Investology

Making Money From Stocks

Making money is always a concern for many people when it comes to investing. There is always a certain level of risk involved whenever retirees or investors engage in opportunities that require some sort of capital. Certain tolerances for risks determine how some people invest. Some people choose to invest in stocks.

The Lowdown

Making money from stocks is just like any other form of investment- it comes with certain risks that can reap its share of benefits when successful. The key to achieving success at it is based on a number of factors. One is trying to understand how stock investing works.

Basically, stock investing is simple. You buy a share of stock at a certain price and then hope that the price goes up by the time you plan to sell it. Every share of stock represents part ownership of a company that offers it. In a way, buying stock shares makes you part owner of a company or business. You get to share from the income it makes in the form of the profits from the business.

Earning From Stocks

Although it may be that simple, stock investing can also get too complicated, especially in terms or investment returns. What profit you make from your stock shares does not always go directly to you. The company’s Board of Directors have several options how to dispense the profits to their shareholders. They can give back a portion in the form of dividends. They can also buy back the shares from the market using the profits. They may also put the profits back into the company for expansion or use it to reduce the company debt.

The Challenges

In a way, stockholders do not always have a direct say on how the company may use the profits. That becomes the job of the Board of Directors looking over the company’s future. But as a minority owner of stock shares for the company, you can earn from your investment solely in the form of dividends, if the company decides to distribute profits to its investors. Secondly, stockholders can try to sell their stock shares at the stock market. When the share-selling price is higher than the share price when the shareholder bought it, the difference becomes the gross profit, still subject to other fees and taxes.

Tags: stock investing