How do you make money in stocks?


Quick Answer

A person can make money from stocks by selling a stock that appreciates in value over time. Investors can also get paid through dividends, which are given to shareholders who have stock within a company.

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Full Answer

A stockholder's income largely depends on the performance of the company that issues the stock. Based on price-to-earnings ratio, stock that is held over the long-term has greater value in the future. For instance, a $10 stock may grow to $620 per share if the company continues to grow in the next decade. This results in a larger stake for investors and an increase in profit.

Investors who choose to hold a stock that has increased in value have what is called unrealized gains. Since stocks constantly change in value, investors are never truly certain of the stock's true value until it is sold to a buyer. A buyer may wish to purchase a stock if he feels a company has the potential to expand in the future.

Stockholders who possess dividends can make money by monitoring such aspects as a company's balance sheet, dividend yield when the stock is purchased, and dividend tax laws. The income from dividends can be used to purchase more stocks that can potentially yield more revenue. Purchasing dividends from a company that incurs heavy debt is a risky venture despite the value of the dividend.

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