Your Questions About Money Making Stocks

Michael asks…

How do i collect money i make from stocks? Do i just go to my broker and they give me it?

I’m new to the stock market so i dont know. Do i have to sell my shares in order to make money or how does it work? DO i just go to my broker everyday and collect the money? PLEASE HELP.THNX

John answers:

Goodness gracious man, how do you think this works? When your shares lose money are you going to give the broker the money that was lost? Of course you have to sell in order to have cash money. Go to the broker and ask him or her all your questions, they would love to take advantage of you. If your not going to learn on your own how this works your going to be taken advantage of by any salesman you run into. Pick up a book, google “investing” there is plenty out there.

Betty asks…

Is this money and stock market situation making you spend your money or save your money?

Now with the stocks and the bad situation at the Wall Street and many banks going bankrupt, is that making you spend your money because you are scared of an inflation or are you saving your money in the hope to have some left when it comes to retirement or for your or your childrens future???

John answers:

I’m saving – here’s some ways for you to save too:

Steven asks…

How can you make money off of stocks?

Are their other ways to make money off of stocks, other then dividends, that actually pay you in cash instead of reinvesting?

John answers:

When you sell your shares for more than you paid for them, you will realize a capital gain.

Laura asks…

How do you make money shorting stocks?

You make money when the price falls, but why and how?


John answers:

Before I start, I will tell you how the traditional method of making money from stocks works. The traditional way is to buy low and sell high, which is known as going long because you are trying to make money from a price increase.

However, instead of going long, you want to go short, i.e. Make money from a drop in stock price. Here is how it works:

Let’s say the stock of Company XYZ is trading at $50 per share. An investor thinks that XYZ’s stock is overpriced and expects it to fall. The investor will then go to his broker and ask to borrow a share of XYZ (you can borrow more than one share if you want to). When the investor borrows that share from his broker, he is essentially agreeing to return that share to his broker. After acquiring a share of XYZ, the investor then sells that share for whatever it is currently trading at, and let’s assume that he sells that share for $50. Remember, the investor has to give back the share of XYZ that he borrowed but he wants to keep some money from that transaction. So he waits for a week or so and the price of XYZ drops to $40. The investor then decides that this is a good time to give back the share so he buys XYZ at $40 and then gives that share back to the broker. From this transaction, he has made a profit of $10 minus any fees associated with the short sale.

If you look at the above situation, the investor was making money traditionally but in a different order. When you go long on a stock, you buy low FIRST and then sell high. But in the above situation where the investor was going short, he sold high first and then bought low and the gain is in the form of saved money.

Being an investor myself, I can tell you that shorting stocks is very risky. Let’s take the same example described previously. Let’s say that after the investor sold XYZ for $50, the price shoots up to $60 the next day and enjoys a run where the stock gains money for the next few weeks. The investor ends up losing money because he has to repurchase that one share of XYZ and give it back to the broker. Also, notice that the price of XYZ can shoot up to infinity. There is no limit to how high the stock can go but there is a limit to how low the stock can go and the stock cannot go below $0. So basically, the risk is theoretically unlimited.

You may ask who would do this. Many seasoned investors/traders do this from time to time. Usually, stocks that have been going up for a long period of time (e.g. A few weeks) will be shorted. The theory is that once a stock has had a good run, traders will want to sell in order to lock in a profit. However, short sellers essentially have to use their hunches and best judgment to decide when to short a stock. However, one ought to look at how low the stock can go because chances are that they will have to pay commissions just to make the necessary trades but may also have to pay additional fees, and all of this will eat into their profits.

Jenny asks…

How to make money which stocks when oil goes up or down?

When oil is going up or down, which stocks can i invest into for a week or a couple months? Are there stocks that go up or down with oil or gold? futures seems to risky for me. i want to a day,week or month trader.
thank you for a fast reply, tom

John answers:

I’m also interested in oil but am waiting for it to fall below $30 a barrel before buying (if it even falls that low). You can buy an oil ETF like United States Oil (USO). Some oil ETF’s are lousy, not reflecting the current oil price. USO hasn’t risen as high as when the oil price was at its peak and has fallen lower than when the oil price dropped: so you lose more when it goes down and gain less when it goes up. But so far it’s the closest correlation to oil pricesw I’ve seen.

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