I’ve been asked many a time on how it is possible to generate a stream of income from the stock market. Most people are perplexed as to how holding a stock can produce anything more than just paper gains on your trading account!

You Are Investing In A Business, Not A Stock

Well, the answer is easier than you think.

The first thing you have to understand is that listed stocks are not merely numbers hopping around on screen. Behind every stock is a real world business that is constantly changing and in a dynamic state, and you actually own a piece of this business.

Now you’re starting to think like a Value Investor!

As a Value Investor we always think in terms of business ownership.

This allows us to see past the short-term volatility that the market presents… this volatility is what causes the downfall of many a speculator!


3 Ways To Extract Cash From Your Investment

Because you understand real business with tangible value, it is possible to extract cash using several methods, namely:

  • Dividends
  • Capital Gains
  • Option Premiums

1)  Receive Regular Dividends

As a company makes profit from its business operations, it can choose to retain this money for future growth plans, pay off debts or return this money to shareholders in the form of declared dividends.

extract cash from stock holdings

Every quarter, Warren Buffett receives an estimated $140,000,000 USD of dividends from his investment into Coca Cola. Since he purchased the stock in the 1980s, he has received a total dividend sum that covers back his initial investment by multiple folds.

If you are interested in receiving dividends, the key is to hunt for financially sound companies with consistent declaration of dividends. It is also important to assess that the company’s profits can give you dividends sustainably, for years to come.

extract cash from stock holdingsJenniser, above, is one of Value Investing College’s graduates who utilises dividends to help with her daily costs of living. At the time of writing, she is creating about $800 a month passively from her portfolio.


2) Sell Your Stock When It’s Overvalued

From time to time, it is reasonable to sell stocks that have grown in your portfolio as part of rebalancing, especially if the stocks are overvalued. This can provide a sudden surge of income as you cash out on capital gains.


3) Use Options Strategies For Regular Cash

Options are an interesting way that investors can use to generate cashflow from their holdings.

By promising a possibility to transfer ownership of stocks at a fixed time, investors can create cash through the sale of options to other investors. By following the practice of selling covered options (backed by capital and stocks) it is possible to utilise options in a much safer manner than what has been called “naked options” (not backed by capital or stocks).

extract cash from stock holdings

Calvin and Chloe (above), an engaged couple who learnt Options Selling from Value Investing College, love to use this particular strategy to create cash returns for themselves.


If you would like to find out more on how you can generate cash from stocks using proven methods, start investing in Singapore now by grab your complimentary pass to our legendary workshop by clicking the button below:

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This article was written by Aaron Tan