IInvesting in the stock market is one of the best ways in the world to generate wealth. One of the great things about the stock market is that there are so many ways to profit from it.
But with great potential reward also comes great risk, especially if you’re looking to get rich quick. If you plan to engage in short-term or aggressive market strategies, keep in mind that you may lose some, if not all, of your investable funds.
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Most of the strategies listed below will ultimately prove unprofitable for the average investor, and you should always speak with a financial advisor before embarking on any new aggressive stock strategy. However, if you want to try your luck with these methods with a small percentage of your wallet, it can eventually help you generate outsized gains.
If you’re an agile and skilled trader, probably the “easiest” way to make money on the stock market fast is to become a day trader. A day trader quickly enters and exits a stock in a single day, sometimes making multiple trades in the same security on the same day.
For investors with a good understanding of market trends and the ability to anticipate or decipher the financial results of particular companies, money can be made day trading.
However, the average day trading investor usually loses money. In fact, anecdotal estimates suggest that up to 95% of day traders lose money – and, even worse, they continue day trading. There is definitely money to be made as a day trader, but it’s generally best left to the professionals.
A short seller is essentially betting that the price of a stock will go down. Technically, a short seller borrows stocks, sells them, then buys them back and returns them to the lender. If the stock price has fallen between these two trades, the short seller makes a profit. But if the stock rises instead, the short seller loses.
In many ways, short selling is similar to day trading, which means it’s a pretty aggressive strategy. As the long-term market trend is strongly bullish, a short seller must have a compelling reason to believe that a specific stock or index will fall. Macroeconomic factors, an overvalued stock price or deteriorating business are all reasons that can cause a stock to fall, but they are not guarantees.
In a booming market, even “overvalued” or unprofitable stocks can continue to rise. Like day trading, short selling can be profitable, but it takes a very astute or professional trader to do it.
Trade speculative stocks over-the-counter
Although names like Apple and Microsoft dominate the financial news, there are plenty of stocks the average investor has probably never heard of that offer much greater opportunities for profit and loss.
Over-the-counter stocks, for example, don’t trade on a public exchange and often sell for pennies a share. While many of these companies eventually fail, they also offer speculators the opportunity to double their money in a short time based on rumors and innuendo. Be aware, however, that there is a lot of hype and outright fraud in the OTC markets, as they are full of touts who will drive up the price of a stock so they can sell before prices fall. are collapsing.
Dive into meme stocks
The so-called “meme stocks” that have risen to prominence in recent years, such as GameStop and AMC Entertainment, have provided fantastic gains for some shareholders — and equally devastating losses for others. GameStop, for example, jumped 400% in a single week in January 2021, while AMC Entertainment posted an unfathomable 1,183% gain for the full year.
However, they both returned to Earth, only to bounce back again recently in 2022, and are enjoying another push.
Investing in these types of businesses is not a solid long-term financial plan, and you certainly shouldn’t devote a significant portion of your portfolio to them. However, if you are looking for stocks that can make huge moves in a relatively short period of time, these are areas you might want to investigate.
Earn compound interest
The main reason the stock market has been such a tremendous generator of wealth is because of the compound interest effect. While you can make short-term profits in the stock market, it’s actually safer to leave your money in the long-term market and let compound interest do its magic.
For starters, the longer you leave your money in the market, the less risk you take. While no one can predict what the market will do from year to year, the S&P 500 index has actually never lost money over a rolling 20-year period. That’s an amazing statistic when you think about short-term market volatility.
If you can keep your money in the market for 10, 20, or even 30 years, your wealth-building potential is huge. Think of it this way: if you put $10,000 in the market and earn 10% per year, withdrawing your profits each year, you will have a net profit of $30,000 after 30 years, which is three times your money. But if you instead let that money accumulate each year at 10%, you’ll end up with just under $200,000, or 20 times your money.
It may not be the answer those looking to make a quick buck want to hear, but the best and surest way to generate real wealth in the stock market is to stick with it.
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This article originally appeared on GOBankingRates.com: The Fastest Ways to Get Rich Investing in the Stock Market
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