Eli5: How is money made from stocks?

Question

I understand buy low and sell high, but then what?

If, say the S&P500, keeps growing there is no ‘peak’ to sell at. Do the gains compound? if so how? Or do you just hold it forever and sell when you want to get the money?

In: Economics

Answer 1

There are a few ways to make profit in the market, Buy low sell high, Short the market (Bet that a stock will go down) and Dividends (basically a company pays you to own their stock.) Some people live off dividends. Just having huge amounts of money in high paying dividends and do absolutely nothing and get a check either monthly, quarterly or annually. Some people make HUGE amounts of money fast by buying options which is even riskier than buying stocks or mutual funds.