## How Can Stocks Be Consistently Profitable? Mastering These Money-Making Strategies Is Key

In an era where inflation erodes savings, putting money in the bank simply can't preserve wealth. Investing in stocks has become the inevitable choice for many. But whether stocks make money or not depends largely on the strategies you choose.

### Are you choosing the right profit models for stocks?

There are three main ways to earn returns from the stock market:

**Mode 1: Holding Shares for Dividends, Letting Money Make Money**

By becoming a shareholder, you have the right to share in the company's profits. Some companies, like Berkshire Hathaway, reinvest profits to boost stock prices; others, like Coca-Cola, directly distribute profits to shareholders. Some companies choose to issue stock dividends, increasing your shareholding.

While dividends sound attractive, beware of a trap—if a company's "profit distribution rate exceeds 100%," it indicates it is eating into its capital. HTC is a stark lesson: in 2011, it paid a cash dividend of 40 NT dollars, but the following year, profits plummeted, and the stock price crashed from 1,300 NT dollars to 200 NT dollars. Many dividend investors are still deeply trapped.

Another factor to consider is tax costs. Dividends from US stocks are taxed at 30% by the US government, significantly eating into your returns. Therefore, when investing in US stocks, instead of blindly pursuing dividends, it’s better to focus on capital gains.

**Mode 2: Buying Low and Selling High or Selling High and Buying Low, Profiting from Price Differences**

Stock prices fluctuate every minute, driven by company performance, market sentiment, circulating shares, and other factors. Investors usually predict price movements through fundamental analysis, news tracking, and technical analysis. Buy when optimistic, sell at target prices; or short sell when expecting a decline.

Choosing stocks suitable for short-term trading is crucial. Short selling requires caution—setting a forced buy-back point is necessary. It’s recommended to cut losses when the stock price moves 15% in the opposite direction, avoiding overconfidence.

**Mode 3: Lending Stocks to Earn Borrowing Income, Passive Income Enhancement**

If you plan to hold a stock long-term and don’t mind short-term fluctuations, consider lending it to investors who want to short. This way, besides earning dividends and capital gains, you can also earn lending fees.

The downside is losing operational flexibility—once stocks are lent out, you must recall them before selling at a certain price during trading hours. Short-term traders are generally not suited for this approach.

### Why do so many people lose money in the stock market?

According to Taiwan Stock Exchange data, the average retail investor has lost 15.7% over the past three years. Why? Because most investors lack clear strategies and discipline.

The market is full of variables—company performance, industry development, social events, political fluctuations, media reports—each can influence stock prices. Even professionals find it hard to predict accurately; studies show over 80% of US fund managers fail to beat the market index over ten years.

Investor psychology is a critical factor. For the same stock, buyers believe it will rise, sellers believe it will fall—who is right? This is the hardest part of stock trading. Most people have a bad habit: taking quick profits and locking in gains, or holding onto losses in hopes of a rebound, leading to small gains and big losses.

To make money in the stock market, you need to:
- Avoid emotional trading, not be swayed by market volatility or others’ opinions
- Combine fundamental, technical, and market sentiment analysis for rational decisions
- Strictly control position sizes, pre-set acceptable loss levels
- Set clear goals and investment horizons for each trade, and sell once achieved

### Choose your investment strategy based on your personal situation

The most important thing before investing is to understand yourself. What is your cash flow like? Do you have time to monitor the market? What is your risk tolerance? Different people suit different strategies.

**What should office workers or retirees do?**

If you don’t have much time to watch the market, it’s recommended to focus on dividend investing, emphasizing dividend income. Look for stocks with higher yields or invest mainly in ETFs tracking the broader market index. According to statistics, investors who regularly invest in 0050 (Yuanta Taiwan 50 ETF) for over five years have achieved an 82% profit rate.

**What about investors who have time to monitor the market?**

You can choose to position before earnings reports or major events.

**Conservative investment approach:**

Value investing is the eternal gospel of investing. Select undervalued good companies, buy at reasonable prices, and hold long-term, waiting for the value to return. The key is to find companies with sufficient competitive advantages or moats; otherwise, after short-term positive news is digested, there may be no follow-up catalysts, and the stock could decline again.

Alternatively, use dollar-cost averaging to invest in index ETFs or companies you believe have long-term competitiveness, such as Apple, Microsoft, Amazon, etc. This approach smooths out your average purchase cost, and as long as the market trends upward long-term, your assets will grow steadily.

**More aggressive investors can try:**

Swing trading to capture significant short-term fluctuations, such as holiday concept stocks or shopping festival-related stocks. A swing can last from days to weeks. This requires paying attention to real-time news, judging whether the stock is in an upward phase, and constantly assessing how long the rally can last.

Day trading involves buying and selling within the same day without holding overnight positions. Suitable for investors who can monitor the market all day. This approach mainly relies on news and technical analysis to identify support and resistance levels. Both long and short positions can be taken, but it requires deep understanding of trading.

### The real probability of making money in stocks

Long-term investing has a higher success rate because companies that continue to operate can generate profits. Short-term frequent trading, on the other hand, involves high transaction costs and taxes, and most retail investors tend to lose due to psychological factors.

True short-term experts do exist, but they put in considerable effort and time. If you are a beginner, it’s advisable to accumulate experience first before considering short-term trading.

### Choosing the right method can make stocks create wealth for you

The road to stock investing is full of opportunities, but the premise is to have a clear understanding of yourself and choose strategies that suit you. Risk tolerance, investment time, available capital—all vary from person to person. There is no one-size-fits-all approach. Only by starting from your actual situation can you achieve long-term, stable wealth in the stock market.