As promised I’m going to share with you the money associated with buying stocks as well as how you make money from stocks.
First, let’s talk about where and how you’ll be spending your money.
- Opening your stock account- This amount varies between brokers and the type of stock account you’ll open. For example, a collective investment scheme might be cheaper because a fund manager pools the money of different investors and manages the account. On the other hand you have other investment accounts where you pick the stocks that you buy and sell. Brokers usually have varying investment options, it’s up to you to know which one or ones are for you.
- Fees– Every time you choose to buy or sell a stock , the broker charges a commission. There is also a Jamaica Stock Exchange Cess of 0.19625% when you buy and sell a stock. In addition to that, there is GCT on the commission and the Cess. It’s important to note that there is no GCT on your capital gains.
- Buying Stocks– Of course, to buy the stocks you’ll have to spend money. Generally you have to buy at least 100 units of a stock. (It’s handy to check in with your individual broker though). Stocks aren’t usually pricey, there are stocks for as little as 1JMD being sold. Remember though, just because the stock is the cheapest, doesn’t mean it’s the best, you can re-read this blog post to see which criteria you should be looking out for when choosing stocks.
So how do you make money?
- Price Appreciation- This simply means that the stock is worth more than you bought it for and if you sell it you would have gotten a profit.
- Dividends– A dividend is the distribution of profit to its shareholders. The shareholder would be the person who bought stocks in the company. Dividends are paid monthly, quarterly or yearly. Some companies don’t pay dividends at all. Some decide their profits are better spent improving the company and this may translate to a better company and benefit the shareholder in the long run.
In the case of the stock accounts where someone pools the money of varying investors, the profit made is split between the accounts depending on how much money you invested.
As usual if you want to hire me to write you can do so here.
This is not investment advice, I am not a licensed professional.