How Can Stocks Make You Money?

Updated on September 12th, 2019

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When it comes to investing, stocks are one of the most popular and rewarding securities you can own! Although stocks do come with the risk of potentially losing money, history has proven that investing in fundamentally sound stocks over a long period of time has made investors a lot of cash.

Men Lie, Women Lie, Numbers Don’t

To prove our point, the S&P 500 index, which tracks a combination of 500 stocks that together represent the overall performance of the United States economy, has gained an average of 10% each year since its creation in 1928. Even after adjusting for inflation, which is the rising costs of goods and services each year, the S&P 500 has returned on average 7% annually.

From 2010 to 2017, the S&P 500 gained over 100%, doubling investors’ money. And between 2000 and 2017, the S&P 500 gained over 83% even after weathering the storms of the dot-com bubble of the early 2000’s and the stock market crash of 2008. Let’s put these returns into perspective to truly witness the power of stocks.

The Power of Stocks

If you had $5,000 to invest for 10 years, depositing this money into a savings account with an annual interest of 0.6% would bring your account to a balance of $5,308.23, or a gain of roughly $300, while instead investing this $5,000 in the S&P 500 would bring your account to $12,968.71 or a gain of roughly $8,000 based on average yearly returns.

Let’s also take a look at how some of the most popular companies in the world have performed in the past 5 years. From 2013 to 2017 Apple’s stock price increased by 118%, Google’s stock price increased by 198%, Walmart’s stock price increased by 43%, Disney’s stock price increased by 120%, and Amazon’s stock price increased by 364%. As you can see, investing in stocks has the potential to produce a great amount of profit.

If you want to learn how to build your wealth through investing in stocks, check out the rest of our videos on how to do just that!