Can You Make Easy Money In The Stock Market?

A question that is asked often - in life as well as - in the stock market, is whether it is possible to make 'easy money'.

Your author's opinion is that there seems to be very little easy money to be made anywhere, and the stock market is no exception. As such, this is a question usually asked by (information here) to the stock market rather than those with more experience.

However, on very rare occassions, it does happen. Really it does. Generally, it is in the wild throes of a raging bull market. The last of these was in the internet 'bubble' of the late 1990's. In the residential property 'bubble' of the early part of the noughties, it was also possible in many parts of the developed world.

This is more of a phenomenon rather than an investment opportunity.

Back in the late 90's, if you happened to be in 'the market' it was possible to make 30% per year by holding just about any stock! But if you were in the right stock, then 100% was quite reasonable too (information here). Imagine, owning just about anything that was 'tech' and 'sexy' was a way to virtually print money. That really is a phenomenon.

Of course, it did not last long, and those massive gains were taken back by the market (information here) as easily as they were first given. In fact, many of those stock market stars turned into duds and were later declared bankrupt.

The real problem was in valuations. The market was trying to adjust to a 'new business paradigm' which changed the very nature of business for the benefit of us all. Instead of paying customers, 'eyeballs' were the new way of valueing a business online. As we now know, eyeballs don't pay the rent...

For the newer investor, the search for easy money is likely to be a difficult and elusive one. Investment banks, private equity and hedge funds employ highly educated and ambitious MBA graduates to sweat long hours looking for opportunities - they are your competition for profits! If that doesn't warn you, nothing will.

Watch These Free Videos And Learn To Trade The Stock Market

There are many that sell products in many markets that are targeted solely to a an audience that wishes to get rich quick or depending upon your perspective, get rich easy. That audience usually pays high prices to get nowhere at all. And as with business opportunities, internet marketing, MLM and other easy solutions, the majority do not end up with the money.

However, it is impossible to dispute that people do get rich quickly. Think, for example, of the Russian oligarchs. They went from not very much to becoming billionaires in the space of a decade - that is an astounding speed of wealth accumulation. It certainly was fast, but I'm not so sure it was easy.

What does this mean?

In practice, making money in the stock market is a long-term adventure and needs patience and persistence. If you have funds to invest and a willingness to learn and improve, you can make money. Look at Warren Buffett - he makes lots of it! But he also has incredible skill, patience and dedication. Nothing easy there...

For those involved in the day to day workings of a market, there are certainly more opportunities for profits. Firstly, if all you did all day every day was to watch Bloomberg screens and discuss companies and their prospects with other like-minded people, eventually you would have insights that could be used to make successful buying and selling decisions.

Of course, all that information could lead to meeting the right people and asking the wrong questions. The easiest money in the stock market is certainly insider trading using sensitive information that is not available to others. These people are typically well educated, connected and hard working and it is that combination that has put them in the right place to have these facts become available to them. 

While it may be like knowing the answers to an exam in advance, it is illegal for that same reason. For those that 'get away' with such trades often, this is similar to a licence to print money. However, in the post 2008 financial crash world, regulators are looking much more closely at the way investment bankers, M&A; lawyers, hedge fund managers and prop traders operate. The future will be much more difficult for these stock market cheats.

Watch These Free Videos And Learn To Trade The Stock Market

Where to look?

Of all the potential locations to look for fast money in equity markets, NASDAQ seems to be the place. As mentioned elsewhere on this site, it is 'ground zero' for the world's day traders. There are a number of reasons for this, mainly because of the fast growing high-tech companies that populate it. These types of companies would normally be expected to move in price more quickly than firms on the Dow Jones, for example. If you are thinking about how to make money in the stock market fast and have a nest egg to work with, this might be the best place to look.

Needless to say, there are many risks associated with trying to aggressively trade on a stock exchange and it is possible to both make or lose money very quickly. Much of the time the result will be down to luck unless you have thought and researched your way to a system that provides an advantage that has not yet been devised by others. That luck will then likely be enhanced (for better or for worse) by leverage. This is a risky business...

However, for the majority of long-term investors that do not actively follow the movements of capital markets (such as most pension fund or mutual fund investors), the results they achieve are little more than luck and (hopefully) a good decision about which fund to invest in. In which case, by taking matters into one's own hands and making more assertive moves, perhaps there is less luck involved? Such theoretical questions only offer mental stimulation, but when trying to understand how best to invest in the stock market, perhaps this is the best we have.

Take your time

It is clear though that there are some economic and market conditions that are more conducive to making money. As mentioned above, there have been times when every idiot could make easy money in the markets - though these have been rare. In some circumstances, the rising tide really does lift all boats.

There are other times when prices are dropping like a stone and even most financial savants are taking a beating (information here). In such trying circumstances, making money will be one of the hardest things to do in the world. It would seem as though simply betting on falls (selling short) will do the trick, but there are typically so many small rallies (when resistance levels are met or broken) that most traders are broken by margin calls even though the long-term trend is clearly in their favour.

This is one of the reasons why day trading strategies are so favoured by many people. The entire trade lasts perhaps a few minutes or under an hour and then it is all done - there are no ongoing surprises when other exchanges open or close or bad news flashes across the television screen.

To read more about bull markets, please follow these links:

Understanding Bull And Bear Market Situations

What Is A Bull Market?

What Is Economic Growth?