Weekly Newsletter   Challenge account   Weekly Newsletter   

What is the secret of stock trading to make money all the time?

You need to distinguish between “stock trading” and “stock investing”.

Stock investing is easy and you can make a lot of money over time. People tend to over estimate their ability to make money in the stock market in short time (everyone thinks they can get rich quick) but under estimate their ability to get rich in the long run.

So the secret is to set a plan of what you will be buying and why. What do you want your investments to do for you. Do you want growth? Or income? What is your time horizon? And how much money can you invest?

For example, I myself wanted stock to buy and hold them for a long run – 20, 30, or 40 years. And while sitting on them and waiting, I wanted to be paid all the time, 4 times a year. And which stocks will reward you with quarterly paycheck while you hold them? Dividend growth stocks.

Buy and hold strategy works 100% of the time if you hold the stocks 100% of the time. Let me repeat it – if you hold them 100% of the time! People lose money because they are a buy and hold investors only until the next correction. Then they panic and sell. And usually, they sell at the low. Then they are afraid to buy back in because “what if the stock goes lower” fear. And when they are finally convinced that this correction was finally over, they buy back in – and usually at the high.

So the secret is, buy and hold. Never sell. Consider your stocks to be your rental property. You do not buy and sell your house whenever the price goes up or down, do you? So, do the same with your stocks. And if you buy high quality dividend stocks, which grow the dividend every year you will be rewarded while waiting. For example, Johnson & Johnson (JNJ) paid dividends for last 100 years and increased dividends every year for the last 50 consecutive years. They even increased the dividend in 2008 when everyone was predicting the end of the world. What are the odds that this company suddenly stops paying or reduce the dividend? Well, there is a chance, but so slim that we can call it “impossible”. These are the types of companies you want in your portfolio.

Later on, you can start monetizing your “property” (stocks) by selling options around them (like renting your house). You can sell cash secured puts to buy stocks, and covered calls to sell the stocks – and generate additional income. An excellent book on this strategy is “Generate Thousands in Cash on your Stocks Before Buying or Selling Them by Samir Elias. I practice this strategy myself and it is very rewarding. You may expect 30% – 45% annual return on your portfolio.

And trading stocks? Well, that is a different topic and in my opinion you would have to be a prodigy or a miracle child to succeed. 95% of all stock traders fail in 6 months. I admit, I tried myself and failed. I tried three times, and three times I wiped out my portfolio. I made money – tons of them, but I also lost them all. And I do not have the secret formula to tell you how to trade stocks and be rich quickly (and if I had one, I would use it myself and wouldn’t share it).

Leave a Reply

Your email address will not be published. Required fields are marked *