Stock Profit???

Question

So if you buy a stock at 98 and sell at 105 thats only a 7 dollar profit, so why would you even want to invest in stocks if you're only going to gain so little? I don't think i understand stock profit so please help! Thanks ALOT!!!

Answer 1

Ok... 7 dollars gain on a stock is not much, it's only 7%, you can get 5% a year from a bank at most, but you could do this many times a month or a year and end up making 20-50% a year, wich is a decent profit for a couple of hours work a week. this is much better than your money stuck in a savings account. the stock market is the perfect business, and I just recently started making a living full time out of it... good luck

Answer 2

The simplest explanation is that over the longer term stocks can go up considerably more than that. For example in July 2002 you could have purchased a share of Apple computer stock for $8/shr. Yesterday Apple closed at $132/shr. If you'd spent $800 for 100 shares of Apple (and most investors buy more than 1 share of a company) your investment would now be worth $13,200.



Apple has had an extremely successful half decade, but even the stock market as a whole has gone up about 50% since 2003. Over the past century the market went from 43 to 12,000.



Even the example you mention is a pretty good 7% return-- if the stock went up that much in a year it'd be a much better investment than a savings account.

Answer 3

What you are missing is the number of shares.

Each share of the company stock you buy is $98. If you buy

100 shares, the total price will be $9800. Now when you sell the stock at $105, you will be selling 100 shares and you will be getting $10,500. Your profit, excluding transaction fees, would be $10500 - $9800 or $700. I use TD-Ameritrade to buy and sell stocks. The transaction fee for each buy and sell is about $10. The net profit including transactions fees for your example would be $680.

Answer 4

That's a 7% profit. Not too many banks pay that. Maybe you could read a book on stock investments.

Answer 5

this is true and i have the same thoughts!

you can however get a stock at around the same price that gains $10 wich is around 10% and if your investing $10,000 then that turns into a $1,000 profit!

you will find stocks that are cheaper especialy under $10 will make bigger gains and profit!

check out http://goldenbullpicks.com

Answer 6

The profit would be $7 for each share that you own.



So if you own a 100 shares, you make a profit of $700.

Answer 7

well, if you bought last week and sell only 7 days later, your profit rate before costs is 7 dollars times 52 weeks a year divided by 98 dollars cost, or 371% annually.



at 371% annual rate of profit, if you can find more of these deals, you'll quickly become wealthy.





oh

Answer 8

How much so you think you will make by putting it in the bank? If I have 1000 shares that 7 dollars equals $7000. How many years will it take you to make that in a bank or thru CD's. This 7000 dollars could have been made in a weeks time.

Answer 9

Its about leveraging your Money. You'd have to buy a lot more than one share to make it worth your while.



Your logic is as follows: The Rolling Stones have a world tour concert. It costs them 500 million to produce the tour. The Stones only make $35,000,000 in 6 months. Who would want to do that?



The more shares you own, the more money you would make.

Answer 10

Got your calculator?

I buy 100 shares of PCU in Dec 06 for $ 5160. ( $ 51.60 per share)

I sell on Apr 16 for $80.03 per share...I now have $ 8000. to buy 218 shares of Medimune ( at $ 36.70 )

On Apr 23, I sell those 218 shares for $56.57 each...$ 12,332.

Same day I buy 306 shares of WNR ( Western refining) for $ 40.30..( $12332. worth )

If I sell Monday morning it's worth $ 19173.96

$ 14000. and change since Christmas....

... so the lesson is..you're not buying one share..you're not holding forever..and you're constantly reading and looking for info ...PCU: feeding China the metal it needs to build....Medimune:most likely of three companies strongly eyed for takeover ....Western refining...refining boom starts in Mar or Feb ( most years) and builds 'til mid- summer.

Info available to everybody... and there's more than one way to do things...remember that 100 shares of PCU ? Even if I didn't make the trades, they would be worth $ 10,193.00..

( more than doubled the money in 7 months.)

That is a little example of " stock profit" and " why you would want to invest..."

Hope it helps.

Answer 11

Hi ,



The $7.00 you made as a profit is called capital gain. In

addition you stand to share in the company profits which

are called dividends .

Rgds.............

Answer 12

It comes down to percentages, keep in mind that 7% on 1mil dollars or on a 100 dolars is still 7%.



Lets look at some examples and ways how you can start with a little money and see it grow into larger money.



The old saying that you need money to make money is the cornerstone of any investment. Lets say you started with 1000 dollars in your investment account, and your goal is aggresive growth and very little risk adversion.



you buy that stock at 98 you got a whopping 10 shares so the stock goes up 7 bucks, and you sell. Well congrats you made 70 bucks.. Sounds ok right? However now you must minus commisions, 10 bucks when you bought it and 10 bucks when you sold it, Well thats 50 bucks, not for a week swing trade... You are ready to put that 50 bucks into your next stock and then you realize got to pay capitol gains tax (depending on whether you held for a year or not)



So now that 50 bucks is around 37 dollars (i have a cpa im not one)

So your point is valid, if you dont have alot of capitol and cant afford more shares, but to folks who can that 7 dollar move or bidu recent move can be very profitable..



back to saying, takes money to make money

the more money you have the more you can make. conversly the more you can lose..



Where there is risk there is reward

and it brings us too a very important concept Leverage



now, instead of options like they use in the example below , substitute small-mid cap and growth stocks. I think options carry more risk versus reward then small cap or growth stocks. 90% of options expire worthless



Leverage



What does it Mean? 1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.



2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged.



Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains and losses. In the business world, a company can use leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and credit risk of default destroys shareholder value.



Investopedia Says... 1. Leverage can be created through options, futures, margin and other financial instruments. For example, say you have $1,000 to invest. This amount could be invested in 10 shares of Microsoft stock, but to increase leverage, you could invest the $1,000 in five options contracts. You would then control 500 shares instead of just 10.



2. Most companies use debt to finance operations. By doing so, a company increases its leverage because it can invest in business operations without increasing its equity. For example, if a company formed with an investment of $5 million from investors, the equity in the company is $5 million - this is the money the company uses to operate. If the company uses debt financing by borrowing $20 million, the company now has $25 million to invest in business operations and more opportunity to increase value for shareholders.









There are 2 ways to leverage yourself, you can use margin. You can also buy lower priced stocks so you can own more shares. Now lets say you bought margined the 1000 dollars in your account. So now you had 2k of buying power and you bought 400 shares of a 5 dollar stock, and that stock went to 8 in a 1 month swing, now you got 1200 before capital gains, commisions are still 20 so its small precentage of profits, a incremetnal fee of 5 dollars to borrow margin for a month. Now you are looking at taking 800 bucks after all is said in done.



Much better then that 37 prior buying the 98 dollar stock..



heres another post of mine about investing that might help as well



.....................................................................................................





Ok first off congratulations on investing, looking for places to put your hard earned capitol to work for you is paramount to building wealth. Now this new found road is not without its perils, and should be treated like any of lifes great journeys.



Preparation, due diligence, and some elbow grease can prepare you to start your journey,



1) Arm yourself with as many tools as you can, Read Read and Read ( did i say read?) Every thing you can in your local libary about investing, fundamental .and technical analysis



A few books to start would be Rich dad Poor dad, Warren buffet and trump's book, and for a understanding of stock technicals and movements read A beginers guide to trading by toni turner.



Ok, maybe after a little reading , now your feeling like you can give this investing idea a shot and now you want to put the principles you learned to work.



2)So what company to invest in, ?

Well first you have to have a plan certain parmeters our goals that ideally you want your investment to provide.



lets say you are looking for a stock that has the potential to go up 100% + and your time frame is 1-3 years. Well from your reading, you remember that generally small - mid caps and growth stocks typically out preform the general market . You also remember that on average the stocks market has given 10% roi. You are shooting for 33% each year over 3 years. So that would be a example of one goal.



You also were watching live earth, and enjoying the music and thinking how you could do your part to help out.

So you were doing some research on alernative energy and green companies on hoovers.com



Maybe another goal, is to invest in a company that not only can make you money, but whos product has the ability to disrupt the market place and is has a socially responisble misison statement or ethos. The point is, your dollar is your vote at the supermarket or in the stock market. Without investors some of the greatest technologic advances of the last century would of never taken place. So just realize your investment is you actively taking part in what the world could be like in the future. ( sorry to ramble, im a better talker then i am writer =], )

As smart guy, you realize that global landscapes are changing and green energy will be the new paradigm of the future and would probably make a good investment.



So you start you research, you get a list of green companies.When you invest, you may be doing it just to make money, but your investment also spurs the world we are born in live in and will die in.



You stumble across a stock called Raser Technologies Inc., because you think hybrid demand will increase and there will be a shift from oil, and efforts to reduce energy consumption accross the board. Since Raser is a relatively new company, that holds many patents, and is just turning the corner from a R&d company into commercialization of its technologies. You think this could be a great company in its infancy and could fit you investment goals.



So now you check various places to find info on the company

you check the website (www.rasertech.com) , the sec filings, and maybe yahoo or msn.com for ratings if applicable and recent news etc......Then you check the stocks technicals, you see that the stock has a strong uptrrend developing and see that historically stock is undervalued and oversold relative to its previous high of 50. You examine its fundamentals, share structure , any revenues cash in the bank.



keep in mind when we invest in potential growth stocks, we are not looking at what has happned in the past but more concerned to what the future holds. Since the the company which was founded in 2002 and up until now has been a research and development company, dont expect it to see many revenues now. Since the company is about to carry out the commericilization of its techs and go online with its geo thermal projects,you are investing for the bright future.



3) finding a broker so you can invest



Now you must choose a broker, i would think a online retail broker would be perfect for you when begining.



etrade.com schwab.com scottrade.com

or a few adequate choices.





4) Now if you think you need more experience, and you dont want to risk your hard earned money yet. You can choose a site like www.clearstation,com and paper trade your investment ideas. This way if you are wrong about your analysis, you can learn without losing real money.



paper trading will allow you to monitor your success, the bad part is if you are right then you dont make any real money paper trading=[





5) Ok here ya go, you are ready to palce your first order

few tips always use limit order , market orders put you at the mercy of the market makers and is not reccomended ever!



Another tip always sell on the ask never the bid!







Before you hit that trade button,you have developed your investment plan, contigency plan, and done all your research.



Plan your trade and Allways trade your plan, use the tools you have learned and always try not to invest on emotions>>>>>>



Use research technicals to make investing decisions not emotions.



I hope this is the best answer and you have a long prosperous road as a future investor, its late now so please excuse me for the grammar and spelling errors. If my opinions can be of anymore help feel free to contact me.



goodluck

Source(s):



http://moneycentral.msn.com/investor/hom...

hoovers.com

http://en.wikipedia.org/wiki/investment...

www.stockcharts.com

Answer 13

u have to get broker's advice



http://www.freewebs.com/investyourmoney...