When investing in stocks, there are two approaches. In the following lines, you'll learn what these two approaches are and how they work. To make money with stocks, you first have to invest in them, and a distinction is made between active investing and passive investing. With active investing, you research individual stocks closely, invest in them and try to achieve high returns through clever strategies. With passive investing, you don't invest in individual stocks but in the market itself, meaning global stocks. With this method you don't try to beat the market but rather to move with it. Since the index, that is, the global market, grows by roughly 7-8 percent a year, the idea is to track it and invest in global stocks, for example through the MSCI World, in order to achieve average returns. Because passive investing lets you spread risk particularly well, this approach is especially advantageous.

Making money with stocks

Making money with stocks using the two-account model

To make money with stocks, you also need a one-time or monthly savings amount. To keep that amount from weighing too heavily on your budget, a two-account model helps: a certain sum is transferred every month to a second account for saving, or rather for investing. To stick to your savings amount while still having enough money left for other costs, it helps to set up a spending account and a savings account. The spending account covers your fixed costs, such as rent, your phone bill or electricity and water. Variable costs, such as trips to the pool or sauna and spending on clothing or groceries, also come out of the spending account. The savings account, on the other hand, is only for building wealth and you should never dip into it, for example to move a bit of money over to the spending account. To make money with stocks, a certain savings amount from your monthly paycheck has to be transferred to the savings account at the start of each month. With this savings amount, which you can set yourself, you can then invest every month.

The following costs come out of the spending account:

  • Fixed costs
  • Variable costs

The following costs come out of the savings account:

  • Investment costs

What you need to keep in mind

If you want to build long-term wealth, passive investing will be considerably more successful than active investing. Active investing can deliver higher returns over shorter periods, but over the long term, meaning a period of 10 years, passive investing is clearly more effective. When it comes to making money with stocks, one more thing plays a very important role. You have to pay attention to whether a fund is distributing or accumulating. Here it's advisable to choose an accumulating fund, since the returns are reinvested and you can benefit from the compounding effect. So there are a few things to keep in mind when making money with stocks, but if you do and invest for the long term, you can earn quite high returns.