Investing: A Smart Way To Make Money?

Investing is a great way to make money, but it's not a get-rich-quick scheme. It's a long-term game that requires patience and a good strategy. The most common types of investments are stocks and bonds. When you buy a company's stock, you own a small slice of that company and may be able to vote on important decisions. The value of your stock increases as the company grows and becomes more valuable. Bonds, on the other hand, are like loans to the company, with regular interest payments made to you over time.

There are also other ways to invest your money, such as day trading, investing in commodities or cryptocurrencies, or even flipping real estate contracts. However, these options may come with more risk. To make money through investing, you need to understand the market, manage your risk, and stay invested for the long term. It's also important to diversify your investments to reduce the impact of any single loss.

While investing does come with risks, historically, it has been a good way to build wealth over time.

Day trading stocks

Day trading is a high-stakes approach to the financial markets and requires a significant understanding of the markets. It is not suitable for inexperienced traders or those without the finances to absorb potential losses. Successful day traders stay informed by monitoring market headlines and economic reports, make quick decisions, and employ leverage to amplify potential profits (and losses).

• Tools and Platforms: Day traders require access to real-time market data feeds, sophisticated charting platforms, high-speed internet connections, and trading software.
• Risk Management: Day trading is risky, and successful traders adhere to strict rules about position sizing and employ stop-loss orders to limit potential losses. It's crucial to set a maximum amount you're willing to lose per trade, typically no more than 1-2% of your trading capital.
• Time Commitment: Day trading demands intense focus, quick decision-making, and the ability to remain calm under pressure. It requires constant monitoring of data streams, interpreting market signals, and executing trades with precision timing.
• Pattern Day Trader Rule: If you execute four or more day trades within five business days, and those trades represent more than 6% of your total trades in that period, you'll be designated as a pattern day trader. This designation comes with specific requirements, such as maintaining a minimum equity level of $25,000 in your margin account when day trading.
• Strategy: Day traders use various strategies, including scalping (focusing on small profits from temporary price changes), range/swing trading (using preset support and resistance levels to determine buy and sell decisions), and news-based trading (capitalising on heightened volatility around news events).
• Best Times to Trade: Day traders typically find the most liquidity and volatility in the hours after the market opens (9:30 a.m. to noon ET) and in the last hour before the close (3:00 p.m. to 4:00 p.m. ET).
• Securities to Trade: Stocks are popular for day trading due to high liquidity and low commissions. Other options include bonds, options, futures, commodities, and currencies.
• Characteristics of Good Day Trading Stocks: Look for stocks with good volume and some volatility. Familiarity with the stock and its triggers is also important, as is newsworthiness, as media coverage attracts more buyers and sellers.

In conclusion, day trading stocks can be lucrative but is challenging and risky. It requires a deep understanding of the markets, quick decision-making, access to the right tools and platforms, and effective risk management strategies.

Long-term interest rates

When investing in long-term interest rates, you can choose how and when to receive interest payments. For example, you may opt for regular intervals, such as monthly or quarterly instalments, or elect to receive the interest at the end of the term. Some investments also offer the option to reinvest the interest, allowing your returns to generate further profits.

It's important to note that interest-bearing securities are tied to current interest rates and may not outperform inflation over time unless they are high-risk investments. Additionally, the majority of these securities carry a rating from major agencies like Standard and Poor's, which can provide insight into the potential risk of default by the issuer.

When considering long-term interest rates, it's advisable to compare different options and choose an investment term that aligns with your financial goals and risk tolerance.

Dividend-paying stocks

There are two main ways to invest in dividend-paying stocks: through funds, such as index funds or exchange-traded funds (ETFs), that hold dividend stocks, or by purchasing individual dividend stocks. Dividend ETFs or index funds offer investors access to a selection of dividend stocks within a single investment. The fund will then pay you dividends on a regular basis, which you can take as income or reinvest. Dividend funds offer the benefit of instant diversification. If one stock held by the fund cuts or suspends its dividend, you can still rely on income from the others.

When investing in dividend-paying stocks, it is important to evaluate the stock's dividend yield and payout ratio. A payout ratio that is too high—generally above 80%—means the company is putting a large percentage of its income into paying dividends. Dividend yields over 4% should be carefully scrutinized, and those over 10% are considered risky. The best dividend-paying stocks may not be the ones with the highest yield. Falling stock prices can increase dividend yields, and some companies go into debt by overspending on their dividends.

• WesBanco (NasdaqGS:WSBC)
• Columbia Banking System (NasdaqGS:COLB)
• Peoples Bancorp (NasdaqGS:PEBO)
• Interpublic Group of Companies (NYSE:IPG)
• Financial Institutions (NasdaqGS:FISI)
• Southside Bancshares (NYSE:SBSI)
• Huntington Bancshares (NasdaqGS:HBAN)
• Old Republic International (NYSE:ORI)
• PNC Financial Services Group (NYSE:PNC)

New industries

If you're looking for new industries to invest in, there are a few emerging sectors that could be worth considering. Here are some options:

• Clean Energy: This industry has been gaining traction due to the focus on addressing climate change. The development of "green hydrogen" as a clean energy source has attracted significant interest, with search volume for "green hydrogen" increasing by over 1,500% in the past five years. The US government is also supporting this sector, with President Biden announcing a $7 billion program to establish hydrogen hubs.
• Pet Care: Consumer spending on pet-related products and services has skyrocketed in recent years. In 2022, total consumer expenditures on pets in the US surpassed $136 billion. The pet care industry includes niches such as pet supplements, insurance, luxury toys, premium food, and pet tech.
• Cybersecurity: With the number of cyberattacks reaching record highs in 2023, the cybersecurity market is expected to grow. It was valued at nearly $250 billion in 2023 and is projected to surpass $657 billion by 2030. The increasing importance of cybersecurity for governments, enterprises, and individuals alike makes this industry an attractive investment opportunity.
• Femtech: The femtech market, which focuses on healthcare solutions for women, has seen significant growth since the term was coined in 2016. Search interest in "femtech" is up 700% since 2020, and the market is currently valued at $7.48 billion. The number of femtech startups has also surged, with a 1,000% increase since 2012.
• Autonomous Technology: The global autonomous technology market is expected to grow, with a predicted value of over $59 billion by 2030. This technology is being applied in various sectors, including warehouses, healthcare, agriculture, and delivery systems. One specific area of growth is agricultural drones, which are used for tasks like fertilizer distribution and seed planting.
• Digital Health: The digital health sector experienced rapid growth during the pandemic and continues to expand. The ongoing healthcare professional shortage and consumers' desire for convenient access to healthcare information and services are driving this growth. The market is projected to reach nearly $550 billion by 2028, representing a 25% CAGR.
• Gaming: The gaming industry is evolving with new developments like the Metaverse, AR gaming, mobile gaming, and eSports. Revenue is predicted to grow by 13% in 2024, reaching $282.3 billion. The number of players is also increasing, with over 3.38 billion people playing video games worldwide in 2023.
• Semiconductor Manufacturing: The semiconductor industry is expected to continue its growth trajectory, driven by the rapid digitization of the world. By 2030, the semiconductor market is estimated to generate $1 trillion in revenue, with significant contributions from the automotive, data storage, and wireless sectors.
• Solar Power: The solar power industry has been growing steadily, with a 19.3% average annual growth rate between 2018 and 2023. The Inflation Reduction Act and other tax breaks have made solar panel installations more accessible to consumers, driving further growth.
• Artificial Intelligence (AI): AI is a significant driver of innovation across multiple industries, allowing companies to automate processes, improve efficiency, and make better decisions. In 2023, AI experienced a market growth of 64.1%, and it continues to be a promising area for investment.

Mutual funds

• Interest and dividend payments from holdings
• Capital gains from selling assets at a profit
• Appreciation of the fund over time, meaning each fund share will grow in value

• Management fees
• Sales load fees
• 12b-1 fees (distribution fees)
• Redemption fees
• Account fees
• Purchase fees
• Exchange fees

The total expense of a mutual fund is expressed as a percentage per year of the total amount invested, known as the expense ratio.

• Decide whether you want to invest in active or passive funds. Active funds are managed by professionals and aim to beat the market, while passive funds are more hands-off and often have lower fees.
• Calculate your investing budget. Consider the minimum investment amount and how much money you have to comfortably invest.
• Decide where to buy mutual funds. You could buy through an employer-sponsored retirement plan, directly from the fund company, or through an online brokerage.
• Understand the fees. Mutual funds have different structures and associated costs, so it's important to do your research.
• Manage your portfolio. Consider rebalancing your portfolio annually to keep it in line with your diversification plan.

As with any investment, there are risks involved with mutual funds. These include market risk, interest rate risk, and management risk. It's important to carefully review the fund's prospectus and consider your own risk tolerance and investment objectives before investing.

Frequently asked questions