How To Make Money In Stock Market? Here Are Top 8 Money-Making Strategies For Investors

If you are getting started to invest in the stock market for the first time, key elements would be to plan how much and how regularly, you want to invest

Tactical investing focus on short-term investment decisions to capitalise on anticipated near-term price movements in a security or market sector.

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By Priti Goel

Strategy is a general plan to achieve long-term goal under conditions of uncertainty (i.e. situations involving imperfect or unknown information). Strategy is important because the resources available to achieve goals are usually limited. If you are getting started to invest in the stock market for the first time, key elements would be to plan how much and how regularly, you want to invest. Keep in mind that once your money is in the stock market, it's not easy to cash out compared with a bank account.

There's potential for loss, so it's a thumb rule to only invest money you won’t need right away. The longer your money remain invested, more time it has to weather market fluctuations and potentially grow. You should also define your investment goals (saving for retirement, child education, etc) and risk tolerance.

Now, let's look at 8 money-making, time tested strategies for stock investors.

1. The buy-and-hold strategy, also called position trading is a passive investment approach where an investor buys stocks (or securities like Index Funds, ETFs) and holds them for an extended period. Warren Buffet praise this approach for healthy long-term returns. Owning shares provides voting rights and stake in corporate profits as the company grows. Investors can defer capital gain taxes.
2. Dividend investing focuses on stocks that pay out dividends. Companies pay out this distribution of stock or cash to reward their shareholders and keep them on board. Investors benefit in two ways, price appreciation and dividends.
3. Value investing involves buying securities that appear underpriced but have strong fundamentals and growth potential. Investors tend to uncover the intrinsic value and develop patience to buy the stock at price that is lower than its intrinsic value.
4. Growth investing typically look for investments in rapidly expanding industries (or even entire markets) where new technologies and services are being developed. It is highly attractive to many investors because buying stocks in emerging companies can provide impressive returns (as long as companies are successful). However, there is also a high risk given that such companies are untried.
5. Diversification is a risk management strategy that creates a mix of various investments within a portfolio. In theory, holding investments in different stocks and sectors reduces the overall risk. Diversification is more enjoyable to pursue but it can minimise returns as the goal is to reduce the portfolio risk. In general, diversification aims to reduce unsystematic risk, hedges against market volatility and offers potentially higher returns over long term.
6. Tactical investing focus on short-term investment decisions to capitalise on anticipated near-term price movements in a security or market sector. It is an active investment strategy that adjust allocations based on current market conditions and opportunities. Technical analysis plays a significant role, helping identify price trends and optimal entry & exit points. Tax implications (example capital gains) need to be considered.
7. Risk management investing is to avoid risk altogether by selecting low volatility stocks. It also means accepting the risk and holding onto it without taking any specific actions to mitigate it. It can also means implementing measures to minimise the impact of potential losses by setting stop loss orders. Investor can also spread the risk across portfolio by diversifying, shifting the risk to other parties (like derivatives, etc).
8. Thematic investing identifies macroeconomic, geopolitical and technological megatrends with a potential to reshape industries. This method of investing focusses on companies likely to benefit from ongoing trends (example ESG, reduction in carbon foot print, etc).

While above strategies are broad and proactive framework for investing, continuous learning is essential for anyone interested in the stock market. Choosing the right strategy will remain dependent your investment goal and your risk tolerance.

Avoid emotional decisions when markets/stocks are fluctuating. Thorough research, careful analysis and patience are crucial before making any investment decision.

Some of the other tips are pick a strategy and stick with it, avoid chasing a hot-tip, focus on future and keep a long term perspective and be aware of taxes.

"The individual investor should act consistently as an investor and not as a speculator." — Ben Graham

The author is the founder and CEO of Prisha Wealth Management Private Limited and a certified investment advisor.

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