Investors can make money from stocks mainly in two ways:
- Capital appreciation : This means making a profit by buying a stock at a lower price and selling it later at a higher price. The increase in the stock’s value over time leads to a capital gain when the stock is sold.
- Dividends : These are regular payments made by companies to shareholders, typically derived from profits. Dividends provide a source of passive income while holding the stock.
These two methods—capital appreciation through price increases and income through dividend payments—are the primary ways investors earn returns from stocks.