How to Earn from the Share Market?
When rightly done, stock market trading is a lucrative avenue that provides better returns than other investment forums. Building a portfolio of shares that consistently give decent returns over the long term is the ideal way to earn money from the share market.
Before we explore ways to earn from the share market online, a note of caution - the stock market is a volatile asset without guaranteed returns. However, it is also true that in the long-term equity has delivered more than inflation-adjusted returns amongst all asset classes.
Without further ado, here are some ways to earn money from the share market:
Prepare Before Investing in the Share Market Online
While this may seem obvious, investors must prepare themselves properly before they start to invest in the share market online. To avoid future inconvenience, here are some ways to prepare yourself for investing in the stock market:
- Research: There are a variety of factors affecting the share market movements – both local as well as international. As these factors are not in anyone’s control, daily market movements are unpredictable, and so these need to be studied before investing.
Also Read: What is Daily Margin Statement?
- Prepare Your Mind: Neither should you be greedy nor afraid while investing in the share market online. These are the two factors that almost always result in inappropriate decisions. While you will expect to make the best out of your investments in the stock market, your goals must be realistic and attainable.
- Analyse Your Risk Potential: Don’t get swayed by the decisions of others before you make your own. It is important to consider the trends, however, because the investing capacity of every individual is different, set your entry and exit points and swear by them.
- Avoid Herd Mentality: Don’t invest in the share market or buy stocks without understanding the business and the company’s financials simply because you feel left out when a stock shoots up. This herd mentality investing leaves you at the mercy of the big operators, which is a financially damaging situation.
Build a Diversified Portfolio
Diversification of stocks across sectors and market capitalisation of stocks is important while investing in the share market. This is because every sector has its own set of challenges to overcome, and when the economic environment is not favourable for one, not all your investments are vulnerable.
For new investors in the share market, it is recommended that purchases are restricted to large-cap stocks comprising the index. Once investors acquaint themselves with the stock market landscape, they can think of investing in emerging companies after carefully analysing their business and financial standing.
Don’t Try to Time the Stock Market
Market timing is when buying and selling of stocks are done by predicting future stock market price movements. You can indeed earn money by investing in the share market online; however, by timing the stock market, you can lose your hard-earned money quickly.
This is because accurately predicting the top and bottom prices of stocks is not possible. While buying low and selling high is every investor’s idea of utopia, trying to predict it might result in heavy loss of finances.
Pay When You Profit in Share Market
You can also choose to invest in pay when you profit brokerage scheme. This is not particularly to earn money but to save it. Usually, under the pay when you profit scheme, when the buy and the sell leg are executed on different exchanges, they will not be considered as an intraday trade.
This means that under the pay when you profit scheme, the calculation of profit and loss will not be considered to be charged a tariff. Instead, pay when you profit plan charges your intraday exchanges by considering each leg as a delivery trade. In essence, you only have to pay when you profit in the share market.
Share Market Knowledge Centre
- Demat account
- Share market
- Trading account
- Online share trading
- Intraday trading
- Futures trading
- Commodities trading
- Currency trading
What is Equity Delivery?
When newbies hear the term ‘equity delivery’, they feel they will receive the delivery of equities just like they receive the products ordered from Amazon. However, that’s not how it works entirely. While you do receive your equities, you receive them in digital form in your Demat account.
What are Equities/ Equity Shares?
Shares are believed to offer the best potential returns on investment. The shares traded in the share market are equity shares. But, what are equity shares? What is their worth? Why are they traded in the share market?
What Are Stock Market Indices?
If you switch to any business news channel and listen to stock market updates, one of the first few things you will hear is the rise or fall of Sensex or Nifty. But what is Sensex or Nifty? These are stock market indices. That brings us to the next question – what is a stock market index?
Frequently Asked Questions
Pay when you profit in the share market is a scheme introduced by brokers where your buy and sell legs from intraday trading are considered as a delivery trade.
Intraday trading is where investors buy and sell shares within a day. As it requires proper analysis of the stock market, it is not recommended for novice investors who are still learning about the capital market. Some tips to earn money from intraday trading include:
- Invest in shares that have a high volume. Volume here means the number of shares that get passed on from one hand to the other within a day.
- To avoid incurring huge losses, use a stop-loss order.
- For a safe bet, follow the market trend.
It is important to have a disciplined approach while trading in the stock market. Ideally, to earn money from the share market investors must focus on building a diversified financial portfolio that generates a decent return in the long run consistently.