Introduction

I'm not a major shareholder of anything, but I can explain how knowledgeable investors and major shareholders can earn from their stock investments. For those interested in stock market investment and wondering if major shareholders earn daily or monthly profits, this guide is for you.

Profit Mechanisms for Major Shareholders

There are three primary ways major shareholders can earn from their stock investments:

1. Dividends

Dividends are payments made by a corporation to its shareholders from its profits. Major shareholders, like any other shareholder, can benefit from this mechanism. Each month or quarter, dividend-paying stocks provide payouts. In my case, ATT pays dividends quarterly, while Realty Income pays dividends monthly.

While I could choose to receive these dividends in cash, I prefer reinvesting them back into the issuing stock. This strategy, known as dividend reinvestment, enhances the long-term value of my portfolio by allowing compounding growth without taking reinvestment risk.

2. Capital Gains

Capital gains refer to the profit made from the difference between the purchase price and the selling price of a stock. If the stock price rises above the purchase price, major shareholders can sell and realize gains. Traders, for instance, might engage in short-term trading, selling and buying frequently. For the average investor, this process could be monthly, yearly, or even longer depending on their investment strategy and goals.

3. Total Return

Total return includes both dividends and capital gains realized. When a company declares dividends and the stock price appreciates, the combined effect can lead to significant profits for major shareholders. If the stock is sold for a higher price, not only do you earn from the dividends but also realize capital gains. Conversely, if the stock value declines, losses can be incurred.

Real-Life Examples and Tracking Progress

In April 2018, I received $71.28 in dividends, followed by $42.18 in May 2018. Although I haven't documented my June dividends yet, you can track my ongoing progress on my investment income report. If you're interested in detailed tracking, it's essential to maintain thorough records of dividends received and capital gains realized over time.

Compounding Benefits and Tax Implications

Major shareholders benefit from the compounding effect of dividends and capital gains. For example, if you bought shares at an initial price and the stock appreciates, the value of your dividends also increases, leading to a higher reinvestment value. Additionally, the increased asset value enhances borrowing power and net worth.

For instance, if you bought Bitcoin at $5.00 and sold it at $10.00, you would pay tax on $5.00 in gains. However, if the sale price was $25000, your tax base would expand to $24995. The compounding effect can be significantly higher if you hold onto investments for a longer period.

Long-Term Capital Gains and Tax Efficiency

Long-term capital gains, which are the profits made from holding stocks for more than a year, are usually taxed at a lower rate than short-term capital gains. This can provide a significant advantage for major shareholders who prefer long-term holding strategies.

Moreover, the concept of stepped-up basis is crucial for transferred assets. If assets are held for generations and then passed through an estate, the value of the asset is stepped up to its current value at the date of inheritance. This can provide substantial tax benefits when assets are transferred to heirs.

Conclusion

In summary, major shareholders have multiple pathways to earn from their investments. Whether from dividends, capital gains, or a combination of both, these mechanisms can contribute to significant financial gains over time. Understanding these strategies and their tax implications is crucial for making informed investment decisions.

For more detailed information, you can track your earnings and investments by maintaining regular records and staying informed about market trends and tax regulations.