How to Create Wealth Through Stock Investing

by Matt Swayne ; Updated July 27, 2017

Over the long haul, investing in the stock market produces more wealth than investing in other assets. Many millionaires -- even billionaires -- have made their money, at least in part, through astute stock trading and investing. It's not difficult to learn how stock investing can create wealth.

Step 1

Research stocks that fit your investment style. If you don't have time to monitor the market, choose stocks that have long-term potential and high dividend yields. If you want to trade stocks actively, look for stocks that have the highest potential of capital gains (the profit from selling a stock).

Step 2

Select a low-fee, low-commission broker. Paying high fees can cut into your profit. Discount brokers are the best choice for independent but active investors.

Step 3

Pay yourself first. Make sure a portion of your earnings from your regular job is used to fund your investing accounts.

Step 4

Diversify. Not all the money you save should be placed in your trading or stock account. Spread a portion of the money in cash, bonds, real estate and other forms of investment. Diversifying your account should help you survive any deep downturns.

Step 5

Establish an investing discipline and stick to it. If you don't have a lot of time, manage a buy-and-hold strategy by selecting the best stocks for long-term performance. If you want to actively trade stocks, pick a trend-following or day-trading discipline.

Step 6

Check your emotions at the door. No matter what investing philosophy you choose, remember to keep your emotions in check. Fear and greed cause irrational investment decisions.

Step 7

Reinvest your profits. You can compound your returns by reinvesting dividends and taking profits off the table and investing in other stocks that are demonstrating higher potential.

Warnings

  • Remember that investing is not gambling, although risk is certainly involved. Make sure you are making sound decisions based on your risk tolerance level.

About the Author

Matt Swayne is a journalist, writer and author with 15 years experience. He also wrote a book called "Haunted Valley... The Ghosts of Penn State." His works have appeared in newspapers, blogs and magazines, including Playboy Online.