How can you make money by investing in stocks?

Question

I don't really understand how stocks work and I was just wondering if you can get money investing. Just the fundamentals of how much money you invest and how much you get back.

Answer 1

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Answer 2

Companies offer shares (fractions of their total worth) to buyers like you and me so that we can own a piece of their company.

So, if a company is worth $1,000,000, and they have 100,000 shares available, then each share would be worth $10 per share.  

Getting started in stock investing is great for individual investors, since it allows you to take control of your own investments.

I'm an advocate of value investing -- finding great companies, buying these companies at a discounted price, and only selling once these companies become overvalued.

How would this work?  Well, if we knew (based upon how the company does its business) that the company is really worth $10 a share, and the stock market is pricing this company at $5 a share (this can happen on occasion...), then you know that you're buying this company at a bargain price.

So, if you do your homework, and the market eventually corrected itself (as it generally does over time...), you can make a lot of money.  Quoting rates of return can be difficult because it depends on how disciplined you are and what your investment strategy is.

I've seen initial investments grow to be 10 times (or more) in value, and I've seen investment go to almost nothing as the company lost their entire value.  As with any investment, you should be willing to learn, be disciplined, expect mistakes (because you will make some -- we all do...), and keep a positive mindset.  

If you do this, you'll become a great investor.

Hope this helps, and good luck!

Answer 3

Yes you can make money investing.   As outlined by the other "answerers" you can buy shares of a company at a certain price, and, as time goes on, and the company earns more money, "theoretically" the value of those share will go up.  On-line brokerages will typically open an account for as little as $500.  The amount you invest and get back can vary greatly depending on the company you invest in.  My advice would be to open a "practice" account for 6 months with an on-line brokerage to get a feel for it.  During that time you can save up some money and if you decide it is for you, you'll have a better grasp on the particulars.

Use http://secnotes.talkspot.com to research the companies you are interested in investing in.

Answer 4

This is how it works:

Lets say you buy 50 shares of Yahoo at $20/share. You pay 1000 for it. Then, you wait for some time and see the price goes up to 30 (thats a good thing), you decide to sell it. You get $1500 for it. This is a 500 dollar profit.

Answer 5

If you buy 100 shares of stock at $1/share (spending $100, plus brokers fees) and the stock goes to $2/share, you can sell all 100 shares for $2 a share and make.... close to $100.

You spent probably $105 or so to buy it ($5 commission)

You spent another $5 to sell it (so your total amount out of pocket was $110)

but you received $200 from the sale, so you made $90 on it.

If you hold it, the company could issue dividends - which means they pay every shareholder a little bit per share.  If you get a $0.10/share dividend, you'd make an extra $10 on the stock.  (Note that these are all made up numbers.)

It also doesn't speak to any taxes you'll owe. Things can get complicated around tax time if you sold stock in that year - it took me about 15 hours to do my 1040 this year, and 10 of that was just dealing with my stock sales.