How can you make a lot of money by investing?
Do you want to make money investing? Whether you are in the UK or on Hawaii: thanks to the modern means of communication available, anyone can invest money anywhere. But how can you actually start earning a lot of money by investing? What is the best way to make a lot of money? And which risks do you have to watch out for?
How can you make a lot of money by investing yourself?
Do you want to decide for yourself what to do with your time in the future? Do you want to become completely financially independent? Then investing can be a good option! The great thing is that you don’t have to invest money to start! You can try out the possibilities for free with a demo. In this way you will discover whether you can make money by investing without running any risk yourself. Use the button below to compare the different demos:
The first step to making money with investing
The first step in making money from investments is to draw up a plan. For this, you have to ask yourself at least a few important questions:
- How much money can you invest at the moment?
- How much extra money can you invest each month?DEMO INVESTING
- What risks are you prepared to take?
- How much time do you have to invest?
It goes without saying that you can make more money when you can invest with more money, when you are willing to take more risks and when you have more time. At the same time, the chance of losing (a lot of) money also increases when you take more risks.
How do you make the most money investing?
If you really want to make a lot of money investing, you should at least apply these basic lessons:
Don’t wait too long
If you want to make money investing, it is wise to start today. This is partly due to the power of compound interest.
When you invest, your assets grow in the long term. The money you earn with your investments can then be reinvested. You will also receive a return on this reinvested money, which will allow your assets to grow exponentially.
If you want to make a lot of money investing or even become a millionaire, it is wise not to wait too long.
If you want to make money investing, you have to be patient. Many investors lose money because they are too greedy. They invest in a nice set of shares and sell them after making a small amount of money. Or the stock market plummets and out of panic they sell the shares, just before the prices move up again.
If you really want to make a lot of money investing, you need a lot of time. Therefore, have a long investment horizon and don’t deviate from your plan. This will increase the chance of achieving a good return!
Fight your emotions
When you want to make money investing, you have to fight your emotions as much as possible. People avoid pain as much as possible. It is annoying to lose money and it is also annoying to lose profits. That is why most investors tend to keep losing investments open and to cut off profitable investments to quickly.
You can counter such instincts by drawing up a plan. Establish clear rules and do not deviate from them. In this way you avoid losing a considerable amount of money.
Get in when everyone runs to the exit
I invested a lot of money during a crisis. During the corona crisis share prices fell by tens of percentage points. Many investors then quit because they saw share prices fall by dozens of precents. I myself then go looking for nice investments: after rain comes sunshine.
When, on the contrary, prices rise enormously and almost everyone is shouting that you have to be crazy not to invest, you have to be careful. Euphoria often comes before the crash!
Even a great investor like Warren Buffett is still learning all the time. Therefore, the investor who makes the most money is the investor who is the least stubborn. You make mistakes: by regularly evaluating your investments, you learn what you have done wrong, and you can improve the results you achieve.
The luck factor
It is important to remember that luck also plays an important role when investing. It is a fact that economic crises occur on a regular basis. You simply do not see a black swan like the credit crisis or the corona- pandemic coming. If you get in at the wrong time, you can lose money.
It is therefore particularly important to spread your risks well and to invest according to a plan. By doing so, you increase the chance that you will continue to earn money with your investments in the long term. After all, a short, quick profit followed by losses is worse than a substantial loss followed by stable profits.
What is the best way to make money investing?
If you do not have a lot of time to investigate shares yourself, it may be smart to invest in an ETF. An ETF is an index fund that automatically tracks a basket of shares. By investing in an ETF, you automatically apply risk diversification, and you pay low transaction costs. For most people, investing in an ETF on a regular basis is the most profitable way to invest.
A good ETF in which to invest is the Vanguard FTSE AW. This ETF tracks the performance of the FTSE All-World index. At DEGIRO, you can invest in this fund at no transaction costs. Use the button below to open an account with this broker:
You can also earn money by selecting shares yourself. In practice, it is difficult for many people to beat the market. If you do manage to select the right shares, you can earn even more money than by following an index.
Are you looking for a good broker where you can buy and sell shares? Then take a look at our overview of quality brokers & discover the best option for you:
The quickest way to make (and lose) money with investments is by actively speculating. You can then use leverage to increase both your potential profit and your potential loss significantly. With a leverage of 1:5 a price gain of 10% already leads to a profit of 50%. At the same time, your capital can immediately fall by 50% with the same decrease. Active trading is therefore not suitable for people who avoid risks. However, it is the only way to earn a lot in the short term by trading.
Please note that around 80% of investors who actively trade lose money. It is therefore certainly not advisable for the majority of investors.
How much money can you make with active trading?
One million pounds! If only it were such a celebration: you can never say with certainty how much money you can make with investments. And don’t forget that you might as well lose a lot of money investing. Nevertheless, there are a few things that determine how much money you can make by trading in shares.
Firstly, it is important to look at the relationship between risk and return. If you make a losing one for every winning investment you make, you have to make sure that you earn more for a winning investment than you lose for a losing one.
Good traders try to optimize their risk: return ratio as much as possible. They only open investments that involve a small potential loss and a relatively higher chance of profit. In this way you increase the chance of making a lot of money with investments.
On the basis of this you can determine the trading expectancy at a certain point. This is the amount you on average earn on an investment.
Number of trades
When on average you achieve a positive result with your investment, your profit increases when you make many investments. Of course, this only works if you open high-quality investments. Randomly opening all kinds of risky investments is of course counterproductive and reduces your chances of success.
How much do you invest in one trade?
How much money you earn then again depends on the amount you bet per investment. When you achieve a return of 1% per investment, it makes a lot of difference whether you invest $1.000 or $100.000.
You must pay close attention to your total capital or account size. In this way you can prevent the trading account from being blown up. If you lose the entire capital on your account, you are out of business.
By drawing up a good plan, you can somewhat predict how much money you can make by investing. It is important to first try out your plan in detail with, for example, a demo. Also maintain sufficient margin: it is better to make stable smaller amounts than to risk everything.
What mistakes should you avoid when you want to become an investment millionaire?
Everyone dreams of becoming a millionaire. If you are good at investing, and you draw up a good plan then this is probably possible in the long term. However, you should then avoid the following pitfalls:
Investment misstep 1: following others to much
Almost everyone has a good investment tip: buy this trendy stock, invest in Bitcoins or put all your money in a savings account. If the person you are talking to hasn’t become a millionaire by investing, you’d better ignore their advice.
Investment misstep 2: parking your money with an asset manager
Many people make the mistake of blindly giving their money to an ‘expert’. The problem with asset managers is that they often cannot beat the market. In addition, they charge high transaction costs, which means that it still takes a long time before you earn money with your investment.
Investment misstep 3: investing without knowledge
It is essential to invest only in investment products that you understand. If you are going to buy all kinds of complicated derivatives without sufficient knowledge, there is a good chance that you will lose a lot of money investing. Therefore, first study the financial markets before you even think about making money on the stock market.
Investment misstep 4: just saving
A little saving is sensible: it is very annoying when something has to be repaired, and you simply run out of money. It is therefore certainly advisable to always put enough money aside. However, putting all the money you receive into a savings account is not a winning strategy when you want to become a millionaire: the interest rate on savings is historically low and the return on investments is actually almost always higher. Saving yourself rich is therefore not an option.
Investment misstep 5: Create a financial roadmap
You are never going to make a lot of money investing without a step-by-step plan. Consider the time frame within which you want to raise a million dollars with your investments. Then examine whether it is realistic to achieve this goal with the money you can deposit each month. If this is not the case, you will first have to increase your income to earn more with investments. And remember: you should never invest with money you can’t afford to lose!
The average annual return on an investment in shares is seven to eight percent. Whether you actually earn this depends very much on when you get in. Once you are at the top of the market, it can take a long time to make a profit on your investment. It can therefore be smart to apply dollar cost averaging with which you invest money at different times.
Do you want to know how to buy shares? Then read our special about buying & selling shares:
What are professional investors doing?
Everyone can invest online thanks to the advent of the Internet by using an online broker. But making good money by investing? Not everyone succeeds! More than 70 to 80% of beginning investors make a loss. It is therefore wise to follow a few tips when you want to start making money by investing.
Don’t be stubborn
A first important tip for every investor who wants to achieve a good result is not to be too stubborn. When the price has been rising for months, it is unwise to suddenly take a short position. The trend is your best friend and is a good motto for any novice investor!
Spread your chances
A visit to the casino is dull when you immediately bet all your money on red. If you want to gamble on the stock market you can bet all your money on one share. However, this is not a winning strategy. Spreading your positions as much as possible over different investment products and regions reduces your risk and thus increases your chances of success!
Don’t be a sheep
It is important not to behave like a sheep. If you want to be part of the herd, you soon belong to the 70% to 80% of investors who make a loss. You can do better than that! So don’t sell your shares in blind panic when things get worse. Also be mindful of bubbles when prices are rising.
You can only make good money by investing if you are not behaving like a sheep!
Read all 14 tips!
Do you want to get off to a good start right away? Do you want a higher chance of immediately making good money with your investments? Then read our 14 comprehensive investment tips to increase your chances of success:
When investing via the internet, it is important to know the difference between buying and selling. As soon as you buy a share you make money when the price goes up and as soon as you sell a share you make money when the price goes down. It is important to recognize the right patterns.
Short-term investing is actually about recognizing patterns. I always first determine the general direction of the price: this is called the trend. When the price has risen further and further over the past month, we can speak of an uptrend. When the share price has fallen, we can speak of a downtrend.
Ultimately, when investing, the trick is to buy at a mainly rising price and to sell at a mainly falling price. In an uptrend you should buy when the price dropped slightly and in a downtrend you should see when the price has risen slightly.
Fortunately, you don’t have to do this manually: by investing with an online broker, you can easily earn money by automating your system! After all, it is possible to set orders on which you automatically purchase the share or commodity. Moreover, you can also make use of a stop loss or a take profit: in this way, you automatically limit your maximum loss, and you can take your profit at a certain moment.
Do you want to invest better? In our technical analysis course you will learn exactly what you need to recognize patterns correctly.