How to get rich quickly in stock market?

At the beginning of last year, if I asked you to give a couple of predictions on how the stock market would perform in 2020, would you have predicted the big drop due to the global pandemic and the market recovery since?

Probably not, right?

Last year was a very interesting year for the stock market. Early in 2020, everything was firing on all cylinders. Many stocks were breaking 52-week highs and the bull was running wild. This thing called the coronavirus was making news but people didn’t think it was a big deal. 

Then COVID-19 started to show up in many countries, people got sick and many died, investors got spooked, and the stock market dropped. The downward stock market trend started in mid February and the stock market eventually hit a bottom in late March. Then something weird happened. The global stock market began to recover. In fact, many stock indices hit record highs in 2020 and continued to climb higher and higher. 

Who would have predicted the stock indices continuously making record highs amidst a global pandemic with over two million deaths, over a hundred million people infected by the virus, as well as many large scale lockdowns and stay-home orders?

I sure did not!

How to get rich quickly in stock market? 

With people working from home and staying home because of the lockdowns, people are finding more time on their hands. Some people started to day trade via discount brokers like Robinhood and Wealthsimple Trade.

When the market is going up, it’s easy for someone to believe that they are the second-coming of Warren Buffett. Stock trading techniques like momentum trading and swing trading quickly gained popularity and people think they can get rich quickly and easily in the stock market.

Enter these investors on TikTok that are “sharing’ their investing strategies with the internet. For example, this couple’s video of their “advanced” momentum trading technique has since gone viral…

“I see a stock going up and I buy it — and I just watch it until it stops going up and I sell it. I do it over and over and it pays for our whole lifestyle.” 

If they’re making so much money on momentum trading, why are they bothering sharing their Robinhood affiliate link? Hmmm something certainly seems fishy here… 

So why would you analyze stocks and read quarterly and annual reports when you can make money so easily in the stock market? Only suckers like yours truly take the time to analyze stocks before pulling the buy trigger. Why bother knowing what a company does or makes when investing? 

To add fuel to the fire, Reddit subforums like Wallstreetbets are gaining popularity like no tomorrow. People are speculating and picking stocks. GameStop share price shot up due to short squeeze. Many people certainly got rich quickly and easily thanks to GameStop. 

But do people realize that GameStop is losing money and not making any profits? 

Fear of missing out (FOMO) becomes a real thing when stocks get hot and hotter. People don’t want to miss out on making money quickly when their neighbours and their friend’s dog are getting rich so effortlessly. People also don’t want to lose the bragging rights. Isn’t it cool to talk about those 10 or 20 baggers with your friends?

So people started “investing” with all their RRSP or 401(k) funds by utilizing these day trading techniques; some people started using options to get rich even quicker; some people even started using margins to invest and leverage their gains, because borrowing is so cheap. 

Is it possible to get rich quickly and easily in the stock market? 

Sure, you might be able to…. but when people are so wrapped in the frenzy and the craze, many fail to realize that what goes up fast most likely will go down even faster… 

People who invested their money because of FOMO will probably get squeezed when the tide turns. Those who invest with money that they need in the short term will probably feel the most pain because they didn’t ask themselves the three key questions before investing. They were too focused on making money quickly.

Why do I continue to invest in dividend paying stocks and index ETFs? 

So, why do I continue to invest in dividend paying stocks and index ETFs when I can easily double or triple my money via day trades? 

Although I’ve never tried day trading, years ago, I traded stocks based on technical analysis like channel breaking, seasonality, trend analysis, moving averages, etc. What I realized that is technical analysis works, but not 100% of the time. If technical analysis always works, making money in the stock market would be easy. I also realized that trading using technical analysis isn’t really investing, it’s more speculating. 

Learning about technical analysis and trading via technical analysis has made me realize something very important – over the long term, it is far better to invest in solid highly profitable companies. By owning shares of these profitable companies, my investment will appreciate in dollar amounts. Similarly, investing in broad based index ETFs will allow me to stay diversified and own part of profitable companies. 

I am not getting rich quickly, rather; I am getting rich slowly. By getting rich slowly, I am taking on a lot lower risk compared to if I were to day trade. 

So, why do I continue to invest in dividend stocks like Enbridge, Apple, Costco, Canadian and National Railway?

Why invest in Enbridge?

Enbridge is one of the leading energy delivery companies in North America with a vast network of pipelines. Enbridge moves about 25% of the crude oil produced in North America and transport nearly 20% of the natural gas consumed in the US. In addition, Enbridge also operates North America’s third-largest natural gas utility by consumer count. To improve sustainability, Enbridge has been building their renewable energy portfolio by investing in offshore wind turbines and a net zero greenhouse emissions target by 2050. 

Since President Biden has decided to kill the Keystone XL pipeline project, getting approvals to build new pipelines are getting increasingly more difficult. As a result, existing pipelines are now more valuable than ever. With North America relying on crude oil and natural gas for many years to come, Enbridge will continue to generate more and more profits for its share owners.

Why invest in Apple?

Apple is a juggernaut in the technology world with a long history of product innovations. The company transformed personal computers many years ago; the company transformed MP3 players; the company then transformed smartphones. 

Years ago, Apple was mostly a hardware centric company. But the company has transformed itself into a services company. Today, a large percentage of Apple’s revenues come from recurring services. Apple consumers stay with Apple not just because of the nicely designed devices, but because of its software ecosystem. Once you are tied into the Apple ecosystem, it becomes difficult to switch.

Apple has a long history of making existing products even better. Look at the Macs, iPods, iPhones, etc. By making products even better than what’s available in the market, Apple has been able to charge premiums over its competitors. With rumours of Apple working on autonomous driving EV vehicles, it’s hard not to get excited as an Apple shareowner.

Why invest in Costco?

Have you been to a Costco warehouse pre-COVID? Back then, whenever I shopped at a Costco warehouse, it was always hard to find a parking spot, and the warehouse was always packed with people. Even amid a global pandemic, Costco warehouses are busy with people buying cartloads of stuff. Heck, I even broke my personal record a few months ago by purchasing over $1,000 worth of groceries at Costco (my excuse was that I was shopping for three households). 

While Amazon and online retailers are impacting brick-and-mortar stores like Costco, Costco continues to do very well. Costco warehouses are strategically located worldwide, giving its members easy access to the warehouses. Costco also has very competitive pricing, often better than Amazon. For some grocery items, it is far easier to shop offline (i.e. in person) than online so that one doesn’t have to wait for these items to arrive. 

Costco has also improved its online store by allowing same-day delivery and three-day delivery, depending on the product that you order. What’s not to like about Costco? 

Why invest in Canadian National Railway?  

Canadian National Railway is one of the leading North American transportation and logistics companies with over 32,000 km network spanning Canada and Mid-America, connecting ports on three coasts. The large rail network certainly creates a wide moat for the company. 

Given the land size of North America, transportation goods via rail is still a more efficient method than via trucks. Given the extensive rail networks, this puts Canadian National Railway at an advantageous position compared to other transportation companies. Sure, autonomous electric vehicles may change Canadian National Railway’s advantageous position, but I am convinced that the company is well positioned to take on these future challenges.

But I really want to get rich quickly and easily in the stock market…

Great, you thought… I must get rich slowly and have patience with building my wealth. But what if I really, really want to get rich quickly and easily in the stock market? Are you saying that I absolutely shouldn’t speculate and day trade at all?

Well, that’s a personal decision you have to make yourself. I can’t decide it for you. Having said that, I do believe in having a core investing strategy and stick with it. So for us, that’s investing in dividend paying stocks and index ETFs. They are our core investments. 

If we were to choose to invest outside of our core strategy, then we only allocate a small percentage of our overall portfolio to the new strategy. For example, while we hold dividend paying stocks and index ETFs, we do invest in growth stocks (and often extremely volatile) like Google, Facebook, miners, Tesla, etc. Some of these investments have done well, some have not. The key thing is, we only allocate a small percent of our overall portfolio to these growth and speculative stocks. If we were to lose this money completely, it would suck, but we wouldn’t lose sleep over it. 

Similarly, if I were to trade based on technical analysis again or to speculate, I would allocate less than one percent of our overall portfolio to limit my exposure and risk. 

Summary – How to get rich quickly and easily in the stock market? 

I don’t believe in these get rich quickly stock trading strategies. Most of them, if not all, are highly risky and you can get into trouble very easily. Please don’t believe the idea that you can just watch a stock price go up and sell it when it stops going up. 

Having started DIY investing in my early 20’s and gone through different investing strategies myself, I believe it is far better to aim to build wealth overtime by investing in profitable companies via either individual stocks or broad market index ETFs. 

Please, please, please, don’t get sucked into these get rich quick stock trading strategies. If you were to take a risk on one of these get rich quickly stock trading strategies, please consider limiting your exposure by only using money that you don’t need for at least the next two or three years, or using money you can afford to lose completely. Please do not speculate with your retirement funds! Please limit your exposure and risk! 

Finally, please remember that people will always brag about their investment successes and big gains. People seldom talk about their investment losses. 

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14 thoughts on “How to get rich quickly in stock market?”

  1. Well-written article.

    I agree with your premise but I’d like to point something out:
    Borrowing from your home equity to invest in the market is not the same as investing via margin. This is because the likelihood of a “margin call” is next to nil when it comes to HELOC.

    When you obtain (or re-finance) your home, you are given a set amount of money that you can borrow based on your income. Now so long as your income is stable, you would not have to worry about being denied renewal if you have a mortgage remaining along with the HELOC.

    And if you have no mortgage? Then you will never have to worry about renewal so you can theoretically max out your HELOC with absolutely zero worries of a “margin call.” This is assuming you pay the interest on your HELOC on time. The banks will never call their HELOC as long as you have initially qualified for the HELOC and so long as you continue to make the interest payment.

    I had thought about smith maneuver for 5+ years before I implemented it last year. I wish I had done it sooner but the timing worked out just fine.

    Just some food for thought!

    Reply
    • Hi R,

      Thank you. Good point, when I use the phrase “invest on margin” what I really meant was investing via margins from your broker. HELOC and SM are completely different. 🙂

      Reply
  2. I don’t believe in getting rich quickly in the market. However, I do a little “core and explore”, which means that I have my index funds that grow slow and steady… and I have my exploring funds. These exploring funds go to riskier companies with the chance of good growth.

    I’ve been lucky to hit on a couple of those risky companies. I also haven’t lost much on any companies. My biggest loss so far is about 10% on IBM, but that pays a 5% dividend every year, so I don’t mind. I’m way ahead if those dividends are added back in.

    These exploring stocks are not big enough bets to become rich quickly, but they can add up to a few thousand dollars here and there and it has compounded well.

    Reply
    • Nothing wrong with having exploring funds when you have your core funds. That’s basically what I concluded in this article. If you are OK with high risks investments, use the play money but limit your exposure.

      Reply
  3. Nicely written, Bob. Buying a stock just because it’s going up is not a valid long term strategy. One thing the TikTok couple didn’t talk about is survivorship bias. I wonder how many other people have lost money by using the same trading strategy as them, lol.

    I prefer dividend growth stocks like yourself. It’s interesting how we both own shares of Enbridge, Apple, Costco, and CNR, even though we bought them at different times using our own separate analysis. 5 years from now these companies will continue to be profitable and great additions to a balanced portfolio. We can’t say the same for GameStop shares though, lol. But as a meme connoisseur I just couldn’t stay away from this one. I will hold my $GME and see what happens to this meme stock. To the moon or to the grave.

    Reply
    • Thanks Liquid. The TikTok couple certainly made “buying” stocks and “making money” sound super easy. But seasoned investors know it’s not as easy. The scary thing is, a lot of newbies actually believe the TikTok couple…

      “Investing” in GameStop is fine if you’re OK with the risk (i.e. the stock price going to $0) and the investment is only a small part of your overall portfolio.

      Reply
  4. As much as I love watching the Gamestop mania, I feel like there’s a shoe waiting to drop here. I’m unconvinced that the Gamestop rally was totally organic, and I think securities regulators might have a similar view. I also think that this type of investing is dangerous, especially for new investors. Sort of like visiting a casino and winning your first play at the slot machine. Hopefully more people follow your path, Bob, but I feel like this whole WSB saga was a step back for a segment of young investors who are just getting started.

    Reply
  5. Well said Tawcan! There’s so much noise out there in the news right now about Gamestop, silver, and bitcoin — it’s good to see a reminder of what investing really entails.

    Now, if the readers would just listen! Keep up the good work!

    Reply
  6. Hi Bob great write up
    For Canadian Investors holding candian stocks, did you ever consider just holding xiu etf
    yes there is a small fee to pay every year, but if the xiu did well for the year most likely all canadian dividend portfolios will do well.
    Active mutual fund managers cannot outperform the index consistantly in the past.
    xiu will also pay distributions.

    Reply
  7. It’s super interesting how the tiktok video couple shows months where they turned $400 into 5 figures or $1000 into $20,000+. I bet they’ve never turned a 5 figure profit every month of their entire life since they’ve started doing this and I’m sure that they will refuse to show those negative months where the strategy didn’t work.

    Buy and hold is certainly a “you can’t lose” strategy. Though I do like trading stocks at times.. hmm…

    Reply
  8. Well written article!
    Good advice amidst the kind of hype and bullish sentiment we see today.

    I know it sounds very boring talking to someone about long-term investing, value, dividend-growth, etc. However, the people who made it well in short-term momentum stock are obviously popular and sound interesting. The reality is the fact that the hundreds and thousands people who burnt their fingers in the hype will be probably ashamed or avoid talking about it.

    While everyone makes mistakes and adapts their strategy accordingly its vital not to get carried by short-term get-rich hype. There is a huge luck factor or a fluke gain which people can mistake to be a great stock picking skill or midas touch. All it takes is a couple of blunders and one bear market to lose it all. Even if one made it big due to luck its good to invest time in learning rather than applying the same short-term bet, which can burn ones savings.
    Long term strategy reqruires understanding financials, company, industry etc and the work you put in pays off well over the long-term because you know the risk factors and probably have plans to mitagate or minimize risks and gradually boost returns overtime.

    Reply

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