5 Essential Tips to Make More Money in the Stock Market

4/9/20252 min read

If you're looking to improve your results as an investor and make more money in the stock market, this article is for you. Below, you'll find five key principles that will help you avoid emotional traps, protect your capital, and make smarter decisions when investing.

Bonus Tip: Read until the end to learn why focusing only on the P/E ratio could cause you to miss great opportunities.

1. Protect Your Money from Yourself

As strange as it sounds, you might be your biggest financial enemy. That's because we’re all subject to behavioral biases that can negatively impact our investment decisions. Some of the most common include:

Sunk Cost Fallacy: When you've already spent time or money on an investment, it's hard to walk away—even if it no longer makes sense.
Endowment Effect: We often overvalue what we already own, making it hard to sell underperforming stocks.
Gambler’s Fallacy: Believing a stock is “due to go up” just because it's been dropping, even if there’s no data to back that up.

These behavioral patterns are discussed in-depth by authors like Daniel Kahneman, Richard Thaler, and Morgan Housel.

2. Hedge Against Domestic Risk

Even if the U.S. dollar is one of the strongest currencies globally, relying solely on the American market exposes you to country-specific risks, including political shifts, inflationary trends, and economic downturns.

Ways to hedge:

Invest globally through international ETFs and ADRs.
Hold assets tied to other currencies or international markets.
Diversify with inflation-protected securities like TIPS (Treasury Inflation-Protected Securities).

Tip: Check out thought leaders like Ray Dalio or Lyn Alden who frequently talk about global diversification and macroeconomic strategy.

3. Don’t Blindly Chase Dividend Stocks

Dividends can be attractive, but a high dividend yield doesn't always mean you're making a smart investment.

Growing companies often reinvest their earnings to generate higher long-term returns rather than paying them out. On the other hand, companies with unusually high dividends might be signaling financial trouble or a lack of growth prospects.

Why reinvestment matters:

Reinvesting dividends creates the snowball effect of compounding.
Historical data shows that reinvested dividends significantly increase total returns over time (e.g., companies like Apple and Johnson & Johnson).

4. Learn from the Past to Predict the Future

Studying financial history can help you recognize patterns, avoid mistakes, and make better decisions going forward. For example, looking at past market crashes, monetary policies, or inflation cycles helps investors stay grounded.

Long-term stores of value like gold and even Bitcoin are increasingly considered safe havens during turbulent times. While no investment is truly "risk-free," understanding how assets perform historically is a powerful edge.

Suggested sources: Howard Marks, Michael Saylor, and Peter Schiff (diverse perspectives welcome!).

5. Stop Obsessing Over the P/E Ratio

The P/E (Price-to-Earnings) ratio is a helpful tool—but relying on it alone can be misleading. Remember:

Price reflects future expectations.
Earnings are based on the past.

A low P/E might mean a company is undervalued—or it might be a sign that investors are expecting poor future performance.

Look beyond the P/E:

Future earnings potential (growth outlook).
Forward P/E and PEG ratio.
Macroeconomic context and industry trends.

Some of the most successful companies (like Amazon in its early years) traded at high P/E ratios for long periods due to explosive growth potential.

Final Thoughts

Making money in the stock market isn’t about getting lucky or chasing hype. It requires emotional discipline, a diversified strategy, and a long-term mindset.

Quick Recap:

Don’t let emotions rule your decisions.
Diversify beyond the U.S. market.
Reinvest dividends wisely.
Study the past to navigate the future.
Use multiple metrics—not just the P/E ratio.