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How can you make money by investing in the stock market?

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There are two ways you can make money by investing in the stock market. First, you can make money by selling a stock at a higher price than you bought it. Second, you can benefit from the dividend payments made by the company whose stocks you have acquired. A dividend is the proportion of a company’s profit distributed to shareholders.

1.) You benefit from selling the shares at a higher price than the purchase price:

If the company stocks are sold, it should be noted that capital gains tax is usually payable on capital gains. This can vary from country to country. It is important that you are aware of the existence of this capital gains tax and that you incorporate it into your decision-making process when buying or selling stocks.

The only way to make money with some companies is by later selling them for a higher price than you bought them because they don’t pay a dividend. Companies that do not pay dividends are often companies that are still in a growth phase and prefer to reinvest their profits to continue investing in the company’s growth.

Those companies that don’t pay dividends are often companies from the technology sector. Specific examples of companies that do currently not distribute dividends are Amazon, Alphabet, Facebook, Netflix and Paypal. An example of a company that doesn’t pay dividends either, but isn’t in the technology sector, is Berkshire Hathaway.

For the shareholder, in the end, it doesn’t matter so much whether the company pays a dividend or not. Much more important is that management decide what is best for the company, because the shareholders will benefit from this in the long term.

For a company like Amazon, for example, which is constantly expanding its business in order to continue to grow, it makes more sense to put the profits back into expanding its own business activities. The shareholder will benefit from this again because Amazon can increase its sales and profits in the long term by expanding its business activities. This in turn will have a positive effect on the stock price, from which the shareholder will ultimately benefit.

2.) You benefit from receiving dividend payments:

If you are planning to profit from the investment, particularly through the dividend payment, a very long holding period of the positions can often be a good idea. Because with a very long holding period, you can get your original investment back by obtaining dividends.

Examples of companies that pay high dividends:

Examples of companies that pay high dividend yields are usually those who no longer have to invest a large part of their profits in new business activities. For example, companies from the oil business, tobacco goods business, or insurance business can be named here.

It can make more sense for a very established tobacco product manufacturer that generates constant cash flow to pay a dividend, as it no longer needs as much money to expand its own business.

Before investing, you should be clear about how you can best benefit from this investment:

It is important to analyze companies carefully before investing in them and before investing you should be clear about how you plan to benefit from the investment, through the subsequent (partial) sale of the company or through the dividend payments or even through a combination of both.

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