Can You Get Rich From Stocks - Zero To Freedom (2024)

You might be asking yourself can you even get rich from stocks? Bear with me, we are about to find out.

Let’s start by saying that you can get rich from all kinds of things if you are consistent and have a plan. Investing in stocks is one of them. So If you are looking for a short answer- yes, you can absolutely get rich from stocks.

But let’s dig a bit deeper and see how that happens, why and so on. Let’s start by how.

How Can You Get Rich From Stocks?

The magic comes from this thing called compound interest. For those of you unfamiliar- compound interest is when you receive interest on top of your interest.

Let’s say you get £100 with 10% compound interest. First year you get £10 for a total of £110. But the next year you get interest on £110, the next one on £121 and so on. At start it looks kind of insignificant, but the secret sauce here is in the long-term.

To help you grasp the idea let’s play a little game. Say you have £1,000. And you double that 10 times. How much money do you think you will have in the 10th double? Just throw a guess, the first thing that comes to your mind.

Well, the answer is that you will have a million pounds. If you want to play around with some number you can check this compound interest calculator.

And here is how this would look like in a graph.

The principle in getting rich from stocks is very similar. Of course, you can double your money once every 7 years on average. So don’t expect to turn £1000 into a million within 10 years in the stock market. But as long as you have a strategy and know what you are doing you will get there. Which brings me to my next point.

How Long Is It Going To Take

Now, this depend on what do you understand by rich. For some people this might mean having a million pounds. For others this might mean having a private island. What I can do is show you how it all works, so you can make a plan for yourself.

So the idea of the stock market is that you can get a return on your money in the long-term. On average the S&P500(the biggest stock index in the world) returns around 8% every year. That doesn’t mean that you will get 8% every year of course. One year you might get 20%, the other one you might lose 10%. But on average the markets returns 8%.

So what I am saying is that how long is it going to take is completely up to you. And what matters a lot is how much money are you able to put in there and how committed you are. Of course there are a lot of others things that matter- do you have a plan, do you know what are you doing and so on.

And just so you know- seeing the effects of investing takes time. The more time you have the more returns are you going to see. As you can see from the graph on top the most returns happen after a while. If you can see after 5 years you would have £64,000. But after another 5 years you would have a million. After another 5 years you will have 32 millions. I hope you get the idea.

So if you are waiting for some get rich quick scheme, investing is not that. It takes time and commitment. Yes, it works, but it takes time.

Examples

I can give you a couple of examples for people who used the stock market to their advantage. One of them is Warren Buffett. He is currently the 3rd richest person in the world with net worth of over $70b.

Another example is actually Bill Gates. Many of you associate him with Microsoft, but that has been on the sidelines for him for a long time now. He still owns some stock and will always be a huge figure there. But at the moment aside from philanthropic activities he is also an investor, running his own fund.

Of course his situation is very different from everyone who is reading this, but I thought it can be interesting to see this side of him. If anyone is interested you can see his portfolio here.

Another example is Peter Lynch. He is also famous as the investor with the best performance in history. He managed to achieve almost 30% annual growth rate. Or put in perspective- he managed to turn $18 million to $14 billion assets under management within 13 years. Yes, this also includes contributions from clients.

And yes, $18 million is a huge sum of money for most people. But the same returns would turn $20,000 into nearly a million($941,787) within 13 years. Make that 20 years and you would have $7,5 million.

So what was the point of those examples? Well, first to show you that you can absolutely get rich from stocks. In fact 2 out of 3 of the richest people in the world are actively investing in the stock market.

But my other point was to make you understand that there are three very important ingredients to that.

What it Takes to Get Rich From Stocks

As a chef I like to use food analogies to explain stuff. So let’s say you are making ham. It is an incredibly simple and in the same time complex thing to do. It seemingly doesn’t require much, it is only 3 ingredients after all. But in the same time you have hundreds, if not thousands of different hams around the world. But let’s not get carried away.

My point is that it requires 3 things- the meat, salt and time. The secret is that all three should be in perfect balance in order to achieve success.

The same can be said about investing. It is actually not that complicated. But in the meantime not many people can be successful doing it. Warren Buffett has made unparalleled average returns over his career. And his investing strategy is actually as simple as it gets- find stocks at fair price, buy them and let them be. Some of the stocks in his portfolio are actually there for decades.

So my point is this- just as making ham, getting rich from stocks also requires 3 ingredients- capital, time and strategy. And just like the ham all of those three are crucial. If you want to succeed in the stock market you will need to have all three. Now let’s take a look at them.

Capital

This really goes without saying, but in order to make money in the stock market you will need to put money. This is how Ray Dalio defines investing- “Investing is the exchange of a lump sum for a future cashflow”

The beauty is that the more you put, the more you start to get. This is when compound interest starts being on your team. So my advice to you is this- if you want to get rich from stocks find a way to boost your income. There are always ways- find a side hustle, improve at your job, work more at your job and so on.

Of course there is limit to everything and everyone is different. Don’t just go and sacrifice your well-being to make an extra buck. There is nothing wrong with a little push, but find your balance.

Strategy

Every successful investor has his own, personal strategy. Having one would actually work for your whole life, not just investing. So here is my advice for even before you start investing.

Sit down, ask yourself a couple of questions- how long do you want to invest? ; What is your end goal? ; What return do you want to see? ; How much risk are you willing to take?

After that you can start building a portfolio. This way you can have your own, personal portfolio that you believe in. When you have stocks that you believe in things are way easier. You don’t panic as much and you don’t question yourself as much.

Ok, you have some capital, you have a strategy, it’s now time for the 3rd piece of the puzzle.

Time

You saw with the examples on top- most of the money from investing is made after a while. In the first couple of years the results will be slow. We can take a look at the graph again-

As you can see the graph is moving slowly in the first 5 years. But then the more time it goes the faster it starts expanding. Let’s go back to the ham again for a second.

It takes more than a year for the Iberian ham to be ready. In the same time it can take a couple of weeks for the mass-produced ham that you eat in the supermarket. And the difference between those is so big that you might as well call them a different product.

So it is really up to you, but the longer you leave your portfolio alone the better. In the end of the day you will have either supermarket ham or Iberian ham, your choice.

If there is one advice I can give you- learn to train your emotions and try to ignore all the noise. There is always tons of information around the stock market and most of the time you don’t a lot of it. Check your stocks or ETFs like every now and again and that’s it. If you have made a proper research you won’t need to check your stocks very often.

Summary

As you can see getting rich from stocks is indeed possible. And it is also not such a difficult concept to grasp- you invest money, you pick your strategy, you keep investing and you will eventually get there. Of course in reality it is much harder, because there are going to be thousands of hurdles along the way.

But as you might have already figured out- nothing in life comes easy. Getting rich from the stock market is definitely not something that happens quickly. But with investing, strategy and time it will eventually happen.

Thank you all for reading, stay safe and don’t forget to join the newsletter and you will also receive a free ebook on how to build a monthly dividend portfolio.

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