The Stock Market – How Can You Make Money Investing In Stocks

Hello guys and thank you so much for joining me on this journey to success. I’m so excited that you want to master the investing in the stock market game, just like myself a few years back. If you persevere and have the patience not to make mistakes that might burn your account and discourage you, you would gain a great ability throughout these lessons.

I’m pretty sure that you’ve all heard of Warren Buffet, George Soros, Charles Schwab, and many other investors who became amongst the richest persons in the world by investing in businesses. That is what you do when you invest in stocks, you invest in businesses. And I’m going to show you how this wonderful mechanism called The Stock Market really works.

What Is The Stock Market

The Stock Market is a financial institution that offers the possibility for the companies to sell to the investors’ stocks/equities, ETF, corporate bonds, and other derivatives financial instruments. When you and/or your associates start a company in order to generate profits, you have a private company. If you decide to grow this company and list it on the stock markets, this company becomes public and everyone can buy shares of it.

The Stock Market itself is a company that generates profit from listing new companies that want to sell their stocks and from the commissions made for every transaction that occurs.

As you have noticed, there are three parts to this system and every one of them benefits from this deal:

  • The investors who are given the opportunity to invest in all the great companies in the world.
  • The companies which can sell their stocks and bonds in order to fund their growth.
  • The Stock Market which takes its fair share of every transaction.

And, of course, the BROKER, which brings together all these entities. Back in the day, investors used to go to the Stock Markets and buy stocks. Nowadays, everything is much easier because everything is intermediated online by the broker.

The Broker is a financial institution similar to a bank but offers different services. The broker facilitates the access of the investors to the Stock Market, connecting the sellers and the buyers.  

In order to start investing you need to open an account with a Broker. This account is similar to a bank account but holds not only cash but also stocks, bonds, and other financial instruments.

Opening an account with a broker is pretty straightforward. You need to fill in a form, to upload your ID and a utility bill as proof of address and after the KYC procedure is fulfilled, you can fund your account and start investing. Most brokers don’t charge you a monthly fee, they only charge commissions for the transactions that you make.

So far we’ve learned how these companies make money. It’s time we found out how are you going to make money.

How do investors make money?

The stocks are parts of a company and offer their owners a few rights:

  • The rights over the company’s assets. If a company declares bankruptcy, the assets are sold and after all the debts are being paid, the money is divided amongst the stockholders.

  • The right to receive dividends, if the company generates profit and decides to share it with the stockholders.

There are many ways to make money with stocks, but these two are the most important ones:

1. Buy low, sell high

  1. Go to the broker’s website.
  2. Log in to your account.
  3. Search for the company that you want to invest in. You’d see the price of the stocks and valuable information about the company.
  4. Place a BUY order with the number of stocks that you want to purchase.
  5. The broker executes the order and the stocks show up in your investing account
2. Dividends

The second way to make money by investing in stocks is through dividends. The companies can distribute dividends to investors, but they are not bound to do that. Some companies consider that it’s in their stockholders’ benefit to reinvest the profit to grow the company even more and in the long run to benefit their investors even more.

There are two more advanced means to profit the Stock Market:

  • SHORT selling
  • Trading options and other derivatives

SHORT selling is a strategy to bet against chosen stocks. If you believe that the price of a certain stock would fall, we open a SHORT selling position to benefit from the falling. It is very risky because you can lose your entire account if your analysis was wrong.

A derivative is a securitized contract between two or more parties whose value is dependent upon or derived from one or more underlying assets. Its price is determined by fluctuations in that asset, which can be stocks, bonds, currencies, commodities, or market indexes. You can trade it LONG or SHORT, but I wouldn’t recommend it if you are a beginner.

I hope you’ve enjoyed this introduction to the Stock Market universe. In the next article, I will show you the most consistent strategy for investing in stocks.

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