Which best describes how an investor makes money from an equity investment?

A. By earning interest

B. By selling the asset for a profit

C. By raising capital

D. By growing the asset

Answer

Investors earn money from equity investments primarily through capital gains by selling stocks for a higher price than they purchased them and through dividends received from companies. Understanding these mechanisms helps investors maximize their returns. Therefore, the best description of how an investor makes money is by selling the asset for a profit.

Explanation:

How Investors Make Money from Equity Investments

Investors make money from equity investments primarily through two mechanisms: capital gains and dividends. Here’s a breakdown of these concepts:

In summary, investors can profit from selling their stocks at a higher price than they bought them for or by receiving dividends from the companies they invest in, thus maximizing their returns on equity investments.