Profiting in stock market investing are possible through the following:
1. Stock Price Increase or Capital Appreciation
This is the main reason and the major profit driver in stock investments. Stocks that are bought are expected to increase in price as a result of the success of the underlying business of the company it represent. Theoretically, the more profitable a company becomes, the higher the stock price will appreciate. For example if you bought shares from EDC, DMC or FGEN mid of february this year, chances are you have already gained 20-35% based on the latest closing of the PSE.
Dividend are part of the company income that is distributed to a company. In investing in PSE, I have experienced 3 kinds of dividend: cash, stocks and property. Cash and stock dividend is the most common form distributed to shareholders. Cash dividend can range from less than 1% up to 10% of the stock price (this will depend of course on the market level). Stock dividend, once sold, can be considered a profit assuming that there is no diluting effect occur on its stock price. Property dividend is very uncommon though I have received this kind once during 2009 when RFM distributed both cash and property to its shareholders.
3. Stock Rights and Warrants
Stock rights is the right given to existing shareholders to buy additional shares normally at a discounted price from the current market price. However, this is not always the case just like the unique stock rights offer by Megaworld (MEG) last Feb 2009 wherein stock rights are offered higher than current price but with warrants as a bonus. Warrants is a right to buy stocks in the future (predetermined date) at a given price(strike price). Exercising both rights by buying the additional shares and then selling it to the market at a margin will give profits to the investor. The case of MEG stock rights and warrants for example is a profitable one should the investors exercised it.
For other countries, derivative like Options are common but unfortunately not available in the Philippine Stock Exchange (only companies and institutional investor are doing these transaction like the case of FGEN's call options to buy EDC).