Haven’t you ever felt tempted to kickoff trading? Or does your mind say “No trading. You don’t want to part with your hard earned money, do you?”. Let us give your mind some peace and find out if you can actually make money from share markets.
There are two possible ways by which you can make money from share markets. They are, when a stock appreciates in value and the next is Dividends.
When a stock that you hold appreciates in value.
For example, you own 100 shares of NTPC Ltd which you bought at Rs 120. Currently, they are being traded at Rs 133 and that means you have made a profit of Rs 13 per share. Here, the cost you paid was Rs 12000, but presently their value has soared to Rs 13300, giving you a profit of Rs 1300. This is known as “Unrealized gains”. It means, only when you sell the shares can you actually realize the profit. Until then, your gains are just virtual.
Dividends.
When you are buying a stock, you are buying a piece of a company. Dividend is a payout that some older, well established companies make to its shareholders that reflects the company’s earnings. It is unaffected by its share price and are paid out on a regular basis. More shares means more dividend.
How Nikhil became a Day Trader?
Nikhil a graduate, knew quite well about trading. But, he was skeptical to dive in. In order to clarify his doubts, he approached his father Goswami who was working with a leading brokerage firm.
He asked, “Dad, I have adequate knowledge on markets and the various trading instruments. But when it comes to trading, I am indecisive. I wanted to ask you if I can actually make money from trading?”
His father replied, “Yes, anyone can make money from trading. I believe you are interested in quick money, so go for intraday trading. It requires a bit of research on your part and a lot of undivided attention. Timing is very important.” Nikhil seemed pleased.
How Janet became a Stock Investor?
Janet has similar apprehensions. She was a software engineer who saved a good percentage of her monthly salary.
However, she had a few concerns like
- “What low risk investment plan suits me the best?“
- “How do I reduce my tax?“
She had read an article which said that equities, in longer run, can offer higher return than FDs. Unconvinced, she approached Mr. Goswami.
Mr. Goswami said, “Its true! FD income attracts higher tax as it is considered as regular income while profits from trading is considered capital gain which calls for a lesser tax rate. Also sometimes, inflation can eat away the profit from FDs (when inflation> Interest on FD). Therefore, I suggest you to invest in stocks for long term. Apart from profits by increase in share price, you can also benefit from dividends and stock bonus. Some good stocks are Yes Bank, SBI, L&T, etc.”
Mr. Goswami’s answers were eye openers for Nikhil and Janet. Nikhil commenced day trading and is now an expert with it. Similarly, Janet has invested in a diversified portfolio and is at a profit.
You can make money from Share Market
In short, knowledge, cash available to invest, time (entry and exit) and risk tolerance are a few factors that help in making money from share trading. You don’t have to be an expert, you just need to play your cards right.
Recommended Read :
- What is Rights issue of a Share?
- Convertible Preferred Shares
- What is Capital Market?
- Indian Stock Market Trading Hours
- Guide for Stock Trading in India
- Indian Online Stock Market Trading
- Market Timing of Indian Stock Markets
- Indian Stock Market Holidays
- What is Volatality?
- What is a Volatile Market?
- What is Pre Open Trade Session?
- What is STT All About Securities Transaction Tax?
- IIP Data and Stock Markets
- Online Trading Brokers in India
Share trading has been a source of income since a long time. There have been countless changes in the financial market over all these years. Many different types of shares, financial instruments have been developed which actually yeild high returns. Share market works mostly on speculations and know can be 100% sure of the market movements. This makes it a bit risky and makes a person think before investing. There are many strategies like hedging, arbitraging, derivatives, etc. which help to reduce risk. There are many financial experts available today to guide first timers. Share trading is indeed a good way to earn money and investing money in shares is not bad. It is risky but can give good returns if you collect sufficient information on market analysis and financial instruments.
The share market is a one game. In spite of getting high returns share market has high risks of downfall. No doubt investing in share market is a way for quick and regular income. A person with a good knowledge of trading and has the ability to tolerate higher risks come in the way can go for share market.
This is an awesome post that made me understand about stocks and trading .The examples of Nikhil and Janet seemed very impressive to me as it gave an easier means of understanding the core concepts. The blog was detailed and explanatory. No doubt this is a best one. Thanks author for choosing this write.