Hey there! Today in this article, we will see How much one can earn in Stock Market in India?. Is there any fixed limit?
Ever wonder how Warren Buffet and Rakesh Jhunjhunwala made all that money, from just simply investing in the stock market, while on the other hand, investors are losing their minds over the stock market?
In other words, there is so limit to how much one can make in the stock market.
There have been instances that one has earned a fortune overnight, and there have been instances that the same person lost all the fortune. Nothing is guaranteed in the stock market, at least nothing in the short term.
You have to learn the stock market by reading stock market books, joining the stock market course, and some things come with experience.
People like Buffet have accumulated all that wealth over a long time and use exceptional observation skills developed over that period. Benjamin Graham was so skilled at reading the market that he could observe the tiniest of movements in it, the microscopic changes.
Let us now see some ways to earn money from the stock market.
You can be an active investor or a passive investor. Active investing includes trading on a day-to-day basis and making profits from the slightest price movements in the stock. These traders rely heavily on graphs and various tools to predict the small-term trends of the stock.
But there is a catch. Less than 1% of active traders, who are skilled and experienced, make money on a short-term basis. The rest lose it.
Being an in-active trader is not easy, but it does come with huge profits, along with huge risk factors, of course. Over the long run, it is proven that traders make more money than investors.
Passive investors or just investors are people who don’t trade their securities daily. They buy stocks, keep them with them for an extended period. These people are the long-term investors and get a decent amount of return over that period. It is much easier to be a passive investor than being an active one.
Investors can be characterized by having a personalized portfolio of companies that have a consistent performance. This enables a good amount of return for them over the long term, with minimized risk.
But in the end, the market forces decide who will win and who will lose. Suppose you choose to be an investor or a trader. In that case, there are many fantastic stock market courses out there, which provide all the essential knowledge and practice, which will be beneficial to you when investing or trading. I will highly recommend you The Thought Tree because they are the best in the business.
A lot of it also depends on the economic growth rate of a country. For instance, in a country like India, whose growth rate is pretty good, the long-term returns will be higher for an investor. And if the investor is skilled, it may go even higher.
People place blind trust in banks and create fixed deposits for the long term. FD rates currently have a return of 6%, compared to equity returns of 10% coupled with the economic growth rate, which is 15%, which is again coupled with the investor’s skill.
Have I told you about the power of compounding? No, I did not. Ok, so let me explain it with an example.
Imagine you have ₹100, which you decide to invest in a stock. This stock has a growth rate of 10% per annum. Now Mr. X thinks that he will invest those ₹100 and forget them for five years. The final return, along with the principal amount, will be ₹150. This was a simple interest method.
10% of 100 every year till 5 years, i.e., a total return of ₹50.
Now, if Mr. X had heard about the power of compounding, he would’ve gotten a higher return. How? Allow me.
10% of ₹100 on the first year, which is ₹10. So, the total value of the investment is ₹110. Now instead of keeping the ₹10 useless, Mr. X will reinvest it in the stock. So, the following year the interest will be charged on ₹110, not on ₹100. This way, the interest return will keep on getting added to the original value, and the final return will be ₹161.05, which is ₹11.05 bigger than the simple interest method.
Now imagine this technique over a large amount of money. Mind Blown.
And now imagine it over a long period of time in a growing economy, in an equity market, in the hands of a skilled investor. The money will start sustaining itself. All you need to do is sit back and relax after it becomes self-sustaining. But to reach that level, you’ll need the highest levels of patience and dedication. I’m talking about 10-20 years. Not to mention you’ll have to choose quality stocks and not sway from them. Making a quality portfolio is the thing of utmost importance for any investor. A skilled investor knows which stocks are required in the portfolio and which stocks will have to be removed.
Now that we have seen no limit to how much one can earn, I would like to say that the stock market is a tricky and challenging place to survive. Even though it is an excellent choice for making money side by side, and even the primary income, it is a very random place. You have a better chance of winning a coin toss. But, if you are patient, observant, and dedicated, you will get your returns. Many investors believe that the best way to earn money in the stock market is to invest for the long term. Although people make quick profits, the number of people who have made money gradually is much higher.
That is it for today. I hope you guys enjoyed reading this article. These are my views on the stock market, and I hope you learned something from this article.
Also, I suggest you stay inside your homes and stay safe. Wear a mask and carry a bottle of sanitizer every time you step out of your house.
Thank you for reading my article. I appreciate it.