LemonTrades
TL;DR
- The most reliable way for most people is also the slowest: buy a low-cost index fund, add to it regularly and hold for years.
- The S&P 500 has returned about 10% a year over the long run, though it has also fallen by half twice this century.
- Trading can pay more, but most people who try it lose money. Treat anyone promising fast, sure profits as a warning sign.
- LemonTrades tells you what moved your market, and why, as it happens, whichever way you invest.
There’s no secret. There are a few well-known ways to make money from stocks, each with its own trade-off between effort, return and risk.
| Way | Effort | Risk | What to expect |
|---|---|---|---|
| 1. Index fundsown the whole market | Very low | Market risk | About 10% a year over the long run, with big swings |
| 2. Dividend stocksget paid to hold | Low | Medium | About 3% a year in cash, plus any growth |
| 3. Picking stocksown a few companies | Medium to high | High | Most professionals trail the index over 15 years |
| 4. Short-term tradingdays to weeks | Very high | Very high | Most people lose money |
1. Index funds
An index fund buys every stock in an index, like the S&P 500, for a very low fee. You don’t need to pick winners. See what is an ETF? and is VOO a good investment?.
| $10,000 invested | At 7% a year | At 10% a year |
|---|---|---|
| After 10 years | $19,672 | $25,937 |
| After 20 years | $38,697 | $67,275 |
| After 30 years | $76,123 | $174,494 |
Illustration only, before taxes. Actual returns vary every year and aren’t guaranteed. Adding money each month helps even more.
2. Dividend stocks
Some companies pay out part of their profit every quarter. A fund like SCHD holds 100 of them and yields about 3%. See when does SCHD pay dividends?.
3. Picking stocks
You research companies and buy the ones you think will grow, like Nvidia or Palantir. The upside is bigger, and so is the risk. Most professional stock pickers fail to beat the index over the long run, so keep this to a part of your money.
4. Short-term trading
Traders try to profit from moves over days or minutes, and costs eat into every trade. See what is day trading? and is day trading worth it?. Practice first with our free trade simulator.
How to start
- Pay off high-interest debt and keep a few months of expenses in savings.
- Open an account: a brokerage account, or a Roth IRA or 401(k) for the tax breaks.
- Buy a broad fund first, and set up automatic monthly purchases.
- Leave it alone when markets fall. See is the market crashing?.
Red flags
Guaranteed returns, secret signals, pressure to act today and “AI bots” that double your money are the classic signs of a scam. See is AI trading legit?.
Sources
Education, not financial advice. All investing involves risk, including the loss of your money. See our disclaimer.
