How Do You Make Money on Stocks?

There are generally two ways to make money on stocks. The first is when a company pays a portion of its profits to you as a shareholder in the form of dividends.

The second is when a stock you own appreciates in value – in other words, when the stock’s price goes up, which means people are willing to pay you more for your shares than you paid for them.

If you hang onto a stock that has gone up in value, you have what's known as “unrealized” gains. Only when you sell the stock have you locked in those gains. Because stock prices fluctuate frequently, you never really know how much you've made until you sell.