If you want to retire early or make extra money to supplement your income then consider learning how to make money in stocks as a beginner.
I started trading stocks when I was 13 years old and still use this strategy to make money while living as a digital nomad overseas in SE Asia.
Anyone can do this as long as you have at least $1,000 in savings and an internet connection. There are dozens of stock trading strategies but I want to share with you my favorite stock market investing strategies for beginners.
What You’ll Need
I covered a lot of the basics in my article on how to invest in stocks so be sure to check that out for a little of basic info on getting started. This article is focused more on making money in stocks so you only need a few things to get started right away.
- Save Up at least $500: This is the bare minimum amount to start making money in stocks if you’re new to the game. $1,000 is a better starting point but don’t let lack of money stop you from buying stocks and learning how the process works.
- Open a Brokerage Account: A good brokerage account is the ticket to making money in stocks. Many different types of brokerages cater to both younger and older stock investors. I use Fidelity (for long term buys) and Robinhood (for options trading) as my preferred stock brokers.
- Strong Internet Connection: Invest some money in fast, stable internet because you don’t want to miss out on buying opportunities due to poor internet. This is especially true for frequent travelers and digital nomads who make money while traveling around the globe.
- Trading Journal: A trading journal helps you track all of your stock trading activity to see how much money you can making. If you are losing money in stocks then this is a crucial step to take if you want to avoid blowing up your investment acccount. Tradervue is a free online trading journal that I use to track all of my buys and sells.
7 Ways to Make Money in Stocks for Beginners
Now, you should be all set up by now with a stock trading account and reliable internet. Here are my favorite strategies to make money in stocks that you can use right now.
1. Buy and Hold Investor
This is the most basic way to make money in stocks by buying a good quality company at a fair or low price and holding onto your investment over a long period.
Investors such as Warren Buffett live by this mantra because it’s a very simple strategy and reduces your capital gains taxes while building wealth over time.
Buy and hold works because you buy great companies when their stock price looks attractive.
Example using Tesla (TSLA): I told my readers to buy Tesla (TSLA) shares in 2019 right before the COVID-19 bull market. That’s because I knew Tesla was scaling its annual deliveries and getting closer to its first profitable quarter. I bought TSLA stock for around $500 then sold it at $1,000 for 100% profit. The problem was that Tesla continued soaring and performed 2 stock splits. My $500 investment would have turned into $3,000 if I didn’t sell!
If you bought TSLA and held your shares you would be up almost 1,000% percent over the last 4 years. A 10k gain would turn $1,000 into $10,000 without any additional work on your part.
Studies show that buy-and-hold investors outperform everyone in the long run so be sure to select a few good stocks and hold a term at least a few years to get some amazing returns.
Read my article on the best stocks to buy and hold for some useful long term stock picks.
2. Morning Panic Dip Buyer
This is my 2nd favorite strategy because you can make money in stocks very quickly when a stock crashes in the morning due to a panic selloff. I learned this strategy from Tim Sykes who calls it “The Morning Panic“.
Once a stock sells off during the morning, you can wait for the dip to buy then sell your shares later for a higher price. This works well if you want to day trading or swing trade stocks without holding them for long periods of time.
3. Buy Before Earnings
Publicly traded stocks are required by the SEC to report earnings 4 times per year for every quarter. This is a good chance to buy a stock before its quarterly earnings to anticipate a rise in price after a good earnings report.
A good example of buying before earnings is PDD (NASDAQ: PDD), a Chinese e-commerce company that owns the fast-growing Temu app.
PDD shares have skyrocketed from $40 to over $120 during extremely profitable Q2 2023 and Q3 2023 quarters thanks to impressive revenue growth and earnings from the Temu app.
4. Buy The Rumor, Sell The News
Another profitable strategy is to buy stocks before a major event or product release and then sell them on the day of the event.
Examples using AMC (AMC) and Tesla (TSLA): Two examples of this strategy are when AMC announced the release of the Taylor Swift The Eras Tour Film and the first deliveries of the Tesla Cybertruck. In both instances, AMC and TSLA shares soared in the days leading up to the events then crashed on October 13th, 2023 and November 30th, 2023, respectively.
Once the rumor hits, investors put heavy buying pressure on the stock and hype takes over logical reasoning. You’ll notice the stock soaring and social media buzz on Facebook, X, and Reddit as everyone gets excited about the news.
However, too much buying pressure sends the stock soaring too quickly even though the fundamentals of the underlying company haven’t changed.
Once the news hits, all of the smart money sells their shares to naive investors who buy at the peak of the bull cycle.
Warning: Take profits on the day before the news or during the morning of the event because stocks can crash heavily during the day of the major event. If you hold onto your shares too long then you may turn a profitable trade into a loss if you wait too long.
5. Buy Stocks That Receive S&P 500 Inclusion
Every year, the S&P 500 removes underperforming companies and adds new ones to the index to keep it updated with America’s largest companies by revenue.
Whenever a new stock gets added to the index, institutional investors must buy the stock to rebalance their S&P 500 index funds, ETFs, and mutual funds.
In Q4 2023, there are currently 3 companies that will be added to the S&P 500 index:
- Uber (NASDAQ: UBER)
- Jabil (NYSE: JBL)
- Builders FirstSource (NYSE: BLDR)
These 3 stocks should go up in price as money managers buy these 3 stocks to match their fund allocations.
6. Buy Crypto Stocks Leading Up to the Bitcoin Halving Event
Crypto stocks are positively correlated to the overall crypto market and soar in value whenever Bitcoin and altcoins rise in value.
Whenever a crypto bull market starts, I pay close attention to the following crypto stocks:
- MicroStrategy (NASDAQ: MSTR)
- Coinbase (NASDAQ: COIN)
- Grayscale Bitcoin Trust (OTCM: GBTC)
- Marathon Digital (NASDAQ: MARA)
- CleanSpark (NASDAQ: CLSK)
Several of these stocks are already up over 500% in 2023 and could continue soaring in 2024.
My favorite time to buy these stocks is 500 days before the Bitcoin halving event because that’s usually the bottom of the bear market.
The best time to sell these crypto stocks is 500 days after the Bitcoin halving event because that’s usually the top of the crypto bull market.
If history repeats then 500 days after the April 2024 Bitcoin halving will be around September 6th, 2025.
Right now, crypto stocks are soaring leading up to the April 2024 Bitcoin halving event and I expect a strong bull run until September 2025. That’s when I will start selling off my crypto stocks and moving into cash.
However, it’s possible that the crypto bull run could last longer so don’t feel pressured to dump everything at the top. Perhaps maybe sell 50% and see if the bull run last even longer.
7. Buy Stocks That Pay a Dividend
If you want to get rich slowly then buy dividend growth stocks that raise their annual dividend each year. You won’t get the same type of fast growth with dividend stocks but your annual dividend income may increase over time and provide you with some nice passive income.
Most stocks pay dividends every quarter (3 months) while some pay monthly.
Cut Losses Quickly
The #1 most important rule after buying a stock is to cut your losses quickly. Sometimes, you buy a stock and the price starts crashing for several reasons such as a bad earnings report, legal scandal, rising interest rates, or even geopolitical conflict like war.
Don’t buy and hope when it comes to making money in stocks. Sell early if your losses start to get bigger. You can always buy back the same stock at a cheaper price.
A good example of this is Lucid Group (LCID), a small-cap EV stock, that soared as high as $60 during its initial hype faze.
Now LCID stock trades around $5 or less. You won’t make a lot of money if you hold onto your losing positions for too long.
Cut your losses quickly and monitor the stock to see if you can buy back in again at a cheaper price. The lower the price, the more shares you can accumulate at a cheaper cost basis.
Remember to Sell and Lock in Your Profits
If you use any of the strategies above then you may strike gold and earn a good ROI on your stock investment. It’s possible to make anywhere from 1% to 200% returns in one day depending on which types of stocks you buy.
Don’t be afraid to lock in some profits if you are up big on a certain stock investment. Sometimes, you will do better by just holding but that’s not always the case.
A prime example of this was during the 2021 stock market run when many growth stocks were trading at crazy high levels. The stock market was overbought due to free stimulus money yet most stocks were extremely overvalued.
Smart investors took profits and preserved their capital during the 2022 stock market crash.
Track Your Trading Activity to Increase Your ROI
One of my biggest regrets during my investing career was failing to trade my trading activity to increase my return on investment. Most beginners simply lose money because they aren’t tracking their gains and losses to see how they can improve over time.
If you’re losing money in stocks then you must track everything to stop losing money and become a profitable trader. What gets measured gets improved.
TraderVue is my favorite online trading journal tool that tracks all of your buys and sells to help you make more money as an investor.
Free Stock Trading Tracker Tool
- Track your trading & investing activity to increase your ROI
- Import all your trades from popular brokers like Robinhood, Fidelity, TD Ameritrade, etc
- Find profitable trades from the TradeVue Community
Recommended Resources for First-Time Stock Investors
If you’re new to making money in stocks then be sure to check out these resources.
- How to Make Money in Stocks
- Yahoo! Finance