Why Invest in the Stock Market? How Do You Earn Money in the
Stock Market?

Why Invest in the Stock Market? How Do You Earn Money in the<br>Stock Market?

Why Invest in the Stock Market? How Do You Earn Money in the
Stock Market?

Stocks are ownership shares in a corporation. If you purchase stocks listed on the Philippine
Stock Exchange, you become a part-owner of that company (PSE).


Assume you purchase stock in Globe Telecom, Puregold, and Jollibee. You become a
part-owner in those businesses. In other words, you become a shareholder in the business. So,
why should you invest? Your shares will increase in value and profit as the company grows. But
if they suffer losses, you mourn them as well.


Stocks have the highest potential for growth compared to short-term bonds or other
investments. The rates are higher than those offered by most banks on an annual basis. So, if
you invest for the long term, your money grows.


As of 2019, banks’ annual gross interest rate ranges from 0.10 percent to 0.20 percent. But if
you start investing in stocks, you can earn much more, even up to 30% if you trade on a daily
basis. You can grow your investment portfolio at an annual rate of 8% in stocks over the long
term. A safe bet, and, of course, better than 0.10 percent.


But how does one make money in stocks? Here are the two ways how you can earn money?

  1. Capital Appreciation
    Each stock has a price associated with it. Capital appreciation occurs when the value of your
    stock rises. It is the difference between the price you paid for your share and the current market
    price.
    For example, if you buy stocks from Company A at P200.00 and the price rises to P230.00 after
    three days, your capital appreciation is P30.00. The realized gain of P30.00 occurs only when
    you sell at P230.00. If you hold it for 30 days and it rises to around 270.00, your capital gain is
    P70.00. If the price falls and you sell it at P200.00, you make no profit.
  2. Dividends
    Dividends are paid to shareholders by corporations. These dividends represent the company’s
    earnings that will be distributed in the form of cash or additional stock shares.
    These are the reasons why you should opt to invest in the stock market rather than just saving
    all of your money in the back. In this way, your money will grow more and earn profit in the long
    run.

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