How do I earn money with stocks?

How do stocks actually help you earn money? Do you get a share of a company's profits equal to your share of ownership?

Hi there,

Companies normally pay dividends to shareholders based on the profits they have made. However, the board may choose to invest money in the business rather than paying out dividends to shareholders. This decision is made on an annual basis.

In addition to earning dividends based on your share of ownership in a company, you can also profit from increases in the value of your stocks. Increases are determined by market demand. If demand for your stocks goes up after you purchase them, investors are willing to pay a higher price for those stocks than you paid for them, allowing you to sell them at a profit.

Best regards from Moneyguru

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The most common way to make money on shares is to hold them until someone is willing to pay you a price higher than what you paid for them. You then sell the shares to the buyer and profit on the difference between the price you paid and the price you get. Whether or not the price of the shares you buy goes up depends on which shares you buy on the one hand, and on pure luck on the other hand. Unless you happen to by privy to the inner workings of the company's whose stock you buy, it's really a bit like gambling. Sometimes you win, sometimes you lose, and there is no sure way of knowing which companies will be hits and which will be sh**s

You also make money off dividends, which is money the company pays out to you as one of its owners based on the profits it makes. There are some shares called preferred shares which pay out a fixed amount of money as a dividend every year. These are not the normal shares which you buy using most online brokers. The dividends of normal shares or "common shares" can be different every year, and if the company’s profits go up then the dividends can go up too. In Switzerland you could also look into Partizipationsscheine, which are similar to shares and pay out dividends, but can cost a lot less than shares.

Whether you want to make profits on gains in the price of shares or on dividends (or both), you should be prepared to keep your money tied up for a long time. It normally takes a couple of years until you earn enough dividends or can sell your shares at a profit large enough to make the investment worth your while.