Invest Money - How to invest money When you lend your money directly to a company — which is what you do when you invest in a bond that a corporation issues — you also receive interest. Bonds, as well as stocks (which are shares of ownership in a company), fluctuate in value after they are issued. When you invest in a company’s stock, you hope that the stock increases (appreciates) in value. Of course, a stock can also decline, or depreciate, in value. But stocks can also pay dividends, which are a bit like the interest you earn from a bank account. Dividends are the company’s way sharing of some of its profits with you as a stockholder. Some companies, particularly those that are small or growing rapidly, choose to reinvest all their profits back into the company. Factoring in appreciation, dividends, interest, and so on helps you calculate what your total return is. The total return figure tells you the grand total of what you made (or lost) on your investment. Unless you held your investment in a tax-sheltered retirement account, you owe taxes on your return. Specifically, the dividends and investment appreciation that you realize upon selling are taxed. Often, people make investing decisions without considering the tax consequences of their moves. What good is making money if the government takes a substantial portion of it away?
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