Making money from stocks

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Tideas

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Okay, here's my understanding of how one can make money while owning stocks.

1) Get dividends.

2) Sell the stocks at a higher price than when you bought it.

3) Like #2, but wait til the stocks split

So, how does one make money from companies that does not give out dividends? Looking on google finance, Apple hasn't given out dividends since like 01, and yet its stocks is so high.

IS there a 3rd way at making money at stocks that I don't know about?
 
You've already covered the two ways.

Basically shareholders are rewarded by companies for their ownership by providing a chunk of the company's cashflow. Some companies choose to do this through dividends, others retain their earnings and use the money to increase the value of the company. This can be done by acquiring other companies, building anything that increases the profitability of the company in the future, buying back stock, paying off bonds.

The reason why dividends aren't desirable is because the government taxes it. But some of the best performing companies, like Altria, pay a ridiculous amount of dividends.

Tideas said:
So, how does one make money from companies that does not give out dividends? Looking on google finance, Apple hasn't given out dividends since like 01, and yet its stocks is so high.
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Apple's stock is not a typical stock. It is a bubble. It's price/earnings ratio is high considering the general economic forecast. Apple sells a lot of expensive electronics. With cost of living increasing so rapidly, they are going to take a hit. As soon as they do, their stock will probably dive rapidly to around 80-120.

If the economy turns around, Apple probably will stay around 120-200.
 
You can also short on stocks... which is the opposite. You earn what the stock goes down since you purchased it. This is a speculation or "bears" market, which is what we are facing these days (especially on oil). This is frowned upon as its a bit... greedy, but it still makes money
 
Tideas said:
IS there a 3rd way at making money at stocks that I don't know about?
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4) Company gets bought out at a higher price than when you bought it. Upon the buyout deadline, your shares either convert to cash at the buyout price or an equivalent amount of another company's stock.

5) If you own a master limited partnership (MLP) rather than a common stock, you are entitled to quarterly required distributions, not dividends (which companies can elect not to pay). A lot of oil and gas pipeline trusts are structured this way, like Kinder Morgan Pipelines, or Prudhoe Bay Trust.

Dividends are great, but growth companies don't like to pay them, and they aren't ever guaranteed. Bank stocks are cutting dividends left and right nowadays, for instance.

But you shouldn't be worried if a company doesn't give dividends. After all, an investor's mindset shouldn't be to make money with stocks, but to generate long term wealth. If a company has a solid plan for growth, it has much better uses for its cash than paying a dividend. Warren Buffet stated (and I paraphrase) that the perfect stock is one you never have to sell... the underlying company just keeps increasing in value year after year, steadily making great returns on its investment capital. If you don't believe him, Berkshire Hathaway stock has given its shareholders an average 20% growth for 20 years and has never split or paid a dividend. That's phenomenal.
 
argon said:
Warren Buffet stated (and I paraphrase) that the perfect stock is one you never have to sell... the underlying company just keeps increasing in value year after year, steadily making great returns on its investment capital. If you don't believe him, Berkshire Hathaway stock has given its shareholders an average 20% growth for 20 years and has never split or paid a dividend. That's phenomenal.
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Warren Buffet also stated (and I paraphrase) that most investors would be better served owning a low cost index fund like the ones at Vanguard and TIAA-CREF. Also, the stock hasn't split but they did create a B Class share which was basically in lieu of splitting the stock. I read the report they send me every year.
 
argon said:
4) Company gets bought out at a higher price than when you bought it. Upon the buyout deadline, your shares either convert to cash at the buyout price or an equivalent amount of another company's stock.

5) If you own a master limited partnership (MLP) rather than a common stock, you are entitled to quarterly required distributions, not dividends (which companies can elect not to pay). A lot of oil and gas pipeline trusts are structured this way, like Kinder Morgan Pipelines, or Prudhoe Bay Trust.

Dividends are great, but growth companies don't like to pay them, and they aren't ever guaranteed. Bank stocks are cutting dividends left and right nowadays, for instance.

But you shouldn't be worried if a company doesn't give dividends. After all, an investor's mindset shouldn't be to make money with stocks, but to generate long term wealth. If a company has a solid plan for growth, it has much better uses for its cash than paying a dividend. Warren Buffet stated (and I paraphrase) that the perfect stock is one you never have to sell... the underlying company just keeps increasing in value year after year, steadily making great returns on its investment capital. If you don't believe him, Berkshire Hathaway stock has given its shareholders an average 20% growth for 20 years and has never split or paid a dividend. That's phenomenal.
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I have 2 questions:

1) I don't get it, what good are stocks if you have to wait 20 years before you can monetize for serious money? How am I gonna take advantage off my "wealth" if it's all stocks and no money?

2) I'm messing around with an online stock market simulator. There, every order I request takes a fixed amount of time before it is completed, aka 20 minutes. That's not the case in real life is it? How often does it happen that you might want to buy or sell and have to wait for long time before a buyer or seller appears? Is this a common problem? That would be a problem because I would like to make short term investing.
 
Mato said:
I have 2 questions:

1) I don't get it, what good are stocks if you have to wait 20 years before you can monetize for serious money? How am I gonna take advantage off my "wealth" if it's all stocks and no money?

2) I'm messing around with an online stock market simulator. There, every order I request takes a fixed amount of time before it is completed, aka 20 minutes. That's not the case in real life is it? How often does it happen that you might want to buy or sell and have to wait for long time before a buyer or seller appears? Is this a common problem? That would be a problem because I would like to make short term investing.
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1) What exactly do you mean by "take advantage of your wealth?" The best way to take advantage of your wealth is to have it generate more wealth, thus a long term commitment to investments.

2) Depends on the stock and what your bid hits the floor at. If you want near instant transactions then bid at market on high volume stocks
 
Mato said:
I have 2 questions:

1) I don't get it, what good are stocks if you have to wait 20 years before you can monetize for serious money? How am I gonna take advantage off my "wealth" if it's all stocks and no money?
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If you aren't willing to wait for something like that, you sell it to somebody else who is willing to do so, at a higher price than you paid.

But generally, the stock market is better suited for trying to make long term gains with your savings. It's not really something to make quick money with.
 
Mato said:
I have 2 questions:

1) I don't get it, what good are stocks if you have to wait 20 years before you can monetize for serious money? How am I gonna take advantage off my "wealth" if it's all stocks and no money?

2) I'm messing around with an online stock market simulator. There, every order I request takes a fixed amount of time before it is completed, aka 20 minutes. That's not the case in real life is it? How often does it happen that you might want to buy or sell and have to wait for long time before a buyer or seller appears? Is this a common problem? That would be a problem because I would like to make short term investing.
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Dude, its called day trading.

You can buy shares and sell them shortly after.

In simple terms:

1)You join a que for a quantity of shares you want to buy at a particular pice
2)If Market forces dictate the share price arrive at your desired level, your order is filled.
3)The process repeats for another potential purchaser, only this time you are the seller.

The whole process is POTENTIALLY very quick, but as im realising right now, market forces can be a damn bitch.
 
I'm looking at getting into financial spread betting which in the UK is completely tax free - Wahoo.

Does anyone have any experience in the field aside from "there is a good reason why spread betting rhymes with bed wetting".
 
Brokers basically follow entire markets or sectors. If you predict an entire economy will grow you invest in that market by buying into the most prominent stocks, growing up to 200 different stocks, and sometimes even more.

Otherwise if you expect a certain sector to boom (say, computing) you invest in ibm, microsoft, apple, HP, etc. Putting all your money into one or two stocks is basically a mugs game unless you are playing the dividend game.
 
You can make money faster from options but the risk is higher. Stocks are always long term investments unless you catch a bubble very early.

My crazy pick for quick money in the next 3 years is Majesco Games (COOL) valued at under $2 a share. Only because they keep reporting that their games are making a profit off the Wii and DS. Fastest selling console, profit making games and low cost stock so what the hell.
 
teh_pwn said:
The reason why dividends aren't desirable is because the government taxes it.
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I don't get it. But if your stock price goes up and you sell it, the government taxes it too. So is there really much difference?
 
Tsubaki said:
I don't get it. But if your stock price goes up and you sell it, the government taxes it too. So is there really much difference?
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Dividends are taxed twice, once at the corporation level and again at the shareholder level.
 
There's a reason they call stocks "the guaranteed investment." Just do a little research on Yahoo or MotleyFool and you're pretty much guaranteed to make big returns in the long run (around one year).
 
The Black Brad Pitt said:
Im getting ass raped by the stock market currently.

Everything i touch turns to shit.
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Remember the reverse psychology works well with things like index funds. If everyone is pessimistic, and your funds are down big, your gut feeling is to sell. Instead, buy more.

During economic bullish times when a certain sector is performing ridiculously good, sell it and use the money to buy the ones that did poorly (rebalance).

This works because sectors in the long term average to about 9-10% average annualized interest. This is just a basic application of buy low, sell high. Don't let your emotions tell you that you should buy more of what did well, because specific sectors never have historically beaten the market consistently. The exception is that Small-cap value gets like 0.5% more than large cap growth, but that's because there's more risk.
 
AstroLad said:
There's a reason they call stocks "the guaranteed investment." Just do a little research on Yahoo or MotleyFool and you're pretty much guaranteed to make big returns in the long run (around one year).
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:lol

Oh AstroLad.
 
AstroLad said:
There's a reason they call stocks "the guaranteed investment." Just do a little research on Yahoo or MotleyFool and you're pretty much guaranteed to make big returns in the long run (around one year).
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Dammit, I did a spittake on this one.

Where's my paper towel?
 
onipex said:
You can make money faster from options but the risk is higher. Stocks are always long term investments unless you catch a bubble very early.

My crazy pick for quick money in the next 3 years is Majesco Games (COOL) valued at under $2 a share. Only because they keep reporting that their games are making a profit off the Wii and DS. Fastest selling console, profit making games and low cost stock so what the hell.
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The games may be making money, but the company's fundamentals look like complete ass. There is a reason why the stock is valued at $1.
 
Cyan said:
Just judging from this post, this is a bad idea for you.

If you must, take a small amount of money that you can afford to lose, and try day-trading with that.
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Well lately I've been able to make some virtual cash out of day trading. Something to the likes of 300$ by investing 40k and about 200$ out of 20k. I don't know if I'd be as daring as to put all my money in one stock if this was real money. But nontheless I'm researching and experimenting before playing with real money.
 
Mato said:
Well lately I've been able to make some virtual cash out of day trading. Something to the likes of 300$ by investing 40k and about 200$ out of 20k. I don't know if I'd be as daring as to put all my money in one stock if this was real money. But nontheless I'm researching and experimenting before playing with real money.
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$300 from a 40k investment? :lol

youredoingitwrong.jpg

Phoenix said:
What stocks do you own so I can sell them? :D
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Embattled shopping centre owners and Speculative Iron Ore miners do it for me. But on the Australian stock market.
 
The Black Brad Pitt said:
$300 from a 40k investment? :lol

youredoingitwrong.jpg


Embattled shopping centre owners and Speculative Iron Ore miners do it for me. But on the Australian stock market.
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Well if i could be making 300$ a day, every day, that would be about 7000$ a month (weekends off) so that would be quite an improvement from my current income. No offence, but some of you people really come off as arrogant idiotic snickers who use neogaf to fuel their ego.
 
Mato said:
Well if i could be making 300$ a day, every day, that would be about 7000$ a month (weekends off) so that would be quite an improvement from my current income. No offence, but some of you people really come off as arrogant idiotic snickers who use neogaf to fuel their ego.
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You can probably earn that much on 40k for a time but day traders eventually bet on the wrong stock and have to get a job just like the rest of us.
 
definitely don't invest until you make a profit in a week or two at a fake game. join a "league" with your friends and see if you finish near the top to see if you are investor material or if you would just be flushing your money down the toilet.
 
Mato said:
Well if i could be making 300$ a day, every day, that would be about 7000$ a month (weekends off) so that would be quite an improvement from my current income. No offence, but some of you people really come off as arrogant idiotic snickers who use neogaf to fuel their ego.
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Do you have $40K to invest in the market?
 
AstroLad said:
definitely don't invest until you make a profit in a week or two at a fake game. join a "league" with your friends and see if you finish near the top to see if you are investor material or if you would just be flushing your money down the toilet.
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gaf should start a fake stock league.
 
Mato said:
Well if i could be making 300$ a day, every day, that would be about 7000$ a month (weekends off) so that would be quite an improvement from my current income. No offence, but some of you people really come off as arrogant idiotic snickers who use neogaf to fuel their ego.
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A friend of mine once bought a limo using similar logic. Renting it out at £100 per hour, average 28 hours per week = £5600 per wekk - Wahoooo...

I'm looking to get into the stock market as well because I like the idea of making my money make money but doesn't the idea of risking 40k to make $300 jar your risk/reward sensibilities?

Where are all of the money suited, rocket booted finance monkeys that infest GAF? Oh shine your financial light down on me...
 
Tideas said:
3) Like #2, but wait til the stocks split
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Stock splits don't change anything except the amount of shares you can buy with your dollar. Think of it like cutting a sandwich in half -- you may have two 'sandwiches', but the amount of food you're getting is still the same.

Relix said:
You can also short on stocks... which is the opposite. You earn what the stock goes down since you purchased it. This is a speculation or "bears" market, which is what we are facing these days (especially on oil). This is frowned upon as its a bit... greedy, but it still makes money
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Why would it be considered greedy? You're just selling stock (albeit, stock that you borrow rather than own).

Mato said:
Well if i could be making 300$ a day, every day, that would be about 7000$ a month (weekends off) so that would be quite an improvement from my current income. No offence, but some of you people really come off as arrogant idiotic snickers who use neogaf to fuel their ego.
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Does the simulation you're using take into account the taxes and fees that you would incur performing the trades in real life? Also, the risk/reward ratio on that trade is terrible.

I'm not convinced that anyone can consistently beat the market over the long term with any consistency by day trading. You're better off investing more long-term, either in index funds or individual stocks, which saves you both time (a few hours a week to review your positions versus full-time hours trading stock) and money in taxes and fees. Read A Random Walk Down Wall Street for a good overview on investing and the market.
 
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