What is included in income in the stock market?
Let us now examine in detail, what is the source of the income received by the investor in the stock market? After all, if the investor receives income, it means that someone pays him the income? Who pays for what the investor in the stock market?
The thing is, that when buying shares, investor's income is formed at the expense of obtained by the company profit, as the action gives the investor the right to participate in distribution of profit.
This happens as follows:
The profit of the company is divided into two components: dividends and retained earnings. The first directly is the income of the owners of stocks, and that's retained earnings remains within the company (on balance sheet), and if the company disposes of the money resources effectively (which they usually do), that is, investing them in the expansion of production and business, it turns out that the retained earnings still works for the benefit of shareholders, contributing to the increase of future profits and dividends. Now, on the stock market received by the company retained earnings leads to an increase in the market value of the shares (that is, their market prices) and this is the second (in addition to the received dividends) source of income of the investor when working with shares.
Long-term growth of the market value of the shares together with dividends in the aggregate share of investment income per share.
In addition to the investment income on the stock market is getting more and speculative gains. Speculative income is income in excess of the investment obtained through the purchase of shares at low prices and selling at higher. In fact, the speculative income arises as a result of a better understanding of the investor of the situation on the stock market compared with other investors. That is, to obtain a speculative income you need to have not only basic, but also some professional knowledge. Receipt of speculative income is rather laborious, apart from the knowledge necessary experience, patience, stamina and other personal qualities. However, on the market there are successful traders are able to earn up to 100% and even more.
