Investing into the stock market can be a great way to build your wealth
, increase your income, and save for retirement. In fact this is probably why it is so recommended by financial professionals from around the world. If you are starting to invest it can benefit you to learn different ways you can make money off of a stock that you own.
There are a few different ways which a stock that you already own can make you money. Ideally an investor would want to find a stock that can make them money in each of these three ways.
1. Long Term Growth
The first way that you can make money from the stock market is pretty obvious. If you buy a stock at $20 and sell it at $50 you have made $30. Buying stocks in strong companies can be a fantastic way of building your wealth and income over the long term.
2. Dividend Payments
Dividend paying stocks pay out a small dividend every month. Although this dividend is normally a small percentage of the total investment it still can be a nice way to receive some extra passive income from the market.
3. Selling Options
One of the best stock tips out there is to not overlook stock options. Most people tend to dismiss stock options as risky and simply look the other way. But selling options has a fantastic ability to make you some additional income off of a stock and they can make you as much in a month then dividends will make you in a year.
This method is called covered call writing. The good part about covered call writing is that it gives you money up front once you enter the position. The bad part is that you may end up getting called out of your stock and having to sell it early.
For instance if you sell a $50 call on a stock then you would be obligated to sell the stock at $50 if the stock went up above $50 before the option expired. But if it didn't go above $50 you just walk away with the profit.