Dividends are one of the main types of earnings. They consist of a portion of the company’s net income that is distributed to its shareholders, according to the number of shares held by each one. Interesting, isn’t it?
What are the ways to earn money?
Many investors — especially beginners — think that the only way to make money from stocks is through their appreciation. In other words, you buy a stock at a certain price and then sell it at a higher price.
This is actually the most common way. However, it is divided into several strategies — being applicable to a wide range of investors with different profiles. In addition, there is a way to make money through the receipt of proceeds and also through speculation.
Want to know more about each of them? Let’s go:
- long term investment
One of the most common ways to make money buying stocks is long-term investing. The idea of this strategy, also known as buy and hold, is to keep the securities in the portfolio for longer, consolidating results.
Therefore, the objective is to reduce the risks related to market movements that occur in the short and medium term. That is, economic crises and specific problems tend not to influence the result of the contribution.
To choose the stocks that will remain in the portfolio in the long term, fundamental analysis is used. It makes it possible to evaluate issuing companies to learn about their fundamentals, capacity for growth and soundness.
More solid companies with prospects for good results tend to be more attractive to investors, which can lead to long-term appreciation. However, as this is a variable income investment, there are no guarantees regarding performance, as there are always risks.
Another way to earn money by buying stocks concerns the receipt of proceeds. They are payments — in cash or benefits — made by the company to its shareholders.
They can be:
- dividends;
- interest on equity;
- bonuses and others.
The best known of these are dividends. Under corporate law, every publicly traded company has to pay them. These earnings represent a portion of the profit received in the period — and each company chooses the percentage of profit that will be distributed.
It is also necessary to mention the speculation. It is not considered an investment, considering that the objective is to try to make money in the short or very short term with the shares. This operation has a high risk, so it is usually used only by bold profiles or with more experience.
The idea of speculation is to take advantage of sudden movements – short and very short term – to profit from the variation in the price of the papers. In the day trade strategy, buying and selling take place in one day, but there are also longer-term operations.
Speculators use technical analysis to assess patterns of behavior and identify profit prospects. In speculation, it is possible to seek gains both from rising prices and from falling stock markets.