The stock market is one of the many investment vehicles where you can put and grow your money. It offers better rewards than simply putting our money in the bank in a savings account or time deposit. However, along with the rewards that it offer there is also the element of risk. The higher the risk, the higher the reward as they say. So how can we earn money in the stock market? There are two possible ways.
1. DIVIDEND
It is a portion of the company's earnings distributed to shareholders on the regular interval e.g. quarterly, semi-annually or annually. Dividends may be given in the form of cash, stocks or even property and is decided by the board of directors of the company. Say for example you bought 100,000 shares of stock of a company that pays 0.30 per share cash dividend, you will receive 30,000.00 at the payment date.
2. CAPITAL GAINS OR CAPITAL APPRECIATION
It is the increase in the value of your invested capital as a result of increased market price. If you buy 100,000 shares of stock of a company at 5.00 per share your investment is 500,000.00 (let us not include the tax, commissions etc. for simplicity). If the market price of the stock reach 7.00 per share and you decided to sell all your shares, the market value of your investment would be 700,000.00. The difference of 200,00.00 is your profit from capital gain. You have to sell the shares in order to realize your gain.
Between the two, the more popular means to earn is through capital appreciation. A lot of traders, individual and institution alike trade in the stock market everyday. Online trading platforms and mobile applications makes it even easier for traders to buy and sell stocks anywhere in the world with internet connection. Some buy and sell stocks on the same day for quick profit, some hold their stocks for a few days, weeks or months for a bigger gain. Their buy and sell decisions are based on technical analysis. They study charts, price patterns, volume and other indicators to time the market in order to minimize the risk and maximize their profit. On the other hand, others consider themselves as investor who buy stocks and hold it for years for a bigger profit. They buy stocks based on the fundamentals and future growth of the company to fulfill their long-term goal.
Whether you choose to be a trader or investor, stock market offers a very high potential of growing your money.
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