Whether you’re a beginner or an individual with some experience with stock trading, chances are that you might have heard or read about traders making Rs. 50,000 and Rs. 1 lakh each month. While in most cases they’re true, there are a lot of underlying factors and things that you should know about if you’re about to try it for yourself.
This article can help you understand whether earning Rs. 1 lakh per month from the share market is possible and the various ways in which you can attempt to do it. So, let’s first begin by answering the elephant in the room.
Can you earn Rs. 1 lakh per month from the share market?
To put it simply, of course. It is possible to earn Rs. 1 lakh each month from just indulging in stock trading alone. But, before you get all inspired to jump fully into the world of stock trading, here’s something that you should know.
Achieving this target month after month is not easy even for experienced investors and traders alike. It not only requires a lot of hard work and patience, but also needs quick thinking and appropriate decision making skills.
The stock market, although well-known for its ability to generate high returns, is a very complex environment and can frankly be quite unpredictable at times. That said, it is very much possible for you to earn that much money each month from the share market.
Different ways that you can use to get to the target of Rs. 1 lakh per month
Now, the first step to achieving your target of Rs. 1 lakh per month is understanding the different ways through which you can go about generating that income. Here are three of the most common ways that traders use to generate returns from the stock market.
● Delivery Trading
Delivery trading is one of the most common forms of trading that individuals take part in. In this, you place a buy order for the shares of a company from your trading account. And once your buy order is executed, the shares of the said company are automatically ‘delivered’ to your demat account within T+2 days.
And once the shares are delivered to your demat account, you can then sell them at any point in time as you see fit. While this is a great way to trade, it may not always give you the returns that you’re expecting each month. This is simply due to the fact that there’s a time delay of around 2 days from the date you purchase the shares to actually getting them delivered into your demat account.
● Intraday Trading
On the other hand, intraday trading involves buying and selling shares of companies on the same day. Here, traders don’t actually wait for T+2 days for the shares to get delivered to their demat account. Instead, they bypass the entire share delivery process completely by buying and selling the shares within the same trading day or session.
Since the demat account is not used for intraday trading, technically, you can make do by just opening a trading account alone. Also, traders interested in intraday trading should make sure that they select the ‘Intraday’ or ‘MIS’ option when placing buy or sell orders. Not selecting this option would mean that the trade would default to the ‘Delivery’ mode.
And considering the fact that you buy and sell shares within the same day or session, intraday trading has a higher potential to deliver quick returns since you can place multiple trades within a day. However, the amount of return per trade may not be as high as delivery trading though.
● Derivatives Trading
If you’re really interested in earning Rs. 1 lakh per month from the share market, one of the best ways, if not the best, to do it would be to start trading in derivatives. Derivative contracts of shares such as futures and options are slightly more complex concepts that require in depth research before you can start trading in them.
One of the primary advantages of derivative trading is that you don’t have to put up the entire amount of investment upfront. Instead, you will only have to pay a small portion of it called the ‘Margin’.
By paying only a portion of the entire investment value, derivatives allow you to purchase more contracts than you would have normally been able to. Buying more contracts can result in amplified profits if the market were to respond to your expectations, getting you closer to your intended target amount much faster than the other two ways.
However, there’s also a pitfall here. While your profits can be amplified to a large extent, your losses, if you were to happen to encounter them, can also be magnified. And this can put your entire investment capital at risk even. Since derivatives carry a very high risk to reward ratio, they’re something that only experienced individuals should trade in.
Things to focus on in your pursuit of earning Rs. 1 lakh per month from the share market
So, we’ve covered the different ways through which you can achieve your monthly target of Rs. 1 lakh per month. It is now time to take a look at a few of the most important things that you should always keep in mind when attempting such a feat.
● Be disciplined in your approach
Discipline in the form of having a set systematic approach to stock trading and consistency is key. Especially since you plan to earn Rs. 1 lakh each month, being disciplined in your approach can take you a long way.
● Do extensive research
While you might be tempted to go by research reports and trading advice from established stock brokers and traders, it is a good idea to refrain from doing so. That said, if you’re ever hard pressed to follow them, always make sure to do extensive and adequate research. This way you can minimise the risks involved in stock trading to a large extent.
● Keep a close eye on your investments
If you have a portfolio of investments, then it is extremely crucial for you to regularly monitor their progress. While the ‘buy and hold’ and ‘buy and forget’ approaches may work well for individuals that have a long-term view, it may not be very lucrative if you’re planning to generate consistent income of Rs. 1 lakh each month. By rigorously monitoring your investments, you would be in a much better position when it comes to taking the right decisions at the right time.
● Keep your expectations realistic
Once in a while, you may experience much higher profits and returns than what you would have expected. In such cases, it is important for you to know that such incidents are not the norm and may only present itself to you once in a while. Instead, having more realistic expectations of what a trade might give you is a much better way of approaching stock trading. For instance, if you’re investing Rs. 1 lakh in the stock market, expecting a return of 10%, which comes up to Rs. 10,000 is what is called a realistic expectation.
Conclusion
The stock market can be a very unpredictable environment. And so, the market may not always move according to your expectations, leaving you with a chance of not being able to make a steady income of Rs. 1 lakh per month regularly. This is something that you must account for without fail. That’s not all. You should be prepared for losses as well.
Also, when placing multiple trades in a short period of time, brokerage charges are again something that you should keep an eye on. Some stock brokers tend to charge as much as up to 0.25% to 0.50% of the trade value as brokerage, which can drastically reduce your income considerably.
Here’s where TradeSmart excels. You get multiple brokerage plans ranging from 0.007% of the trade value to a flat fee of Rs. 15 on each executed order. You can get more information regarding the brokerage plans on offer from TradeSmart Online by clicking this link here.
Frequently Asked Questions
1. What are the different ways through which you can trade in stocks?
You can choose any one of the three following ways to trade in stocks - delivery trading, intraday trading, and derivative trading.
2. Which investment method has the highest risk to reward ratio?
Trading in derivatives like futures and options has the highest risk to reward ratio among all the other methods.
3. Is in depth research necessary to earn Rs. 1 lakh per month from the share market?
Yes, of course. Investing in stocks and other investments without thorough research, can only set you back when it comes to generating Rs. 1 lakh per month through stock trading.
4. What are a couple of key things that you should keep in mind when trading in the stock market?
Two of the most important things that you should always keep in mind is discipline in trading and extensive research and monitoring of investments.
5. Is it possible to earn Rs. 1 lakh per month from the share market?
Yes. Earning Rs. 1 lakh per month or more through share trading is possible. However, it is extremely difficult and requires a lot of hard work, patience, and a good strategy.
