Making money from stocks

If you watched the movie ‘Wall Street’, it’s easy to be swayed into believing that making money from stocks is a matter of picking the right stocks, watching the ticker tape and trading them rapidly. While some people do make money that way, the vast majority won’t and perhaps more accurately, cant. Reason being that the odds are stacked against you. You don’t have access to market moving information at the same depth and speed as the guys on the trading floor.

The reality is that most of the money to be made from stocks, come from owning and holding stock in the right companies, receiving and reinvesting your dividend income, and benefiting from long term increase in the stock price.

It literally doesn’t get any simpler. All you have to worry about is buying the right stock (at the right price). Time and the market will take care of the rest. If the management of the company and the company remains solid, you can expect a dividend cheque at the end of the year and the market would continually build this into the price of the stock.

The average dividend yield for stocks is about 5%. That alone, easily beats what you will get from keeping your money in a savings account.

Occasionally, in a stock market bubble, you can sell your shares for more than they are really worth and pocket the sweet profit.

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