Getting Rich From Stocks: 11 Millionaire Stock Market Rules
If you choose to invest the time to study how the stock market works, it can be an excellent long-term strategy to build a great fortune for you and your family.
The key to getting rich from stocks is to invest in the most profitable companies in the market, and then hold your investments for the long term. This passive style of investing comes with risk, however, it has the potential to make you rich…extremely rich!
In this post, I’ll dive into the key rules millionaires follow to build their wealth in the stock market. If you follow these 11 lessons below, you too may become rich from stocks.
Can stocks make you rich?
Yes, the stock market can make you rich. However, this usually takes a combination of time, experience, and initial financial investment to do so. Investing in stocks also involves a level of risk. Even though you can become a millionaire investing in stocks, it’s essential to be aware you can also lose money.
There are a few ways you can get ready to invest in the stock market. The more time you take to understand the market, the better you will be at investing wisely. If you’re interested in making money from investing in the stock market, the following tips can make you rich while minimizing your risk.
Here are my 11 rules on how to get rich from stocks:
1. Learn about the stock market
Learning about the stock market will only help you become a better investor. You should know the basics before you start investing. Picking up a book about trading on the stock market is one way you can learn about it.
It is a good idea to know what you are getting yourself into. It would be best to educate yourself about the different types of securities traded on the stock market, how trading works, and how to invest in different types of financial options.
There are also plenty of online articles about the stock market; some are geared towards beginners and some towards more advanced investors. A quick Google search about the topic you are interested in learning about should yield many results. This article from Nerdwallet teaches the basics of investing in the stock market.
Another way you can learn about the stock market is to read the daily finance sections of your favorite news article or news app. Keeping up to date with the trading sector can help you better understand the market.
2. Pick the Right Stockbroker or Trading Platform
Picking the right trading app is one way to become a better investor. You should look at what multiple platforms offer before making your decision. Some trading platforms charge commission fees on each trade, while some do not.
Some also have extended trading hours so that you can act quickly on the news about a stock. For example, Schwab, E*Trade, and Wells Fargo allow trading after the market closes, though their hours differ.
Many trading platforms also have a mobile app. This comes in handy so that you can trade on the go. If breaking news happens that can affect a stock price; you want to be able to act upon that news as quickly as possible. Having an app with good usability is one way to ensure that you never miss out on a trade.
3. Only Invest What You Can Afford to Lose
This should be a given, but it must be said. Investing can be a gamble, so it is advised not to invest money you don’t have. Some stockbrokers will offer you a loan to invest with, but it’s best to use the money you already have. You should not take out loans or borrow money from people to invest in the stock market. Doing so can put you in debt, making your efforts counterproductive.
4. Practise With Demo Trade Accounts
Practising with demo trade accounts is an excellent way to get a feel for the stock market without actually risking any money. This is known as paper trading, and it’s a great way to gain experience and confidence. Forex offers demo trade accounts for you to get used to the market.
5. Understand Fees and Commissions
Some trading platforms charge fees. It is good to know what each trade will cost you, if anything, and be aware of the fees associated with trading on different platforms.
Some brokerage companies charge per trade as a commission, and some commissions may be charged as a flat fee, while some may be based on the value traded. Other fees might be added on, called non-trading fees, which can account for charges on withdrawals, deposits, and other things that are not specifically trading.
It is vital to take note of the fees your platform might have, as the fees can often impact what you make. This article from BrokerChooser helps outline the many different fees associated with trading through an online broker.
7. Do Your Due Diligence When Picking Stocks
Taking the time to learn about each stock you are interested in and comparing its overall performance will help you be a better investor. In fact, you can become a millionaire by investing in stocks wisely.
Many platforms come with stock tracking applications, making it easy to watch different stocks over a period of time. Sometimes patience is key to getting the right stock price.
Staying on top of business news can also help you invest better. Keeping an eye out for what companies are doing is one way you can act quickly on breaking news that may affect a stock.
Many news sites and apps feature a finance section, which shares breaking news about companies who trade on the stock market. Some publications and websites are dedicated to delivering breaking news on different companies and the stock market as a whole.
Marketwatch is a popular choice for getting the latest news about the stock market. Investopedia lists some of the best apps for financial news here.
8. Diversify to Minimize Your Risk
“You’ve probably heard it before, the saying “diversify your portfolio.” It is said again and again for a reason. Investing in a good variety of stocks from different industries is one way to keep your portfolio diversified and be on your way to becoming a millionaire by investing in the stock market.
You should also diversify your portfolio with different kinds of financial instruments. You can invest in mutual funds, ETFs (exchange-traded funds), corporate bonds, and derivatives based on stocks, commodities, currencies, and bonds. Adding a few of each to your portfolio can set you up for financial success.
You can learn about the different types of investment opportunities in the stock market in this article from Rule On Investing.
9. Use a Roth IRA
Using a Roth IRA to invest can be a smart move for your financial future. A Roth IRA allows you to invest money that can be withdrawn tax-free during your retirement.
As long as you are over the age of 59 1/2 and have had your account for at least five years, you can take money out of your account tax-free. This is a good idea for long-term investments that you plan not to touch for a while.
If you invest using a Roth IRA early enough, you can have stocks and funds that are worth much more than you purchased them for. Investing the right way in a Roth IRA may even help make you a millionaire by investing in the stock market. After all, it is never too early to start investing for your retirement.
10. Re-invest Your Profits and Dividends
While putting any profit back into the stock market can be difficult, this can often be a very financially sound move. Taking profits or dividends from one stock that did well and putting the earning towards other stocks or funds that you believe will increase in value can help you multiply your earnings.
Re-investing can be a smart move financially and help you set a plan for making future investments. If you re-invest wisely, you can get rich from the stock market.
11. Make a Financial Plan and Stay Disciplined
Making a financial plan and sticking to it is probably the number one way the stock market can make you rich. Taking the time to understand the market and understand all the things that go along with it is just the first step to investing.
Coming up with a foolproof plan to invest in the stock market responsibly and with meticulous dedication can help you become a millionaire by investing in the stock market. Speaking with a financial advisor can help take some guesswork out of planning.
Doing a quick Google search of financial advisors in your area and reading client reviews can help you pick an advisor suited best for you. Financial advisors work with all different levels of investors. A good financial advisor can help anyone, whether a beginner or an advanced investor.
The Bottom Line
Investing in the stock market can certainly make you rich. Investing in stocks can make you a millionaire. With the right know-how and some sound tips like the ones above, you can be on your way to becoming a millionaire in no time.