How to Make Money Investing In Stock
How to make money investing in stock? Anyone who assures you that you will make fortunes is lying by buying the stock of this or that company. Does that mean you cannot earn money investing in companies? No! It means that you have to understand how you can win and what risks we run.
Understanding investment
Investing is putting money to work to start or expand a project or buy an asset or interest, where those funds are at work to earn income and increase value over time. The term "investment" can refer to any mechanism used to generate future income. Today companies and individuals have many investment options, including stocks, mutual funds, and foreign direct investment.
In a financial sense, this includes buying bonds, stocks or real estate.
What does it mean to "buy shares"?
First, you have to understand what an action is. It is a title deed to the smallest part of a company. We can be partners in a shop or a factory and have shares in those businesses. For that, they have to restructure as a corporation and divide its structure into minimal portions. When we invest in creating a business from scratch, we inject capital into it to own that part, where they list as property titles. That is, at that time, issuance of shares makes the buyer interested.
However, we can also buy shares of companies that have already grown and gone public in a market. The company capitalize in exchange for authorized shares to buy and sell freely during operating hours through public offers. The exchange allows anyone who has an account with an agent.
By acquiring shares, we become partners of that company, and we have a percentage of the business, which involves a series of rights. The main ones are the right to receive part of the distributed profits and to vote at the shareholders' meeting if we want to participate. Those who gather 51% or more of the votes control the business.
How to make money investing in stock?
There are three ways to earn money from buying stocks:
1. The first is by choosing companies that register profits and distribute part of those profits among their partners through dividends. We can know if a company made money in the past (and if it distributed dividends). However, it is not easy to understand in advance if it will do well and if it will decide to distribute profits in the future. No business gives a guarantee to make money. The distribution of the gains depends on what the majority of the shareholders decide at the meeting.
2. The second way is to buy shares in a company that is worth more after a certain time (an hour, a day, a week, a month or a year). That the shares of a company rise to make the company worth more because, in the market, there are transactions where those shares are bought and sold at increasingly higher prices than when we bought them, this happens basically because a trend is sustained where there is greater demand for those shares than supply. After all, the company has very good results or very good prospects. These variations in percentage terms. However, we cannot annualize that result as if it were a rate because it is not a guaranteed business. We can only take the rate as an opportunity cost of what we could earn. This stock price logic works both up and down. We can lose money if we end up selling below the price we buy.
Finally, you can earn by borrowing the shares of a company that we believe will lower its value with the commitment to return them in X time. We sell them when the time comes to return them. If the premise with which we speculate when the shares are cheaper, we repurchase them and pay off the debt, with a difference in our favor. This is "short sale" and is through the provision of guarantees. It prevents that if the stock rises too much, the speculator cannot cover the operation's loss.