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Did you know there are ways to get some passive income in the stock market while investinng for the long term? Getting a cash flow off of an investment that you own is always a nice thing and can help to make it feel like it is actually an investment.
So, how are you able to get money from your stock? The first strategy is to buy dividend stocks. With dividend stocks the company is actually paying you a percentage of their profits based on a few factors such as how much of the company you own.
An investor can even get an estimate of how much cash flow they could expect to be making by using something called the dividend yield ratio. This ratio looks at how much the stock has paid out to their investors in the past.
So if the dividend yield ratio was 8% then an investor would expect to receive an extra 8% of what they invested into the company as a passive income each year. So if an investor put in $10,000 they would expect to receive an extra $800 in passive income from the stock that year.
That doesn’t seem like much, but it can add up with the more money that is invested into it.
The good news is that there is one other way that an investor can make some cash flow from a stock. That can be done by simply by taking advantage of writing covered call it can be very profitable.
What happens when an investor writes a covered call is they give someone else the right to buy their stock from them at a specific price on or before a specific date. If the other investor doesn’t exercise their call within that time period the person who sold it walks away with the premium they have made.
However if they do exercise their call the investor who sold the call must then sell their stock. So it does have risks, but it can definitely be worth it.
