Money-Making: 3 Ways to Invest In the Stock Market
As a stock investor, there are three ways you can use the stock market to accomplish your goals:
- Capital gain: buy a stock share at a low price and sell it at a higher price – the difference between your buy and sell price is your gross profit
- Cash flow: have a stock portfolio that pays out dividends or buy a stock share and option it to earn income for ongoing cash flow
- Hedge: buy insurance (options) on your stock share to protect it
All three of these are valid actions. It’s important that you know about these different strategies so you can make smart decisions.
Ask yourself this important question:
“What are my investing goals? Is one of them to increase my net worth? If so, what investments should I buy to accomplish this?”
If stock investors want to increase their net worth with stocks, they can buy shares and hold them in their portfolio, hoping they increase in value. Many people are already doing this through retirement plans such as a 401(k), an IRA, and mutual funds.
However, your goal may be to generate cash flow. You may want to use the strategy of selling options to meet your cash flow goal. Cash flow is valuable to you because it’s how you are able to feed your family and pay your bills. Simply having an asset that increases your net worth does nothing to improve your cash flow situation. That’s why Rich Dad encourages people around the world to think differently and seek assets that give them cash flow.
When you have assets that generate cash flow for you, it can help you now and through retirement. Remember: Net worth doesn’t help you retire; cash flow does.
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