1 Answers: How do I make money in the Stock Market? Buying Stocks?

Question

I am new to buying stocks and would like to make money in the stock market like everyone else is! I hear many things about NASDAQ and other stock markets and some people say just buy the entire S&P500 Index and then sit and wait for it to go up.

How do I make money buying stocks in the stock market today?

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Jones 7 months 1 Answer 91 views 0

Answer ( 1 )

  1. Hi there are actually two main ways to make money in the stock market.

    The first is through what we call Capital Gains. This term is not only used in the stock market but also in the Bond and Real Estate markets. Capital gains occurs whenever the price in the underlying stock increases in value from the original purchase price.

    For example, say Joe buys ten shares in Boeing, which has a current stock price of $100 a share, for a total evaluation of $1,000. One month later, Joe checks back on his investment and sees that Boeing stock price is at $130 a share. So Joe decides to sell his shares.

    Since the stock price increased $30 or a 30%, he made a $300-profit from it. That $300 profit is what we would call Capital Gain. The same thing would occur in the opposite scenario, except we would call that Capital Loss because Boeing stock price would have plummeted.

    Something important to know is that the gain is not realized until the stock is sold. Like everything, when you incur Capital Gains, you have to pay what we call Capital Gains

    Tax. This tax varies from country to country. In the United States, individuals as well as corporations are subject to Capital Gains Taxes on their annual net Capital Gains. And obviously, if Capital Loss occurs, then you’re exempt from the tax.

    The second way of making in the stock market is through Dividends. Dividends are a little harder to understand so we’ll start from a definition. A Dividend is an amount of a company’s profits that the company pays to people who owns stock in the company.

    A Dividend occurs when a company distributes a portion of its earnings. This process is decided by its board of directors. The board will always use Dividend distribution in times of profit in order to attract and keep in investors. It can also be interpreted as a statement which says, “We are a strong company.” The Dividend is also called the DPS or Dividend Per Share.

    It can also be quoted in terms of percentage. So, Dividend Yield.

    In many cases, the more stable the company is, the more Dividends it will offer in order to counteract its low price action movement, basically how it moves up or down.

    On the other hand, a higher growth company will rarely distribute Dividends so the capital can be reinvested in the company to continue its high growth.

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