How to Make a Million Dollars From Stocks

To make millions from the stock market, you need to treat investing as your job. Know your stocks well and when to buy and sell.

| More on:

Often, people ask me how to become a millionaire from stocks. They probably heard trader stories about Redditors buying yachts. I hate to burst the bubble, but there is no such thing as quick money without risk. The trader who made millions in a few months with a few trades invested a hefty sum and took a gamble of losing. But this doesn’t mean you can’t make millions from the stock market. If you want to earn millions and even sustain it, you need time, strategy, and patience.

I will discuss a strategy that can give you a balanced return while taking a calculated risk. And probably, in the long term, set you out on the road to million dollars with controlled risk.

How to be a millionaire investor

Warren Buffett is a celebrated value investor who made his fortune from stock market investing. Like all value investors, he loves the power of compounding, wherein you earn interest on interest. The stock market is dynamic and has its ups and downs. In some years, your portfolio will give negative returns; and in other years, it’ll have positive returns. The trick is not to let the bears and bulls control your emotions. For that, you need to do a thorough research of the stock. 

Firefighters are better skilled at controlling fire because they have protocols and safety measures. This doesn’t mean that firefighters don’t get hurt, but their probability of getting hurt is lower than that of a civilian. Similarly, if you do your research, you will learn the various risks the company is exposed to and its preparedness to tackle them. Hence, when the event happens in real life, you won’t panic. 

Buffett sold his airline stocks in the March 2020 dip, as his research showed that even the largest and the most profitable U.S. airlines can’t sustain in a no-flying environment for months. He was right, as the entire airline industry suffered its biggest loss in 2020. At the same time, he bought Dominion Energy’s natural gas pipeline business and invested in Suncor Energy when they were in the pandemic dip. He knew that these are essential services and would surge significantly in a rebound.  

His market wisdom helped Buffett earn US$8.3 billion in the first two months of 2021. You can learn from Buffett and buy the right stock during the dip and not hesitate to sell a weak stock in the dip.   

One stock to sell in a dip

Instead of parking your funds in stocks that are in a multi-year decline, you can book a loss and recover it later by investing in a growth stock. To help you understand what kind of stocks to buy and sell, I will compare two stocks.   

Facedrive (TSXV:FD) is a stock that surged 284% in February on the back of its all-share acquisitions. But doomsday came, and the stock lost all its value. The company started as a ride-sharing company in 2016. Last year, it ventured into several businesses with little synergies. As the saying goes, too many cooks spoil the food. A similar thing happened with Facedrive. Too many businesses increased Facedrive’s expenses and losses. It lost focus from its core business of ride-sharing, leading to a fall in its value. 

Avoid such stocks where the company’s business shows no proper growth path. Do not buy such stocks, even at the dip, because in the end, the stock price is nothing but the investors’ expectations of the business.  

One stock to buy in a dip

Dye & Durham’s (TSX:DND) acquisitions generated significant returns. Dye & Durham provides software solutions that help legal and other professionals optimize workflow. It has been acquiring companies that offer similar devices to expand its customer base geographically and across verticals. The company enjoys predictable cash flows because of long-term service agreements with clients. Its stock has fallen 22% since September, creating a buying opportunity. 

While it is a good strategy to buy the dip, it is important to choose the right dip. Know the stock before you own it. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Tech Stocks

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

money goes up and down in balance
Tech Stocks

1 “Magnificent 7” Stock I’d Buy Over Nvidia Right Now

Here's why Meta Platforms stock is a better choice for Canadian investors compared to Nvidia in November 2024.

Read more »

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

OpenText stock has fallen in the last few years, but that could mean this top tech stock remains an undervalued…

Read more »

AI microchip
Tech Stocks

Celestica Stock: Buy, Sell, or Hold?

Celestica's stock price has rallied 950% in the last five years. Will the AI boom send it even higher in…

Read more »

data analyze research
Tech Stocks

2 Ridiculously Cheap Growth Stocks to Buy Hand Over Fist in 2024

Well Health Technologies is a cheap growth stock to buy for its record-breaking results, massive revenue growth, and profitability.

Read more »