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

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

There is no “then what”. 

Buckets of apples cost $10 today. You buy a bucket of apples. Tomorrow, they’re selling for $15. You sell the one you bought yesterday. You made a profit. 

You buy a stock for however much it costs today. Maybe you’ll sell it tomorrow. Maybe you’ll hold on to it. That’s up to you. If the price of that stock goes up, you can sell it for a profit. If the stock of that price goes down, either you just keep holding it or you sell it for a loss. 

That’s it. It’s simply gambling.