Ways Investors Make Money From Stocks PDF Print E-mail
Written by Shaun Rosenberg   
Saturday, 10 April 2010 16:53
Investing into stocks can be profitable in more ways than one. In fact there are 3 different ways which someone who buys a stock can make money off of that investment.
by ShaunRosenberg


Investing into stocks can be profitable in more ways than one. In fact there are 3 different ways which someone who buys a stock can make money off of that investment.

1. The Stock goes up

The first way to make money in the stock market is through appreciations. This is a pretty simple idea; you buy a stock at a low price and sell it for more later on. While stocks in general tend to go up in the long term you can increase the odds of making money through appreciation by buying stocks that are both fundamentally and technically strong.

2. Dividend Payments

A second way to make money off of a stock is through dividends. Stocks that offer dividends are consistently paying out a monthly or quarterly income to their investors.

For instance if a stock has a 10% dividend yield ratio then one would expect to receive 10% of their money back through dividends each and every year. For example if you invest $100,000 into this stock you would expect to receive $10,000 in passive cash flow off of the stock every year, and hopefully this passive income will increase over time as the stock appreciates and the company grows.

3. Option Selling

An option gives the seller the obligation of selling a stock at a specific price on or before a specific date in the future. For this risk the seller gets money up front. So if you owned stock XYZ and it is trading at $50 you can sell the $55 call option on it and make the option premium, in exchange you take on the risk of getting called out at $55 at some point in the near future.

So if the stock goes up to $56 or higher you would get called out and miss the potential profit. If the call option expires before the stock goes above the strike price, or in this case $55 it means you will keep the stock and the added premium from the option.

You do take on a little extra risk when selling options but the option premium you take in may justify that risk.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

To get a list of dividend stocks or for more information about the stock market visit Shaun's site about investing into stocks Click here to get your own unique version of this article with free reprint rights.