The stock market this year could best be described as a yo-yo. It goes up and down, and up 📈 and down 📉. But despite that, it is still better to be invested than not.
There are multiple ways to get returns by being invested in the market. Perhaps the most definable way is by capital gains. A capital gain is when a stock you own increases in value. If you bought one share of Baskin Robbins stock at $100 yesterday and today that stock is worth $110, your capital gain is $10.
Another way to make money in the market is by receiving dividends simply from owning a stock. Each company decides the amount and frequency that they distribute dividends to each stockholder. If Baskin Robbins decides to give $1 in dividends this quarter for each share, you now have $101 invested from the one share you own. It is recommended to reinvest dividends instead of taking them out as cash so your investment continues to grow.
Between capital gains and dividends, that is the total amount of your return. In our hypothetical Baskin Robbins investment, we started with $100, plus capital gains of $10, plus a dividend of $1. Your investment balance is now $111, $11 of which are returns, so your return percentage is 11%. Combine this amongst multiple investments and multiple years of compounding. Not a bad way to make extra money. Of course there are always risks involved with investments, so the idea is to stay invested over time to weather through down markets and have positive returns.
MMM tip: Have you opened an investment account yet? Now is the time to take a test drive in the market. Buy one share or a fraction of a share of your favorite company. I am talking a very SMALL dollar amount (less than $100)! See what it does over the next 12 months.
Until next week!
Dariene
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Disclaimer: This newsletter is for informational and educational purposes only and should not be considered financial, investment, tax, or legal advice. I am not a licensed financial advisor. Please consult a qualified professional before making any financial decisions.
