How to Make Money in Investing

Masterworks
October 12, 2021

Want to invest in your future success? Here are a few ways to make money in investing—even if you’re a beginner.

Fun fact: the stock market’s average return is a crisp 10% annually, far better than you can find in a bank account. So…why is it that most investors never see that 10%?

The truth is, many investors never see the kind of returns they could see, regardless of whether they invest in stocks. Many investors shoot themselves in the foot because they simply don’t know how to make money in investing.

We think it’s time to change that. So here’s a few great ways that everyday investors can make money in investing, even if you don’t have a lot of capital to start.

The Get-Rich-Quick Myth

First, though, we need to address a myth that’s costing you money: the get-rich-quick myth.

Because many people interact with investing primarily through their 401(k)s (which is to say, not much) or Hollywood (all the time) many people erroneously believe that you can get rich as soon as you start playing the stock market, kind of like gambling or winning the lottery. This myth is especially prevalent in speculative asset classes like cryptocurrencies.

Here’s the thing: getting rich off cryptocurrencies isn’t as easy as Internet millionaires make it look. That’s true of every other investment too.

Investment is not a sprint. It’s a marathon. You have to stick with it to see real results. This is the only way you see the magic of compounding, which is when an asset’s earnings are reinvested to generate additional earnings. Put it this way: if you invest $100 with a 5% annual interest rate, in one year, you’ll have $105. But in two years, you’ll have $110.25, which is an additional $5 on the original $100 plus 5% on the $5 in interest. That’s not much in two years, but in forty years? It adds up.

How to Make Money Investing

With that in mind, let’s talk about how to make money in investing.

First, think about the three common investment strategies:

  1. Growth
  2. Income
  3. Value

Growth investing focuses on increasing the investor’s capital. Income investing focuses on generating a consistent stream of investment income. Value investing focuses on ferreting out securities’ intrinsic value and then finding options that are currently undervalued by the market writ large.

All three can earn you money, but it pays to think about how you want to earn money—long-term wealth or ongoing revenue. This is all about your goals as an investor, and it will change the assets that work for you.

Here are a few options to earn money in investing, each with its own merits.

Flip or Rent Real Estate

If you’re looking for steady income, or even income sooner than the next twenty years, the real estate market is a great place to be. With real estate, you earn money in one of two ways: renting out the property or flipping and reselling the property.

If you’re interested in flipping, don’t limit yourself to just flipping houses. In reality, some of the best money from real estate flipping can be found not in flipping houses, but in flipping contracts. Also known as wholesaling real estate, this is when you find a property for sale, sign a real estate assignment contract with the seller, and flip the contract to a buyer for profit.

Here’s the thing: the process of flipping contracts isn’t difficult, but it requires a lot of work to succeed. The same goes for renting a property. Basically, you’re going to need to do your homework on the real estate market to figure out what investments are worthwhile.

Day Trading

Day trading is when you buy and sell stocks within the same trading day, in a very short window of time (think minutes or hours) with the goal of making a lot of small profits that add up to large profits over time.

It is not for the faint of heart. It’s not for the gambler, either. It requires a thorough understanding of how the markets move and how to hedge your bets. You have to understand things like stop-loss orders and how market makers move stocks to play to either our greed or our fear of loss.

But if you’re willing to do your homework, it can be a worthwhile way to turn profits over time.

Invest in Long-Term Payoffs with Fine Art

Now, let’s say you want to earn income that’s not subject to the whims of the market (well, the stock market, anyway). Regardless of other investment techniques, it’s a good idea to diversify your portfolio so that even if you lose one income stream, you have other investments to support you.

A great way to do this is with alternative investments like fine art, which have intrinsic value regardless of how the market performs and have very low correlation to market performance.

That said, there are a few things to keep in mind. First and foremost: the art market is not the stock market, and a piece of art is not a stock. The art market follows its own rules. That’s good news, since it doesn’t correlate with the stock market, but bad news insofar as people regularly trade on insider information to earn a profit in the art market (which is illegal in stocks) and you have to be in the know to invest smartly.

The best way to do this is by working with industry experts. That way, you can invest in the right art and the right moment and give yourself the best chance of good risk-adjusted returns.

Invest in Yourself

Last but not least, invest in yourself. The common thread with all of these techniques is that you have to know what you’re doing.

So, invest in a class. Learn about how day trading works, or how real estate flipping works, or how art buyers leverage fine art as an asset. Trust us: it’s the single best investment you can make if you want to earn money.

Ready to Make Money Investing?

We know that it’s possible to make money in investing—and everyone should be able to. That’s why we’re here to make blue-chip art investing accessible to regular investors like you.

Think of us as your art experts. Our research team uses historical data in collaboration with Bank of America and Citi Bank to identify growing artist markets with the best potential for strong risk-adjusted returns. Then, we handle the buying and selling for you. All you have to do is buy shares in art you love, and when we complete the sale, you earn your profits. Ready to make money investing in what you love? Then fill out your membership application today.


Masterworks
Masterworks is a fintech company democratizing the art market. Our investors are able to fractionally invest in $1mn+ works of art by some of the world's most famous and sought-after artists.