How to Create a Steady Income With Stocks
A stock market investor faces many different challenges, depending on his goals. One of the trickiest is to create a steady income from stocks. Just like a trip to another area of the country, there are many different ways to achieve the goal, with some riskier than others. A traditional method of risk reduction is to blend different techniques to come up with an income from several sources and methods of achieving the income.
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Things You'll Need
- Historical dividend charts
- Online brokerage account with low trading costs
- Stock programs
- Funds for investing
- Computer
Instructions
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Hunt for stocks that historically produce dividends. While a solid dividend history isn't a guarantee that you'll always receive dividends, it is an indication that the company generally is profitable. Check for stocks in different sectors and company sizes. A sector is a type of industry. For instance, don't have all your dividend producers in the financial services industry. Since 2008, many of the financial firms either didn't produce a profit or required a bailout from the federal government to keep from going bankrupt. Had you had all your stocks in that sector, you would have had no income from your investments.
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Choose preferred stock over common stock. If you purchase preferred stock, you have the first rights to dividends with a fixed amount guaranteed if there's money available for dividends. If funds are limited, the preferred stock gets a dividend and the common stock may not.
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3
Buy with systematic investments and sell the same way. When you purchase an equal dollar amount of stock on a systematic basis, called dollar cost averaging, the average cost per share is normally lower than buying it in a big chunk. It allows you to buy at highs and lows. Selling in a systematic way, to produce an income works the same way. If you sell the same dollar amount of accumulated shares, you not only have the benefit of dollar cost averaging but also taxation benefits.
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Focus on the cyclic price movement of a few stocks. Some stocks have regular cycles where the price falls and rises between two points. Take advantage to purchase the stock near the cycle low and sell when its price is near the cycle high. Repurchase the stock when the price is near the low again and use the gain as income.
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Depend on small daily gains. If you decide to make an income by day trading, don't get greedy. Small bumps and a daily income of a few hundred dollars is a comfortable living. If you make more money one day, tuck it away for the rainy days when your trades lose money. It can all average out to a respectable income if you select stocks correctly and aim for a small profit from each.
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Tips & Warnings
You may get hot tips emailed or faxed to you from people or sources you don't recognize. These are only ploys by people that own the stock to drive the price higher so they can sell at a profit. Use the fundamentals of the company or analyze the technical indicators. Don't just take another person's word that the price will increase.
