Your definition of “rich” wholly depends on yourself and lifestyle. But, if you were to apply a set amount it’s likely a million dollars… right?
Try $2.4 million.
This is the amount of money most Americans feel they need to consider themselves wealthy. It may seem like a stretch but it’s obtainable given you’re in good health and willing to play the long game.
This article will share how to get rich with stocks.
Read on to learn the fundamental change you’ll need to make before undertaking this journey and strategies that will help you obtain this grandiose idea of wealth.
How to Get Rich with Stocks: The Mindset
Most Americans will spend 90,000-hours of their lives working. This presents 4-5 decades of wealth building. Continual investments throughout this time — and some luck — can and will make for a comfy retirement.
What if you want to get there sooner? Begin by changing your mindset.
Set Financial Goals
Goal setting is an essential step in getting rich in the stock market. It’s proven setting small goals can help you achieve larger ones. Financial milestones will help with both accountability and finding support/inspiration.
Milestones could include:
- Saving 25% of every paycheck
- Spending a few hours budgeting, weekly
- Having $X in your account(s) by Y
Goals motivate while revealing what’s working (or what’s not). This lets you adjust, but doing so based in logic vs gut reactions and “hunches”.
Find a Support Network
Online communities obsessed with F.I.R.E. congregate to share goals and success stories. These groups believe financial independence is obtainable through aggressive savings and investments. Retiring early is the goal of their members.
One study found a weekly update helped 70% of participants reach their goals.
Accountability could include:
- Declaring a goal to the public
- Creating milestone incentives…
- …or using consequences
- Delegating a responsible authority
You may not find support with friends, family, or even your spouse. Seek third-party validation and support if this is the case. Groups could congregate investors, savvy savers, or business professionals.
Develop Efficiency
Like the saying goes, “Work smarter, not harder”.
Creating goals and finding support/ networks makes you feel happy. It’s a dopamine rush because you’re doing something interesting and exciting. Yet, this feeling drops off when it comes time to do work.
Efficiency decimates the “shiny object syndrome” – it:
- Maximizes workable hours
- Reduces unnecessary spending
- Offers scalability
Examples could include:
- Developing a productive daily routine
- Outsourcing or automating workable tasks
- Getting better data sets for financial decision making
The efficiency is what some call lean operations or Six Sigma. Your efforts compound the same as your investments! This generates more money with fewer setbacks due to disruptions and lost opportunities.
Getting Rich in the Stock Market: How It’s Done
Time is the best asset as longer market exposure renders greater compounding earnings. Sure, there’s a chance you could pick a stellar investment, see it pop, and crush earnings. But no one has the ability to predict the market — even the best investors get it wrong (often).
That said, there are strategies you can take to increase your chances.
Invest Early
The market is irrational but has a historical upward trend since its start. Black swan events — ’08 crash — shouldn’t deter you as your goal is buying and holding worthwhile stocks.
Consider the following:
- A $50k starting IRA balance with $5k annual contributions from age 20 becomes over $2.5mil by age 65
- $10k at the Apple IPO invest would have netted almost $4 million from its performance
This is the beauty of compounding, earning more as it grows. The portfolio shows greater returns from early investment because of its longer timeline.
No longer young? Play catch-up by investing more than the average.
Learn the Trade (of Trading)
There are many trading types, each with different opportunities:
- Intraday
- Swing
- Trend
These pair with your trading type:
- Growth-centered
- Value-focused
- Income-oriented
You’ll likely take an income-oriented approach when learning how to be successful in the stock market. Your strategies complement the style, providing direction to what you’ll learn and execute.
You may choose to follow investing and trading experts. The Tom Gentile Money Calendar, for example, offers weekly investment ideas and coaching. Or, find yourself on social trading platforms like eToro, copying performers.
Paper trading is a popular investment learning opportunity. This lets you experiment and backtest ideas, allowing you to trade without monetary investments.
Go Big with Options
Options trading is a combination of skill, education, and luck. This strategy has you betting the direction of a stock, as well as segments or the whole market.
- Call: The stock is going up
- Put: The stock is going down
You’ll pay a premium for each option but the upside is astronomical. A stellar trade generates explosive returns, especially in high-volume. Risks are plentiful with options trading but minimized through far-out expiration and hedging.
Pool or Margin
Early investing works because of its long timeline. The more you put “in” has a significant benefit, too. Those unable to lump invest could pool from fellow investors or trade on margin.
Consider:
- Pooling family savings into a safe but growth-oriented index fund
- Opening a margin account for big investments during prime opportunities
A collection of family members or business associates could offer larger up-front investments. This leverages compounding returns. The group could re-invest dividends or withdraw until the target date.
Brokerages offer margin accounts, too, letting you invest with their money.
You’ll cover the margin with cash/credit as collateral. You’ll also pay an interest fee. But trading on margin lets you gain 2x (or more) securities for investing.
How to Get Rich Off Stocks: The 1-2-3
There is a lot of information to absorb in this article — this is the culmination:
- Invest as much as you can, as soon as you can
- Buy-and-hold
- Pool funding
- Weather the downturns
- Learn trading and get conservatively aggressive
- Set 10 – 20% of your portfolio aside for trading
- Explore day, swing, or options trading
- Save the initial investment, trade on gains
- Embrace stoicism
- Trade with data, not emotions
- Squelch the fear of missing out
- Do your due diligence
A single post can’t reveal everything about how to get rich with stocks. Find yourself absorbed in this interest, and learn everything you can. Look for guidance in our personal finance section, helping you make this financial journey a success!