You may have looked at people who buy stocks and wonder how they manage to make so much money. There are actually several different ways to make money from stocks. You can buy individual stocks, buy groups of stocks or bet on changes in prices of stocks.
Buying and selling individual stocks can make money if you do it well. You want to buy stocks when they are low in price and then sell them when the price has gone up. This sounds simple, but it can sometimes be difficult to hold your nerve if prices fall rapidly after you have purchased and you may decide to cut your losses, which is not a wise thing to do as you will lose a lot of money. Choosing which specific stock to buy can be difficult as there are so many to pick and you could be risking a lot of money by making the wrong choice.
Groups of Stocks
In order to spread the risk, some people prefer to buy a group of stocks. These might be spread across different industries or just a selection of different companies or a fund with a fund manager picking the stocks. Although this can take more work to manage and a fund manager will charge for their services, it can be a lower risk option. If one stock does poorly, then the others may do well enough to offset that loss.
Betting on Price Change
Some people choose to bet on whether a stock price will go up or down rather than just buying them and hoping they go up in value. It is often advertised that this can make a lot more money, but it is also a lot more risky. You will normally have to pay to have the opportunity to take part and if you are incorrect, you will lose that money. However, if you do well, you could end up winning a lot of money. This is rather more like gambling than buying stocks though.
It is always worth noting that buying stocks is always risky. It is not like putting money in a savings account and waiting to see if you get some interest. There is a real risk that you may get back less money than you put in and some people end up with nothing. This is why it is worth doing a lot of research first and only using money that you can afford to lose. You should also be prepared to invest for the long term so that you have a better chance of making a profit even though the stock market tends to naturally go up and down with time. The longer you leave the money in the more chance there is of the stock market going up. This is because the general trend for the stock market is upwards but changes in the short term mean that it can drop as well as go up and the amount it does this will depend on the specific stocks that you hold.