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Investing

How to Make Money in Stocks

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Putting money in the market is well-worn financial advice for a reason: Investing in stocks is one of the best steps you can take toward building wealth.But how, exactly, is that wealth built? How is money earned by purchasing stock market holdings, and what can you do to maximize the gains you make from your own portfolio?

How to make money in stocks: 5 best practices

The way the stock market works — and works for you — is as simple as a high school economics class. It’s all about supply and demand, and the way those factors affect value.

Investors purchase market assets like stocks (shares of companies), which increase in value when the company does well. As the company in question makes financial progress, more investors want a piece of the action, and they’re willing to pay more for an individual share.

That means that the share you paid for has now increased in price, thanks to higher demand — which in turn means you can earn something when it comes time to sell it. (Of course, it’s also possible for stocks and other market holdings to decrease in value, which is why there’s no such thing as a risk-free investment.)

Along with the profit you can make by selling stocks, you can also earn shareholder dividends, or portions of the company’s earnings. Cash dividends are usually paid on a quarterly basis, but you might also earn dividends in the form of additional shares of stock.

Micro-mechanics of how stocks earn money aside, you likely won’t see serious growth without heeding some basic market principles and best practices. Here’s how to ensure your portfolio will do as much work for you as possible.

1. Take advantage of time

Although it’s possible to make money on the stock market in the short term, the real earning potential comes from the compound interest you earn on long-term holdings. As your assets increase in value, the total amount of money in your account grows, making room for even more capital gains. That’s how stock market earnings increase over time exponentially.

But in order to best take advantage of that exponential growth, you need to start building your portfolio as early as possible. Ideally, you’ll want to start investing as soon as you’re earning an income — perhaps by taking advantage of a company-sponsored 401(k) plan.

To see exactly how much time can affect your nest egg, let’s look at an example. Say you stashed $1,000 in your retirement account at age 20, with plans to hang up your working hat at age 70. Even if you put nothing else into the account, you’d have over $18,000 to look forward to after 50 years of growth, assuming a relatively modest 6% interest rate. But if you waited until you were 60 to make that initial deposit, you’d earn less than $800 through compound interest — which is why it’s so much harder to save for retirement if you don’t start early. Plus, all that extra cash comes at no additional effort on your part. It just requires time — so go ahead and get started!

2. Continue to invest regularly

Time is an important component of your overall portfolio growth. But even decades of compounding returns can only do so much if you don’t continue to save.

Let’s go back to our retirement example above. Only this time, instead of making a $1,000 deposit and forgetting about it, let’s say you contributed $1,000 a year — which comes out to less than $20 per week.

If you started making those annual contributions at age 20, you’d have saved about $325,000 by the time you celebrated your 70th birthday. Even if you waited until 60 to start saving, you’d wind up with about $15,000 — a far cry from the measly $1,800 you’d take out if you only made the initial deposit.

Making regular contributions doesn’t have to take much effort; you can easily automate the process through your 401(k) or brokerage account, depositing a set amount each week or pay period.

3. Set it and forget it — mostly

If you’re looking to see healthy returns on your stock market investments, just remember — you’re playing the long game.

For one thing, short-term trading lacks the tax benefits you can glean from holding onto your investments for longer. If you sell a stock before owning it for a full year, you’ll pay a higher tax rate than you would on long-term capital gains — that is, stocks you’ve held for more than a year.

While there are certain situations that do call for taking a look at your holdings, for the most part, even serious market dips reverse themselves in time. In fact, these bearish blips are regular, expected events, according to Malik S. Lee, CFP® and founder of Atlanta-based Felton & Peel Wealth Management.

So-called market corrections are healthy, he said. “It shows that the market is alive and well.” And even taking major recessions into account, the market’s performance has had an overall upward trend over the past hundred years.

4. Maintain a diverse portfolio

All investing carries risk; it’s possible for some of the companies you invest in to underperform or even fold entirely. But if you diversify your portfolio, you’ll be safeguarded against losing all of your assets when investments don’t go as planned.

By ensuring you’re invested in many different types of securities, you’ll be better prepared to weather stock market corrections. It’s unlikely that all industries and companies will suffer equally or succeed at the same level, so you can hedge your bets by buying some of everything.

5. Consider hiring professional help

Although the internet makes it relatively easy to create a well-researched DIY stock portfolio, if you’re still hesitant to put your money in the market, hiring an investment advisor can help. Even though the use of a professional can’t mitigate all risk of losses, you might feel more comfortable knowing you have an expert in your corner.

How the stock market can grow your wealth

Given the right combination of time, contribution regularity and a little bit of luck, the stock market has the potential to turn even a modest savings into an appreciable nest egg.

Ready to get started investing for yourself? Check out the following MagnifyMoney articles:

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Cattanach
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Jamie Cattanach is a writer at MagnifyMoney. You can email Jamie here

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Investing

CNote Review 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

In recent years, finding stable, reasonable yield has been difficult for savers. A traditional savings account rarely offers an attractive yield and the bond market has been somewhat anemic in recent years. This is where CNote comes in.

CNote is a company that takes your money and invests it in community development financial institutions (CDFIs). Basically, these lenders issue loans to local governments, nonprofits and businesses owned by minorities and women. CNote invests your money with its partners and offers you a return.

CNote
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The Bottom Line: CNote offers you the chance to earn relatively stable yields that beat traditional savings accounts while allowing you to make a positive social impact in communities across the country.

  • Annual return beats that of most traditional savings accounts.
  • Investments are used for social impact.
  • CNote has no fees, but it does come with liquidity restrictions.

Who should consider CNote

CNote is meant as a savings account or bond market alternative. It’s not designed to offer inflation-beating potential returns like those seen in the stock market. Instead, it’s more likely to be appropriate for savers who are frustrated with their current yields and want a relatively stable way to boost what they’re earning each year.

Additionally, the social impact aspect of CNote could make it attractive to those looking for socially conscious ways to put their money to work. CNote’s CDFI partners invest in small businesses and community development projects, so for those who like the idea of doing good while their money earns interest, this can be an option.

However, CNote comes with limited liquidity. There are only four times a year that CNote allows for withdrawals (with 30 days’ notice), and at those times you’re limited to withdrawals of $20,000 or 10% of your balance, whichever is higher. (CNote does consider special circumstances and may allow larger or unscheduled withdrawals at their discretion.)

Those who need access to their money for goals in the medium term (four to seven years out) could benefit from CNote, but withdrawals require planning. As a result, it likely doesn’t make sense to use CNote as an emergency fund where immediate liquidity is needed.

CNote fees and features

Amount minimum to open account
  • $1
Commission$0
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $0 full account transfer fee
  • $0 partial account transfer fee
  • $0 inactivity fee
Account types
  • Individual taxable
  • Trust
Customer supportPhone, Email

Strengths of CNote

CNote offers an interesting twist on social investing with the expectation of relatively stable returns.

  • Yield that beats traditional savings accounts: One of the stand-out features is CNote’s advertised return of 2.75% APY (or more). This is much better than most traditional savings accounts. In fact, as of this writing, CNote offers returns higher than the five-year Treasury yield. That means you could see a higher yield for medium-term savings than what’s available with other savings options.
  • No fees: CNote doesn’t charge any fees. Instead, the service makes money on the difference between what they pay you in yield and what they receive from investments made with CDFI partners.
  • Social impact investing: If doing good is important to you, CNote offers a way for you to do that. Your money goes toward helping provide affordable financing to underserved communities for projects like affordable housing, community development and minority-owned businesses.
  • Trust and business accounts: You can open a CNote account as part of a trust or use it for business purposes. Depending on your needs, this can be helpful in your asset management plan.

The service is fairly straightforward and comes with no costs, but it has the potential to help you earn a higher yield on money that might otherwise be sitting in a low-yield savings account.

Drawbacks of CNote

While CNote offers an innovative way to maintain a stable yield, there are some issues that you need to be aware of before you invest.

  • Limited liquidity: This isn’t a deposit account and your money doesn’t remain immediately accessible to you. CNote isn’t simply holding your money; instead, it’s investing your money with its partners. As a result, you need to provide advance notice before withdrawing your money — and you can only withdraw at certain times during the year.
  • Yield is still too low for long-term wealth building: Even though the yield is higher than a traditional savings account, it’s still not high enough for effective long-term wealth-building. If you’re looking for a way to build your nest egg, consider Stocks, Mutual funds and ETFs.
  • No tax-advantaged options: CNote doesn’t offer you the opportunity to invest with tax advantages. There aren’t IRA or 529 options.

If you decide to use CNote, it’s important to understand how you want to use it in your overall portfolio, since there are limitations to when you can access to your money and limited usefulness as a long-term investment vehicle.

Is CNote safe?

It’s important to note that CNote isn’t a depository institution and it isn’t protected by the FDIC. That means if CNote fails, there’s no guarantee you’ll get your money back. However, the loans made by its CDFI partners to community and municipal projects are generally considered low-risk with stable returns, on par with high-quality Bonds. Most of the projects funded by CDFIs are usually vetted heavily and CDFIs impose their own requirements on borrowers.

CNote also uses what it calls Triple Protection to limit potential losses. Because CNote isn’t a holding company, they don’t keep your money; instead, it goes to CNote’s CDFI partners. CNote only contracts with partners that use government-guaranteed programs, which offer a layer of protection. CNote’s partners are also contractually obligated to repay the loans they receive from CNote, even if something goes wrong. Finally, CNote has a loan loss reserve to help cover potential losses.

However, like any investment, there is still a risk, and you could lose capital in addition to missing out on returns.

Final thoughts

If you’re interested in boosting your yield on a chunk of capital that isn’t doing much, CNote could be an interesting place to park your cash. The returns could be fairly stable and may beat what you’ll get at with a savings account. Plus, you get the added bonus of feeling good about making a positive social impact.

However, you do need to be aware of the liquidity limitations and understand that pre-planning is needed before you access the money you invest using CNote.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Miranda Marquit
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Miranda Marquit is a writer at MagnifyMoney. You can email Miranda here

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SpeedTrader Review 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

SpeedTrader is an online broker that caters to active day traders. It offers a choice of platforms and a full selection of research and data tools, making it a competitive option. You also get direct market access with more than 25 routing options, a choice of per-share or per-trade pricing, and the ability to trade Stocks, Options, and Bonds.

However, SpeedTrader has a higher minimum deposit requirement than TradeStation and Lightspeed, which are designed for active traders as well. SpeedTrader doesn’t offer as many options for trading platforms as Lightspeed does, and you won’t have access to multiple free trading platforms with SpeedTrader — unlike with either of its close competitors.

SpeedTrader
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The bottom line: SpeedTrader offers direct market access and advanced trading features, including point-and-click trading, real-time market data and hot keys for faster order entry.

  • SpeedTrader provides a choice of trading platforms, including ActiveWeb, SpeedTrader Pro, and SpeedTrader Mobile.
  • Investors get direct market access — with a choice of more than 25 routing options — to allow for faster execution and better filling of orders.
  • Commissions and fees are affordable, especially for high-volume traders.

Who should consider SpeedTrader

If you’re a day trader who needs real-time market data at your fingertips with the ability to place and execute orders as quickly as possible, then SpeedTrader could be an ideal broker for you. SpeedTrader allows you to save multiple screen layouts, create customized watchlists, stream quotes in real time, manage multiple trading accounts in one platform, and customize 100 different hot key options for the fastest possible order entry.

SpeedTrader also provides support for institutional clients, including hedge funds. Or if you are diving into day trading for the first time, you can request free virtual practice accounts with virtual buying power to make sure you’re ready before you risk any real money.

But if you’re looking for features that cater to hands-off traders, such as commission-free ETFs, no-load Mutual funds, or robo-advising services, SpeedTrader is the wrong tool for you. Online brokers such as Ally Invest, Charles Schwab and E-Trade would be more your speed.

SpeedTrader fees and features

Amount minimum to open account
  • $30,000
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $75 full account transfer fee
  • $75 partial account transfer fee
  • $30 inactivity fee per quarter
Current promotions

When you open a new account with SpeedTrader, you can get up to $100 in free trades or one month of free trading.

Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Coverdell Education Savings Account(ESA)
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • SEP IRA
  • Solo 401(k) (for small businesses)
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
  • Guardianship or Conservatorship
Automatic rebalancing
Tax loss harvesting
Offers fractional shares
Ease of use
Mobile appiOS
Customer supportPhone, Chat, Email

Strengths of SpeedTrader

Some of the key benefits of SpeedTrader include the following:

  • Affordable commissions: With SpeedTrader, you have a choice of how the commissions are structured. You could pay a per-trade fee as low as $2.95 if you make 500 trades or more per month or up to $4.49 per trade if you trade less frequently at under 200 trades in a month — or you could pay a per-share fee instead. Per-share fees start at just $0.0025 if your monthly share volume is at least 500,000 and goes up to $0.0044 if you trade under 250,000 shares. This is comparable to Lightspeed, which charges $0.0045 if you trade under 249,999 shares per month and as low as $0.0010 if you make 15,000,000 or more in trade volume per month. And it’s below TradeStation’s pricing of $5 per trade.
  • Tools to facilitate timely ordering: SpeedTrader is focused on allowing you to place orders as quickly as possible. That’s why you have direct market access with a choice of routing options as well as hot keys to facilitate trades. Most conventional brokers don’t offer direct market access, instead routing customer orders to centralized trading desks, which in turn route to other liquidity providers.
  • Advanced data, charting and research tools: SpeedTrader has multiple platforms, each of which offers customization and advanced tools to help active traders. Investors can create customized watch lists; view streaming quotes as well as time and sales data in real time; and choose from a full array of chart types, including candlestick and price charts.

Drawbacks of SpeedTrader

  • High minimum deposit requirements: SpeedTrader offers only margin and options accounts, and there is a minimum $30,000 deposit for U.S. and foreign clients. There is also a minimum $30,000 deposit if you want to open a day trading account.
  • Costly inactivity fees: There is a $30 inactivity fee per quarter if you execute less than 15 trades.
  • A lack of options for free trading platforms: Lightspeed offers two free trading platforms, while TradeStation doesn’t charge software fees and provides free access to its advanced trading tools. SpeedTrader, on the other hand, charges a minimum of $25 monthly for ActiveWeb unless you generate at least $199 in monthly commissions. And its other platforms are even costlier, with SpeedTrader Pro Level I starting at $49 monthly unless you generate $199 in commissions and SpeedTrader Pro Level II coming in at $104 per month if you have less than $499 in monthly commissions.

Is SpeedTrader safe?

SpeedTrader is committed to account security. It is in full compliance with all regulatory requirements, according to FINRA BrokerCheck. And client assets held with SpeedTrader are insured up to $500,000 since SpeedTrader is a member of the SIPC.

SpeedTrader clients also get additional protection through Lloyd’s of London for up to $24.5 million in assets. That means a combined total of $25 million per client is protected, including up to $1 million in cash.

This insurance does not, however, protect you if the assets you invest in lose value. There are inherent risks to investing, and you could end up losing money if your investments perform poorly.

Final thoughts

SpeedTrader, more than most other online brokers, focuses on facilitating the fastest ordering speeds possible, which is a big benefit for day traders. If speed is of the essence, SpeedTrader is likely the right choice for you. But if you’re looking for a wider choice of trading platforms and are interested in not paying a fee to use them, then you may want to consider Lightspeed or TradeStation instead.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Christy Rakoczy
Christy Rakoczy |

Christy Rakoczy is a writer at MagnifyMoney. You can email Christy here

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