What are the two ways you can make money from investing in the stock market? This is the main question we will be answering in this article here and today.

When we begin learning about the financial markets, we tend to think that making money from them is quite an easy task, and we underestimate how difficult it actually is.

Today, we are going to be learning about the two different ways or disciplines that exist to help us make money from the stock market and what it takes to master each one of them.

Let us begin!

What are the two ways you can make money from investing in the stock market?

To answer the question of how do you make money in the stock market, we need to differentiate the two existing disciplines that we can apply: Long term investing or trading.

Depending on your personality, you might find yourself more comfortable with one rather than the other, and that is something you need to figure it out for yourself.

Let us begin defining the long term investing

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How do you make money from investing in stocks?

When we say we are investing, what we are saying is that we believe that a certain company is going to grow in the following years, and we want part of that wealth because we really believe in what they are doing.

When we invest in a stock, we are buying shares of that particular company because we are certain that in the future, the stock price is going to be much higher than it is today.

For that reason we entrust our money in the company by buying shares of their stock.

While we are invested in a stock, we will not pay attention to the daily oscillations of the price for the simple reason that our aim is to keep their shares for the very long term.

Make money by investing in dividends

Some companies also like to incentivize people to buy their stock by paying some dividends to the shareholders.

Investing in well-paid dividend stocks is another way to make money in the stock market because we will be receiving a payment for having shares of a company in our portfolio.

This money we received can be paid in cash, so it is ours to use it how we want once it is paid.

As you might imagine, investing in dividend stocks is an excellent way to make our money grow over time because the dividend payment is a fixed amount that we will receive for sure.

However, the counterpart is that not every company issue dividend payments, and sometimes, they only issue once a year. That, of course, depends entirely on the company.

How much money can you make from investing with stocks?

If we follow the annual average gains we have registered in the stock market, we will see that the strongest index, such as the S&P 500 or the Nasdaq, will provide with a 7%-10% of return on investment.

If we decide to invest our money in a dividend stock, for example, we should at least make sure that we receive at least a 7% return from the dividends.

How do we do that? By taking a look at the historical data of the previous years. For example, if a company has a growing dividend every year, we should expect more or less the same dividend amount for the following year.

Is investing a guaranteed way to make money?

Sometimes, a picture is worth a thousand words. Just take a look at the recent stock market crash caused by the recent pandemic and take a look at the current price.

As you can see, we have clearly recovered after one of the most unusual situations the world has ever experience.

Make money trading stocks

The second discipline that will help us to make money in the stock market is called trading.

To make money trading stock, we mean that we will be buying some shares at a certain price and then selling them at a higher price to make money from the difference.

The idea here is to obtain a much more faster profit than the long-term investment because we will be buying and selling in a matter of weeks, days (this is called swing trading), or even hours or minutes (this is called day trading).

The idea here is to take advantage of the price oscillations in the stocks to make money from those movements using technical analysis, technical indicators, and a trading system.

Trading in the stock market is not easy

Unfortunately, there is a common misconception that tries to establish that trading in the stock market is easy, but that is completely not true.

Trading is very hard and requires many hours to master, just like any other discipline in the world.

The thing is that trading might seem appealing because it is easier to understand where the price has moved once we have the data on the screen.

But we can tell you that it is much more harder than it looks.

You first will need to know the concepts, then learn the different technical indicators and define your trading system, which is a set of rules you define to trade.

After that, you need to risk money in every single trade you make, and you might possibly lose quite a lot before you even realize it.

Psychologically it can be devastating to face losses that we are not ready to confront. Nevertheless, if we trade with a small quantity, we can begin to control our emotions.

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Trading is more a psychological game than a technical game because we will constantly be fighting our emotions, second-guessing ourselves about our decisions, and facing fear or greed when a trade goes wrong or right.

However, once you have mastered both the technical and your emotions, trading is very rewarding, and it will help you make quite a lot of money. But again, you need a lot of time to master it and the proper guidance to understand how it works and where to start.

You can learn all the concepts you need here at Warsoption because we believe that the stock market trading concepts should be easy to find. We know that it is hard enough to master them in practice, so the best thing we can do is to help you understand them better.

Last words about how to make money in the stock market

Investing in the long term is much more easily psicologically speaking than trading, as we will not be facing a constant risk of losing money. However, it is not as rewarding as trading is.

In any case, we are not experts in the disciplines of investing for the long term. We actually prefer trading, because we believe we are in more control and it will make us money much more faster.

This control we are talking about is something that we have gained by practicing trading throughout the years.

In any case, as we stated at the beginning, both of these two disciplines will make us money, and it is up to you and how you feel more comfortable to explore them. If you stay with us, we will teach you the basics to help you start trading.