Are you currently looking for how you can earn money with as little effort as possible in the future?
In this case there are several options, but a large proportion of them are not serious.One of the one-sided serious offers on how you can earn money includes investing or speculating in stocks.
In our following post you will find out what you have to do in detail if you want to make money with stocks and what variants there are.
Table of Contents
What are stocks actually?
Before we get into some of the ways you can make money with stocks, let’s briefly explain what stocks are all about.
Stocks fall into the large group of securities and are issued by specific companies, namely public companies. The shares represent a proportion of the company’s assets, so that the shareholder becomes a shareholder. By buying shares, you participate directly in the corresponding company and, in a certain way, become the owner of the company.
Because of this, every share has a certain value. If the shares are traded on the stock exchange, one speaks of the market value. This is formed in particular on the basis of supply and demand.
If a share is particularly popular or if the stock corporation presents good figures, demand increases and therefore usually the share price as well. This is exactly the mechanism by which you can make money investing in stocks.
How much capital do I need to make money from stocks?
If making money in stocks online is an option for you, you might be wondering how much money do you need to get started?
Many shares have a market value of a few euros on the one hand, but of course you cannot get rich with a single share in your portfolio. In addition, trading shares is associated with costs , the so-called order fees or transaction costs .
Depending on the trading volume and provider, these costs are usually between 6 and 20 euros per purchase or sale or, in other words, around one percent of the traded value.
This means: if you want to buy shares for 500 euros, for example, you often have to pay a fee of 10 to 15 euros for the purchase . Calculated at 500 euros, this can be up to 3% in costs , so that the order fees would have a disproportionately high impact in this case. For this reason, it makes sense to invest a little more money in stocks so that the transaction costs are significantly less significant.
Of course, there is no standardized approach, but most experts and analysts recommend investing at least 1,000 to 2,000 euros in stocks.
Another point is very important, namely risk diversification . This is also known as diversification and ensures that you can reduce the entire risk of your axle portfolio. In our following section we will show you how diversification works and why it is important.
Why is diversification important?
Diversification means that you distribute your capital across several forms of investment or, when investing in stocks, between several different stocks.
In this case, you don’t buy a single share value for, for example, 5,000 euros, but split your capital. In this case, for example, you can buy five different stocks for 1,000 euros each and thus spread the entire risk . In the following example we would like to make it clear that this is actually the case and that it is not an invention of the experts.
We will now compare two different portfolios, one of which consists of only one stock value, while the other contains five different stock values. In both cases, there is a significant drop in the price of a stock value, which would, however, have very different effects on the total value of your portfolio.
- Share portfolio A:
- Daimler shares: € 5,000
- Share portfolio B:
- Daimler shares: € 1,000
- Telekom shares: € 1,000
- Coca-Cola shares: € 1,000
- Roche shares: € 1,000
- Bayer shares: € 1,000
Now we are assuming that there will be a 30 percent drop in the price of Daimler shares within a few weeks. The question now is how this loss of a stock will affect your entire portfolio in each case, namely as follows:
- ⇒ Current total value of depot A: 3,500 euros
- ⇒ Current total value of depot B: 4,700 euros
In this example you can see very well that diversification has brought something. Because you have four other equity values in the second portfolio in addition to Daimler shares, which – in our example – have not changed in terms of price, your total loss is not – as with the first deposit – at 1,500 euros, but only at 300 Euro.
For a long time, Wirecard was seen as a beacon of hope for the German tech start-up scene and was highly praised by many media. In June 2020, however, the enormous balance sheet fraud was discovered and allegedly more than 1.9 billion euros were missing!
This was followed by a drop from around € 105.00 to currently around € 2.00 and a loss in value of over 99%. Investors who did not pay attention to diversification lost almost their entire investment.
Unfortunately, here is a sad example:
How a pensioner lost almost 450,000 euros to Wirecard fraud
Note: Always watch out for your risk! Of course, it is part of trading on the stock exchange, but you should always limit it. There are different methods for this:
Spread your risk (= diversification) in different stocks. You should only invest in A + rated companies
Use a stop loss! A stop loss is an automatic loss limit that you can set with every broker. So if any price trend drops by 5%, for example, then your position will be closed automatically.
Be sure to read this article:
Losses in capital investments – these 5 mistakes are avoidable
Earning money with stocks: what are the options?
Stocks are flexible and offer investors and speculators several ways in which one can make money with the securities .
In the following we would of course only like to deal with serious options and not with dodgy business models, such as so-called pyramid schemes, which unfortunately are not infrequent when investing in securities.
First and foremost, you can make money online with stocks in the following ways:
- Speculation on price development
- arbitrage -trade
- Use automatic trading systems
- Long-term investment
- Speculation with Derivatives
In all of these areas there are different possibilities and ways in which you can optimize your investment success.
Now let’s take a closer look at the options shown and how you can also earn money online with stocks in each case. However, you should know that some start-up capital is necessary in any case. It is extremely rare for you to become a stock millionaire with just 100 euros of start-up capital.
Speculation on rising prices: a popular variant
Most people who want to make money in stocks want to do so on a relatively short-term basis.
Often it plays a role that there are numerous videos on the Internet that give the impression that anyone could easily achieve several hundred percent in profit within a few weeks or months through speculation. This is of course possible in individual cases, but definitely not the rule .
You can of course pick out a few stocks and then speculate on rising prices by buying the corresponding securities. However, if this is not just about gambling, you should either be very knowledgeable about the market, obtain a lot of information or act according to certain strategies.
An important aspect in connection with speculating on rising share prices is chart analysis .
The fundamental analysis , however, is less interesting for short-term speculation, as it is geared more towards a longer-term investment and the analysis of the figures of the corresponding company. The chart analysis is not easy, however, so you should also deal with this topic beforehand.
What do I need in detail for speculation?
If you’ve decided to bet on stock price increases, the first thing you’ll need are the following:
Securities account
Seed capital
Good selection of stocks
You can open a securities account today with most banks or an online broker .
Above all, make sure that you opt for a free depot and that the order fees and transaction costs are as low as possible. Online brokers in particular are cheap here and often offer trading in securities for as little as ten euros per order.
After you have opened a custody account, all you have to do is ensure that there is sufficient start-up capital available on the clearing account. The third step is already about analyzing some stocks and choosing the stocks that you think have good price potential. The difficulty, of course, is that you will find particularly promising stocks. Sometimes, however, it is already sufficient if the overall market develops positively so that in principle all or at least most of the stocks rise with their prices.
You can see the price development of the Amazon share over the past six months
Amazon’s share price since March 2020
A good example: Amazon
Amazon was able to make enormous profits, especially during the Corona crisis.
The share has doubled in value and stands at around USD 3,200 per share at the time of this contribution. Thus this company or security was extremely interesting for speculation but also, for example, on trading with leverage and derivatives.
