Two Ways to Earn from Stocks

by Gily Tenorio on April 23, 2011

in Stocks

Investing in stocks is not a popular investment vehicles because maybe of the insufficient education and promotion from the government and companies. Many people don’t have an idea how stocks or stock market works.

For example, in my case, I only became interested in stock investing when I worked abroad, primarily because I want to have other source of income. I wanted to invest my money in such a way I can still continue my job at the same time.

Basically, there are two ways on how you can earn from investing in stocks: stock price appreciation and dividend. When the price of stocks you bought increased its price from bought price, you will earn only when you sell it.

Unless you sell your share, you cannot really earn from the stock price appreciation. It is only a book value gain, meaning it is not yet converted to cash and could be changed any time, it may decrease or increase even more from its current price.

Another way is through dividends. Dividend is the profit made by the company that is given to all shareholders in the form of cash or shares of stocks. Most of the established and big companies give dividends.

Giving dividend to shareholders is guided by the dividend policy of the company. There are set of rules on how much dividend should be given and this is approved by the board of directors of the company.

Earning from stocks requires research and study on what stocks are good to buy and which should be avoided. Sometimes you need to learn some facts about the company like its financial status and future plans so you can have idea how the company will perform in the future.

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