Ways to Earn on Stocks, Bonds and Options

Earning in the stock market doesn't necessary ends in the buy low sell high principle. There are actually two ways to earn in the stock market.

Stocks and bonds are two of the most prominent mainstays within the international market. Stock shares represent a fraction of ownership within a corporation. If there are 100 shares issued for a particular company, and an individual buys 10 of them, then that investor owns 10 percent of that company. There are two ways in which a shareholder may profit. As the company's stock rises in value, shareholder is entitled to the price difference if he or she sells off the shares. For example, if an investor buys 10 shares of a stock for $10 per share and then the stock rises to $15 per share, that investor may choose to sell their stock for a profit of $50, or $5 for each of the shares owned.

The second way in which a shareholder might make money is if dividends are paid out.A dividend is a sum of money that is paid out per share, bypassing the sale of the stock. In other words, investors do not need to sell off their shares in order to net a profit from their holdings. This is an added bonus and allows companies to show their appreciation for long-term investors. If a shareholder owns 10 shares of a stock and their is a profit of $5 per share, the company may choose to pay half of that to each shareholder. The shareholder who owned 10 shares would then receive a check for $25: $2.50 for each of the 10 shares he or she owns. The payment of dividends is not an obligation for corporations and may be paid at the corporation's board of directors discretion. This usually occurs yearly but can be as frequent as once quarter.