1. Buy Low/Sell High - After doing research on a corporation, you decide that the value of the stock is going to increase over time. For example, you buy the stock now at $10 per share and, two months later, the value has increased to $15 per share. By selling the stock now, you can make a $5 profit for each share you have purchased.

2. Dividends - Stockholders receive a share of the companies profits. Dividends are paid to a stockholder every three months or quarterly. If you own the stock during the times that these dividends are paid, this becomes income for the stockholder.

3. Short selling - Sell High/Buy Low - This is a way to make money in the stock market when the stock prices are going down. If you think that the price of a stock will go down in the future, you can sell at its current price, even though you do not own the stock yet. If the stock goes down in price, you can now buy it at the lower price and you will earn the difference between the two prices. For example, Microsoft is selling for $150 per share today. You sell 100 shares that you do not own yet, and in the future the stock drops to $110 per share. You now buy 100 shares of the stock and you have made $40 profit per share. Think of short selling as selling something today, but you will actually deliver it to the buyer sometime in the future.
 
 

1. Buy High/Sell Low - You buy stock hoping that its value will go up, but instead it goes down. You decide to sell it before you lose any more money.

2. Dividends - You buy stock thinking that it has a high dividend, but the corporation loses profits and reduces the size of its dividends.

3. Short Selling - You sell a stock now thinking it will go down in price in the future, but instead it continues to go up. You must buy it at a higher price than you sold it. You will lose the difference between those prices.
 
 

Last updated July 21, 1999
by Megan McCarthy