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How Does the Stock Market Grow Your Money

Secrets are supposed to be kept, closely guarded. Nonetheless, it's no secret that you can make money in the stock markets today. Stock market trading, as it stands today, is the most potent and engaging activity among millennials, seniors and all the generations in between. The number of investors in the stock markets just rises every year, as people are convinced that investing in stocks is a good idea. 

Is there any secret to earning the big bucks in stocks? For earning those big bucks, the big investors, those with years of trading experience to back them up, will tell you to stay invested through good times and bad, that is, for the long term. This, you can do on your part, the stocks and the stock market will handle the rest. Hence, this brings us to the question of how the stock market can grow your wealth. 

Making Money in the Stock Market

If you have ever had to open a demat account to invest in the stock market, you must have thought, as a new investor, that you would start making it big on the first day at the stock markets. That’s a common misconception that most newbies are guilty of. It may take a fresher a few years to make money in the stock market. However, the wait will be worth it. The key to earning in the stock market is patience. You must remain in the markets and remain invested without any shifts influencing your investment. Hence, your period of “market time” is actually a measure of how well you will perform. 

Globally, it is known that the average returns of stock markets are close to ten percent on an annual basis. This is far better than you will find at any bank or investing in bonds. Nonetheless, there are a majority of investors who never see that ten percent growth. Why? Because they don’t remain invested for a long enough period. Investors have the habit of rushing into the markets and rushing out, missing out on good opportunities. 

Invest if You Don’t Need Money

When you are involved in stock market trading, you are there because you want to earn good returns. Several great financial advisors will always tell you to invest only the wealth that you would not foresee yourself requiring for a while - at least for the next five years. The stock market can only make your wealth grow if you have good stocks and let them be for a while. In this way, investors tide over the surges and slides in the market, till values stabilise and still make money. This rule holds good whether you invest in direct equity or subscribe to any upcoming IPO through which you are allotted shares of a promising company in one go. 

Get in Tune With a Good Brokerage 

The first thing you should do is get a good broker to invest in the markets. The stock market can grow your wealth if you rely on a good broker with reasonable fees and great knowledge of the markets. A superior broker knows about markets and can give you some handy hints as to how you can make rewarding gains. Your stock market trading platform should be user-friendly so you can navigate the markets and pick stocks when opportunities present themselves. 

Let Stocks Do Their Job

Holding on to a good quality stock for a long time lets you have the advantages of earning from dividends. If companies that you have invested in pay these dividends (once a year), you earn good amounts from these from time to time. If you’re in the stock market on a daily, or weekly, or monthly basis, you may as well kiss any dividends goodbye. This is  because you likely will not own any stock at critical points in the calendar to collect the dividend payouts. The nearer you’ll get to a historical average yearly return of ten percent, is if you spend a longer time with your stock.

Stand-alone stocks or index funds?

If you want that ten percent yearly return on your stock investment, then you should explore investing in index funds. Index funds contain large numbers of stocks which mirror indexes like the NIFTY 50. Consequently, you need some knowledge about certain companies (that constitute the index) in order to succeed. The primary success driver, again here, is the discipline for you to remain invested. You can earn potentially higher returns in individual stocks, but before you engage in stock market trading, you will have to do extensive research about companies and past records to earn well. 

Don’t Let Ifs Get in the Way

The stock market can grow your wealth only if you let it do so. The common mistakes that many investors make is to let too many excuses and feelings get in the way of trading and investing. “If the market is safe, I’ll invest then,” or “I’m bored with this company, so I’ll sell its stock” are often the kinds of thoughts that make you lose out in the stock market. The stock market is perhaps the only market where all the goods are on sale, but investors make all sorts of excuses to make purchases. Investors who wish to wait for a “safe” market are those who may experience a decline in stocks for a few days, or even longer. Waiting for safety may mean that investors are waiting for the stock to rise. This is based purely on their perceived view of the stock’s behaviour and isn’t based on any logical calculation. Most transactions by investors may be based on fear of loss aversion and this can hurt gains in the long run. The other thought of “being bored” with a stock is no excuse to sell it. Some investors need a lot of action while they trade, but they don’t get that the stock market isn’t a casino. It’s a place where discipline and patience have to be exercised. Serious investors may sit on an “unmoving” stock for years, but when the opportunities for returns come, they come like a windfall. 

Funds vs Stocks

The majority of investors gravitate in the direction of two kinds of investments in the stock market - stock funds and stand-alone stocks. If you want true diversification and want the stock markets to build your capital, then you should invest in stock-based funds too. These are in the form of mutual funds and ETFs. If you follow the traditional rule of avoiding “all eggs in a single basket”, the stock market can grow your wealth in more ways than one. 

The Key for Long-Term Wealth Creation

You can go ahead and ask any of the experts and they will tell you that the stock markets may be your answer to wealth and its subsequent growth. When you open a demat account for the first time, you expect your wealth to grow. However, this won’t happen overnight. Additionally, even for other inroads into the stock market, like a subscription to an upcoming IPO, wealth won’t just appear. For the stock market and stock market trading to build your capital, you need to exert discipline, take calculated risks and logical decisions. 

Related Articles: Follow these 5 Expert Advices to Get Started with Investing | 5 Rules Every New Investor Must Know Before Investing | 6 Stock Market Investing Disasters To Stay Away From |  10 common mistakes made by SIP investors | 4 Smart Must-Follow Investment Tips for Beginners in India

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