Thanks to the boom of Wall St and the stock markets growing around the world, there’s no denying the impact that the term ‘investor’ has had on the world. We’ve all heard the tales and stories of people who have invested their tiny life savings into a stock only for it to blow them up into millionaires overnight.
With stories like this becoming increasingly popular and common, it’s no wonder more, and more people are asking the question; can you get rich fast on the stock market, or do you need to invest over the long-term?”
This is a very good question, but the answer is not as simple as yes or no. Today, we’re going to dive into exactly how you make money on the stock market and whether it’s ideal for making more money in the long or short term.
How Do You Make Money in Stocks?
Before we figure out how quickly you can make money, you’ll first want to know exactly how money is made; so for this, we’re going to keep things really simple. Let’s say there’s a company worth $100. You buy 1% of stocks in the company for $1.
The company then takes this $1 and invests it into their company whether that’s expanding stock, creating new products or marketing themselves more effectively. The company does really well and is now worth $200. This means you’ve doubled your money as your 1%, which was equal to $1, is now worth $2.
This is, in a really basic form, how money is made on the stock market. Of course, the risks here come if the company doesn’t make any profit or money. Perhaps there’s a controversy with the company’s manager, and everyone sells their stocks back to the company as quickly as possible.
If a company has a million stocks to give away, and 999,999 of them out, the stocks are obviously sought after and, therefore, are worth a lot of money. However, if everyone sells them back, they can decrease dramatically in value, again losing the company and the investors a lot of money.
There are plenty of different variables here that can make the prices and values of stocks go up and down, which is why it’s such a risky market, but there are also big bonuses and wins to be had.
Making Money in the Stock Market
To answer the original question, whether you’re making money in the long or short-term, it entirely depends on the stock you’re investing in and the infinite number of variables that surround that stock.
Of course, you can follow the financial news to stay up to date with what’s going on, keep updated on what is the Dow Jones today, and you can try to predict what’s happening and how much you’re going to make, but you can never be sure. Say you invest in a new startup company that massively takes off and secures a huge amount of investment.
You could make millions overnight in one single transaction. However, another startup might steadily grow by 10% every single year for the next 30 years, meaning you could earn billions by holding your ground.
The truth is, you can make money on the stock in both the short term and the long term, but it solely depends on how you’re playing the game. The best idea is to research as much as you can in your desired stocks and make the best decisions you can at the time.