How to Make Money in the Stock Market as a Beginner

1. Decide on Your Investment Target

When you are considering how to make money in the stock market, one of the primary factors to consider is the investment target that you have in mind. Every element of your investment from choosing the means of investment to exact route you take and the time frame of your investment is all dependent on this key target.

Another reason that this target is extremely important for beginners in the stock market is that for those who are new, it is extremely important to move ahead with a goal in mind. In the absence of a proper target, the relative newcomer might be absolutely lost in the maze of stocks, upmoves and downward spirals.

Also, the overall road to make money in stocks becomes relatively better charted when you operate with an investment target in mind. This makes sure that you are moving ahead with a goal in mind and there is a definitive purpose ruling every investment decision that you take.

But, you should be realistic in setting a goal. You can make money in stock markets only if you have patience. Set realistic goals with a relatively reasonable time frame in your mind. It would be pointless setting a fantastic goal and then not being able to realize it at all. Apart from the disappointment that it brings forth, it will also make you more apprehensive about the stock market operation.

Moreover, when you have a clear target in your mind, your investment decisions become relatively more precise, and you can take a lot more firm decision. It also helps you better consolidate your stock market positions in a constructive fashion.

2. Research, Research & Research

Any query about how to make money in the stock market begins and ends with research. If there is any form of investment that needs extensive research, it is undoubtedly the stock market. In the absence of adequate research, you will be struggling mid-ocean without even a single straw to hold on for support.

The rather uncertain pattern of stock market movement coupled with a narrow margin for error makes appropriate research the backbone of your success in stock market. Especially for beginners, who have not yet been touched by the ruthless blows of the stock market, it is this research that will help them avoid huge losses.

This is because beginners in stock market depend heavily on theoretical knowledge to lock gains in the stock market. But only a stock market veteran will tell you that mere theoretical knowledge can’t be enough in helping you overcome the challenges in the stock market.

However, if you have deep research to back your effort, you will at least be armed with the potential traps and loopholes that you must avoid in the stock market.

While you can make money only at a reasonable rate, the research will help you avoid deep losses and keep a tab on your overall investment position. It also enhances your overall stance in the stock market. Research can also help you diversify your investment significantly.

I am sure you would have heard the old saying about not putting all your eggs in one basket. Well, the truth of this statement is amply borne out in stock market investment. Yet again, research comes to your rescue. When you understand the various elements of the stock market in depth, you will be able to experiment will all the available options and thereby make money faster.

3. Assess Your Risk Exposure to Make Money

So you want to make money in stock markets but what is the extent of risk that you are comfortable with? Do you fall in the category of risk averse or are you the types that have a very high-risk appetite? You could also be a middle ground where you would take some amount of risk depending on your overall ability to digest losses. For any beginner, this is one of the first requirements to make money in stocks over a sustained period. This is often the most important factor in deciding the course of your overall investment.

So what does it imply if you have very high-risk exposure? It generally means that how willing you will be to lose money in the stock market. Think about it. What will be your reaction if the stock markets plummeted 10% in one day? How will you react if your net worth got eroded 25% in a matter of days? Would you still remain invested? If you have high-risk exposure, the chances are you will keep patience, wait for a decided upmove and then book profit at an opportune moment.

In comparison, investors who are risk averse will try to play it safe. They would only go for those stocks which are not prone to very volatile movements like defensive. While the margin of fall is limited, the extent of gains is also equally limited. But these types of stock market positions will help you make money in a limited fashion. They are typically those who sell when markets fall and buy when markets rise to avoid going against the trend. In the process, they do book personal losses but avoiding risk at all cost is their investment mantra across markets.

But maximum investors who make money from the stock market are the ones who follow the middle ground. They are the types who would take up some risk but at the same time won’t leverage themselves to the point where they begin to panic. They normally have a clear investment target and are continuously working towards that goal. They invariably have solid research backing their investment decision and are not too perturbed by sudden fall in the market. They maintain a balance between profitability and risk. They would never overstretch the extent of money that they put in stock markets and will always look for reasonable returns.

4. Investment Timeframe

For beginners in the stock market, one very important question to consider in their journey about how to make money in the stock market is the timeframe for their investment. Often the risk associated with your investment is also directly proportional to the period for which you are considering to stay invested in the market.

Let’s say the investment horizon for you spans 5 years. Therefore you buy x number of stocks of y company for 5 years with a specific target. But let us understand that 5 years is a relatively long period in a stock market that often sees huge swings in a matter of hours. But given the investment horizon that you have, these daily swings do not worry you unnecessarily. You only keep a track of the yearly performance of the stock and how it impacts your investment target. If that remains on track, you won’t be very worried about the relative swings and volatility in the stock market on a daily basis.

But if you choose to undertake day trades, these daily swings become the primary determinants of your gain or loss in the market. Your ultimate success and overall losses are often determined by the extent of volatility that you are ready to invest in.

Another major role of the timeframe for beginners in the stock market is undoubtedly in helping them to gauge their ability to digest risk. The easiest way to make money from stocks is by sticking to a longer period and betting only stocks that promise reasonably strong returns in the longer term.

This approach will be helpful for beginners because they are still untouched by the vagaries of the stock market swings and with a longer term outlook, they are far better geared to take up the challenge to make money in stock market more efficiently.

5. A Beginner’s Portfolio

Now that takes you to the next key question, i.e. what should be the typical portfolio constituents of a beginner in a stock market? In the beginning, it is a much better idea to concentrate on a few index funds to start your investment journey. The advantages with index fund are that they track the broader market movement and save you form a direct stock investment at the very beginning.

But at the same time, you are sure to make money from these investments. Once you have invested in Index Funds tracking broader and international trends like the S&P 500, your next destination will be Index Funds with the narrower horizon. You could perhaps then graduate to a fund that tracks the Russel 2000. This relative exposure to smaller companies will help you make money better and give a boost to your overall portfolio value.

So now you have exposure to international plays, large cap local plays and also some amount of mid and small cap drama as well. Together the portfolio will enable you to take advantage of the global stock market trends without leveraging yourself too deep into the risks involved with small cap plays or international companies. In short, this is an example of a balanced beginner that does not give up in the spice factor to keep a safe and low-risk approach.

Your next step in how to make money in stock markets now involves graduating to investing in stocks individually on a step by step basis. Well, you have to be prepared for the fact that the going will be relatively tougher but if you keep a gradual pace, it isn’t that difficult either.

An ideal beginner’s portfolio should contain an average of 15-20 well chosen and diversified stocks. The reason I mentioned 15-20 is that while this is not a huge number of stocks to keep a tab on regular basis, it is also quite sufficient for you to book profit and make money over the longer term.

But well-chosen is the key word that you must keep in mind if you want these stocks to help you make money for a sustained period. This is why keeping a diversified approach can be extremely beneficial. Do not concentrate on any one sector, be it IT or defensives or even commodities.

But as you go ahead with adding these individual stocks, you must proceed in step by step fashion. You should be able to grasp the company fundamentals and the operation module of the stocks that you are investing in. It is only then that you can understand the triggers for the stock and tweak your position accordingly. Another reason I feel that beginners must limit to 15-20 stocks to start with as this will give them far better leeway to allocate their limited funds. They can continue adding the stocks as and when they are able to stretch some amount of fund from their key exposure.

6. Continue Adding to Stocks

Now the question is how do you expand your investment horizon? After all, you won’t be a beginner in the stock market forever, but I am sure you target to make money from the stock market for an extended period. Well, this is exactly where your experience as a seasoned stock market player will come to your rescue.

As your investment experience matures, you will be able to broaden the scope and horizon of your stock market exposure. You can take more decisive calls on the kind of asset allocation that you would be comfortable with and how you would want to make money from stocks going forward.

It is never a good idea to leave your portfolio stagnant. Stagnancy never enables growth, neither in your life or your portfolio. It is always a great idea to explore the ways you could adjust and tweak around your holdings to gain maximum profit. You could be selling one particular kind of stock and buying something else in its place depending on the stock market conditions.

If need be, you can also add funds to your portfolio and make an allocation for increasing exposure in a specific type of fund or stocks. You could also use additional funds to increase exposure in specific stocks. Of course, this will again depend on the scope of profit that you can expect in a specific stock.

For example, if a particular stock that has plummeted as much as 10-15% is expected to post good earnings, it would make sense to increase your position in this stock and then book profit when the stock price rises on account of better than expected numbers.

You must remember that if you are exploring how to make money in stock markets, it is always a game of patience and your investment approach has to be systematic.

7. Undertake Smart Stock Investment Options

Remember if you want to make money in stock markets, you need to invest systematically, invest for a sustained period and invest smartly. This will help you make money swiftly and earn relatively higher returns as compared to other savings instrument. So what exactly do I mean by asking you to invest smart? Well, it means you must invest in stocks that will help you clock more permanent gains. These need to be sure ways to make money even in the face of adversity.

One option that easily comes to my mind, in this context, is dividend paying stocks. If you undertake in-depth research in stocks, you would notice that there are some entities that have continuously paid a dividend to its shareholders despite market calamities. These companies are extremely cash rich, and the owners of these companies have constantly been sharing the profit with the shareholders.

So as you gradually keep adding stocks to your portfolio, you must make sure that you also include a reasonable number of these dividend paying stocks. You can, therefore, seal a certain amount of money on a regular basis.

8. Never Be Too Emotional in Your Stock Market Transactions

While understanding how to make money in stock markets, there is one factor that no textbook will prepare you adequately for. This is dealing with the emotional aspect of handling your investment. Often these emotions get in the way of an investor’s judgment, and they can even book deep losses as a result. So the question is how you can keep your emotions at bay and take a calm and collected decision that can help you to make money?

Well, let me explain the whole concept using two examples. Let’s say A and B are two very good friends, they undertook a lot of research and decided to invest in stock markets. A chose a well-balanced portfolio comprising of mid and large caps along with a few international plays. He chose a 5-year horizon and set an investment target accordingly to make sure that he could make money in a sustainable manner. But friend B was in a hurry to make money. He got too carried away with the promise of stock x delivering high returns and concentrated on buying just that.

But soon after, the market slumped. As a result, the stock X which was a small cap plummeted 35%. Friend B panicked and sold all the shares at a significant loss and swore never to trade in the stock market again. But how did Friend A fare? Well for him, he too suffered some losses, but the scope of his investment horizon was relatively longer. He did not panic and gradually consolidated his position over the next 6 months.

Well, probably this teaches you some basics of how to make money from stock markets. One of the fundamental rules is to not let either fear or greed dictate your stock market decisions. Both greed and fear in terms of investing in stock markets denote extreme and often irrational behavior. These can never be useful if you want to make money.

Excessive greed means you will often turn a blind eye towards genuine problem points in your investment decisions. In the race to make a lot of money easily, you tend to lose vision of some genuine points of concern that might crop up in your investment portfolio. Moreover, you become rather tunnel-vision and ignore obvious misses in your overall portfolio allocation and asset division; the result is you book serious losses in your stock market investment.

Similarly, excessive fear means that you are just not able to move ahead of your safe zone. Your safe zone cannot yield you the kind of returns that you have read about in books and investor speeches. In the case of the slightest dip in your trading position, you panic and make some rash decision. It is needless to mention that these impact the overall trading position that you have, and you can jeopardize your investment in stock markets seriously.

So, in both sides of the spectrum, you can understand that the lack of a balanced approach can severely impact your trade positions.

9. Better to Limit Investment to Surplus Funds

The type of funds you allocate for your stock market investment is very tricky. While we all know that the rate of returns is quite high in this trading alternative, it is never a great idea to put your entire life savings into the stock market. Given the volatile nature of the stock markets, the chances of losing huge money in a short while are quite large. Therefore, it is always a great idea to start off with investing only your surplus fund or a separable amount in the stock market.

In this way, you will be able to balance your risk exposure in tandem with your investment expectation. This will make sure that even in the case of a huge fall in the stock market, you do not become penniless overnight.

Once you begin to generate funds, you can reallocate the same fund for additional investment in the stock markets and make money on a sustained basis. This serves a dual purpose. While on the one hand, you can keep your emergency funds untouched, you can also simultaneously increase your risk profile and take further chances. Higher the risk, higher the chances for you to make money a lot faster than you imagined.

When your emergency funds remain untouched, it also means that you can undertake your stock market transactions with relative ease and far lesser fear. This again increases the chances and the ease with which you can make money in stock markets.

Also, as you start generating money from your portfolio and increase the scope of your investment, you will also be able to regulate the average surplus fund allocation in a constructive manner. You can then even look towards expanding your investment scope to other asset classes too.

10. Disciplined Approach to Investment

Discipline plays a crucial role in making sure that the entire investment cycle in stock markets is undertaken in a systematic manner. Whether you think about the balance that you need to achieve in your portfolio allocation or the diversity that you need to maintain in your overall investment profile, discipline is a crucial concept that enhances the scope and speed with which you make money in stock markets.

Discipline also makes sure that you do not go overboard in your reaction to any geopolitical development or economic developments that affect the market. Overall, this is a moderating factor that makes sure that your investment goals do not get disturbed and you can make money in stock markets uninterrupted.

So, Beginners Can Make Money in the Stock Market

Beginners Can Also Make Money in the Stock Market

Therefore, if you are a beginner in stock markets exploring how to make money in the stock market, you need to have a balanced approach. Discipline, drive and determination are those crucial Ds that help you seal your profit. If you want to make money, never lose sight of these Ds. The rest, as they say, will be history.

With a lot of research, experience and some bit of luck, you can soon begin to lock profit in the stock market unabated. As you begin to expand your experience horizon, the extent of your profit too can improve. Never be too intimidated by the fact that you are a beginner. The trick is to believe in yourself and stay put with your investment goals. You will see that your effort soon starts bearing fruit and you can make money in stock markets with comparative ease and convenience.

The Rich Get Richer

The point is any trader and investor, beginner or professional and experienced, has to have money to trade and invest. You can’t do anything when you don’t have the money you need to trade and invest. So, the first thing you have to do is creating a reliable and strong source of income that makes money for you. Here is the complete guide to do it: The Easiest Way to Get Rich Fast

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Chris Pottorff

"Whether you think you can, or you think you cannot, you are right." - Henry Ford

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