What are the different ways to make money when investing in stocks?

by Justin Weinger on August 13, 2014

If you’re new to investing in the stock market then it’s possible that you don’t know just how many different ways there are to invest, and make money, in the market. Below is a brief look at popular strategies that many investors are using right now and that you can use yourself to take advantage of one of the best long-term investing tools ever invented. Enjoy.

If you want to focus on companies that you believe have very strong prospects for the foreseeable future, you may wish to become a growth investor. Most growth investors shy away from paying too much but, if they find a really promising business, they definitely don’t have a problem ponying up the money to get its stock. One of the best examples of this is Google (NASDAQ: GOOG). Over the last five years they’ve surpassed 75% in annual earnings, which is simply phenomenal.

Investors who are fond of purchasing stocks that pay dividends like Duke Energy (NYSE: DUK), are known as dividend investors. The reason they like these types of stocks is simply that they pay them back with income streams that are quite generous. Although the aforementioned Duke Energy only has a 4.8% yield and typically won’t have big price jumps, dividend investors count on the fact that these types of stocks will outpace their counterparts over time.

Then there are those who purchase stocks in companies that are well-established with highly proven track records. These large-cap investors buy stock from Microsoft (NASDAQ: MSFT) and Walmart (NYSE: WMT) for the simple reason that these companies are extremely stable and the likelihood that they will go out of business is extremely small. The reason is that they are well beyond their growth phase and into their maturity phase.

If you’re an investor that looks for stocks that have fallen out of favor and have been abandoned by other investors, but still seem to have some life and hope for a rebound, then you’re a value investor. Value investors seek out stocks with the best prices and, while some of these actually don’t ever recover, some do and provide fantastic returns. One of these is Fairfax Financial (NYSE: FFH), a bargain at one time and now a superstar for those who picked it up.

Investors that don’t mind a little bit more risk will put their money into undiscovered companies rather than those that are well known. The reason that these small-cap investors to do this is that they are betting that the profits they will gain when that company becomes the household name of tomorrow will outweigh the losses that they face from any companies that eventually fail.

Lastly there are international investors who realize that not all of the best companies in the world exists in the United States. The fact is however that a company that is relatively obscure might still be an excellent investment, and bring greater rewards due to that obscurity, than a company that’s more well-known.

Now that you’ve seen the different types of investors, and investments, that there are in stock market, you might be a little surprised at the diversity. The fact is that this diversity is one of the best reasons to learn how to invest in stocks because, just like a diversified portfolio, they offer protection, less risk and higher long-term rates of return.


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