How do you make money in stocks???

Question

I understand the whole gaining money from capital and buying stocks when they're low and selling when they're high priced. But lets say you buy a stock for 98 dollars and the stock price for the company grows to 105 dollars. What would be your profit if you sold your share at this price???Also, how do you know if the company gives quarterly dividends?

Answer 1

Purchase price-sale price. There is also a thing called bid ask spread which will cut into your profits, also you will pay a fee for purchasing and then for selling the stock (fees will vary depending on where you buy). In order to figure out if the company issues quarterly dividends you would need to look at their income statement, it is clearly reported their, and every company issues quarterly earnings statements (found in the 10Q). Look at ford's, they issued in first quarter 2006 not 2007.

Answer 2

It depends on the amount of time that you hold the stock. A $7 dollar rise in one day is a lot more than a $7 rise over 10 years. Time is a major factor in figuring returns. A $7 increase in 6 months is 14%, over one year, its 7%.

The only way to compare returns is by a %. If you are talking real dollars return. It depends on how many shares you buy, and if you borrowed any money to do it.

If you have $100 and make 7% you make $7 . However if you use your $100 to borrow money and then buy $300 worth of stock your same 7% return just gave you $21. Minus any interest costs.

Check the company website of the stock to see if they pay a quarterly dividend

Answer 3

2

Answer 4

You research the stock to find the dividend yield and P/E ratio and get to know about the company before choosing to buy. If you buy at one price and sell at another your profit or loss would be the purchase price plus commission minus the sales price and commission so if you bought at 98 and sold at 105 but paid $4 commission to buy and another $4 to sell you would have a cost basis of 102 and have received 101 from the proceeds or have a loss of $1. If you got a dividend that would have been income when you got it not when you sell.

Answer 5

The amount you make from a buy-sell transaction is:
$Gain = #shares*( $Sell - $Cost) - 2 * TransactionCost
I use TD-Ameritrade, my transaction costs are $10.

The next important question to ask is if you make 100 buy-sell transactions, how many of the transactions will have a positive gain verses a negative gain i.e. a loss?

Yes, there will be times that you could be selling with a loss.
Or are you planning on holding onto the stock until it rises in value again? Wishing and hoping does not work!

I use the philosophy, let the winners run and sell the loosers.
The most important part of this is to keep your losses small.

Given that you will have losses, what must your average gain be to compensate for the average losses? Assuming that 50% of your transactions are losses averaging 10% of your investment position, your average gains must be 14% to break even if your positions are $1000 each.

Now consider the trading system you plan on using. Does it have a historical record to produce netgains?
If your positions are too small and you buy-sell too often, the transaction fees will eat you alive.

I use the yahoo group ComputerProgramPicks.
Best of luck to you. Having luck is executing with a prepared mind.

Answer 6

98 -> 105 is $7 a share.

About the dividends, when you look up a stock, there's usually a field called Yield. This is expressed as a percentage and it represents the amount of dividend the stock pays as a percentage of the stock price. It's usually around 1% if it has any at all.

For example, the S&P 500 index fund has a fairly high yield of 1.6% http://finance.yahoo.com/q?s=SPY

Answer 7

$7 per share minus commisions, sec fees and taxes that have to be paid. Buy low sell high.

Answer 8

a yield of 1.6% is NOTHING! $7 a share plus any commissions you had when you sold it read the prosopectus for dividend info.

Answer 9

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Answer 10

It comes down to percentages, keep in mind that 7% on 1mil dollars or on a 100 dolars is still 7%.

Lets look at some examples and ways how you can start with a little money and see it grow into larger money.

The old saying that you need money to make money is the cornerstone of any investment. Lets say you started with 1000 dollars in your investment account, and your goal is aggresive growth and very little risk adversion.

you buy that stock at 98 you got a whopping 10 shares so the stock goes up 7 bucks, and you sell. Well congrats you made 70 bucks.. Sounds ok right? However now you must minus commisions, 10 bucks when you bought it and 10 bucks when you sold it, Well thats 50 bucks, not for a week swing trade... You are ready to put that 50 bucks into your next stock and then you realize got to pay capitol gains tax (depending on whether you held for a year or not)

So now that 50 bucks is around 37 dollars (i have a cpa im not one)
So your point is valid, if you dont have alot of capitol and cant afford more shares, but to folks who can that 7 dollar move or bidu recent move can be very profitable..

back to saying, takes money to make money
the more money you have the more you can make. conversly the more you can lose..

Where there is risk there is reward
and it brings us too a very important concept Leverage

now, instead of options like they use in the example below , substitute small-mid cap and growth stocks. I think options carry more risk versus reward then small cap or growth stocks. 90% of options expire worthless

Leverage

What does it Mean? 1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged.

Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains and losses. In the business world, a company can use leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and credit risk of default destroys shareholder value.

Investopedia Says... 1. Leverage can be created through options, futures, margin and other financial instruments. For example, say you have $1,000 to invest. This amount could be invested in 10 shares of Microsoft stock, but to increase leverage, you could invest the $1,000 in five options contracts. You would then control 500 shares instead of just 10.

2. Most companies use debt to finance operations. By doing so, a company increases its leverage because it can invest in business operations without increasing its equity. For example, if a company formed with an investment of $5 million from investors, the equity in the company is $5 million - this is the money the company uses to operate. If the company uses debt financing by borrowing $20 million, the company now has $25 million to invest in business operations and more opportunity to increase value for shareholders.




There are 2 ways to leverage yourself, you can use margin. You can also buy lower priced stocks so you can own more shares. Now lets say you bought margined the 1000 dollars in your account. So now you had 2k of buying power and you bought 400 shares of a 5 dollar stock, and that stock went to 8 in a 1 month swing, now you got 1200 before capital gains, commisions are still 20 so its small precentage of profits, a incremetnal fee of 5 dollars to borrow margin for a month. Now you are looking at taking 800 bucks after all is said in done.

Much better then that 37 prior buying the 98 dollar stock..

heres another post of mine about investing that might help as well

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Ok first off congratulations on investing, looking for places to put your hard earned capitol to work for you is paramount to building wealth. Now this new found road is not without its perils, and should be treated like any of lifes great journeys.

Preparation, due diligence, and some elbow grease can prepare you to start your journey,

1) Arm yourself with as many tools as you can, Read Read and Read ( did i say read?) Every thing you can in your local libary about investing, fundamental .and technical analysis

A few books to start would be Rich dad Poor dad, Warren buffet and trump's book, and for a understanding of stock technicals and movements read A beginers guide to trading by toni turner.

Ok, maybe after a little reading , now your feeling like you can give this investing idea a shot and now you want to put the principles you learned to work.

2)So what company to invest in, ?
Well first you have to have a plan certain parmeters our goals that ideally you want your investment to provide.

lets say you are looking for a stock that has the potential to go up 100% + and your time frame is 1-3 years. Well from your reading, you remember that generally small - mid caps and growth stocks typically out preform the general market . You also remember that on average the stocks market has given 10% roi. You are shooting for 33% each year over 3 years. So that would be a example of one goal.

You also were watching live earth, and enjoying the music and thinking how you could do your part to help out.
So you were doing some research on alernative energy and green companies on hoovers.com

Maybe another goal, is to invest in a company that not only can make you money, but whos product has the ability to disrupt the market place and is has a socially responisble misison statement or ethos. The point is, your dollar is your vote at the supermarket or in the stock market. Without investors some of the greatest technologic advances of the last century would of never taken place. So just realize your investment is you actively taking part in what the world could be like in the future. ( sorry to ramble, im a better talker then i am writer =], )
As smart guy, you realize that global landscapes are changing and green energy will be the new paradigm of the future and would probably make a good investment.

So you start you research, you get a list of green companies.When you invest, you may be doing it just to make money, but your investment also spurs the world we are born in live in and will die in.

You stumble across a stock called Raser Technologies Inc., because you think hybrid demand will increase and there will be a shift from oil, and efforts to reduce energy consumption accross the board. Since Raser is a relatively new company, that holds many patents, and is just turning the corner from a R&d company into commercialization of its technologies. You think this could be a great company in its infancy and could fit you investment goals.

So now you check various places to find info on the company
you check the website (www.rasertech.com) , the sec filings, and maybe yahoo or msn.com for ratings if applicable and recent news etc......Then you check the stocks technicals, you see that the stock has a strong uptrrend developing and see that historically stock is undervalued and oversold relative to its previous high of 50. You examine its fundamentals, share structure , any revenues cash in the bank.

keep in mind when we invest in potential growth stocks, we are not looking at what has happned in the past but more concerned to what the future holds. Since the the company which was founded in 2002 and up until now has been a research and development company, dont expect it to see many revenues now. Since the company is about to carry out the commericilization of its techs and go online with its geo thermal projects,you are investing for the bright future.

3) finding a broker so you can invest

Now you must choose a broker, i would think a online retail broker would be perfect for you when begining.

etrade.com schwab.com scottrade.com
or a few adequate choices.


4) Now if you think you need more experience, and you dont want to risk your hard earned money yet. You can choose a site like www.clearstation,com and paper trade your investment ideas. This way if you are wrong about your analysis, you can learn without losing real money.

paper trading will allow you to monitor your success, the bad part is if you are right then you dont make any real money paper trading=[


5) Ok here ya go, you are ready to palce your first order
few tips always use limit order , market orders put you at the mercy of the market makers and is not reccomended ever!

Another tip always sell on the ask never the bid!



Before you hit that trade button,you have developed your investment plan, contigency plan, and done all your research.

Plan your trade and Allways trade your plan, use the tools you have learned and always try not to invest on emotions>>>>>>

Use research technicals to make investing decisions not emotions.

I hope this is the best answer and you have a long prosperous road as a future investor, its late now so please excuse me for the grammar and spelling errors. If my opinions can be of anymore help feel free to contact me.

goodluck
Source(s):

http://moneycentral.msn.com/investor/hom...
hoovers.com
http://en.wikipedia.org/wiki/investment....
www.stockcharts.com
Source(s):

http://en.wikipedia.org/wiki/margin_%28f...