The stock market is the place where making money is not difficult but is it so easy? Yes, it is easy and there are many ways to make money with the stock market. Here we have listed 4 ways to make money in the stock market.
Stock Market is a place where stocks are bought and sold every day. These stocks represent the valuation of a company. Let’s suppose the share price of a company is Rs 20 and the company has 100 shares in total the valuation of the company becomes 2,000. So, when you buy a share of a company you become the owner of the company. And, this valuation is backed by the business performance of the company. So, if there is news that can enhance the business performance automatically it should increase the share price also.
It happens because based on that positive news the market would expect a better performance in share also and automatically the demand would rise. So, in short, the share market functions on the basis of demand supply. If the demand increases automatically it would lead to an increase in the price and a decrease in demand or increase in supply will lower the price.
Ways to Make Money in Stock Market
Initial Public Offer
The process of getting listed in the stock market is called Initial Public Offer. Basically, there are two types of companies in the Indian context viz. public limited and a private limited company. A private limited company is owned by a set of private or known individuals. But, when this private company wants more money to expand itself, it asks the public to be a part of it by buying some shares. Now, this whole process is called IPO and it is regulated by SEBI.
And, this whole process is called IPO in which the company would announce the details with a prospectus mentioning all the details. If the company is good, definitely there would be a number of people who want to be a part of the company. Once you pay money to the company by subscribing to their IPO, they would allot you some shares and it will get listed in the stock market as well. After getting listed the shares can be bought and sold openly in the market. And, if the company is good, automatically the demand would be there hence increasing the share price.
9 out of 10 IPOs have given good returns to the investors within a span of 2 weeks which makes it very attractive. So when the next IPO comes maybe for LIC or any other company it would be a good opportunity for you to make money out of it.
Investing your money in some asset is a way to multiply it and preserve its value. there is something called inflation, if you are not doing anything, every year your money is going to decline by the rate of inflation which is about 6% a year. It means the value of 100 rupees will be only Rs 94 or the worth of 100 Rs now would be the same as 106 next year. This is called the increase in the prices of goods and services and the decline in the price of money.
And, investing in Bank deposits will not help you as it is lower than the rate of inflation itself. So, we need to find a way where we can expect a return of more than 6% which means at least 12% so as to beat the inflation and get a decent 6% as well. And, doing it for the long term only will get you the kind of wealth you are looking for. An investment of Rs 5,000 per month for the time of 30 years where you get a return of 12 years would become an amount of 17,474,820.66, isn’t it crazy?
This is called the power of compounding or the power of investing and it is the true value of time actually. You don’t need to find the stock or the company for the maximum return but maintain consistency. And, the minimum 12% return that we are expecting is going to be there only in the equity market whether through the stocks or indirectly through mutual funds.
3. Dividend Income
The biggest advantage of investing in good companies is that they pay dividends. The dividend is a part of the profit which is paid to the owners as in the end it’s their money using which the business is making money. So, if it is a good company, definitely it will make money and that money is paid out to the shareholders. And, in the long run, if you have accumulated a lot of shares of a good company that pays a regular dividend. This regular dividend can become a source of passive income for you in the long run.
Trading means simply buying and selling with the motive of profit. And, whenever people say stock market all they mean is trading as it’s very quick to make money in the stock market but the problem is a risk. In the long run, everything goes positive as that is what the nature of nature itself is but in a short period of time you cannot be sure of it. So, with trading, you can make money but you have to put in a lot of time and energy for your research and do it regularly.
There are different types of trading activities that people do.
Types of Trades
when you buy a share having a target in your mind and holding it until you achieve your target is called swing trading. Here what you are doing is waiting for that swing to happen what you expected. And, in the short run this swing trading is nothing but pure expectation but it has to be studied well before execution.
2. Intraday Trading
The same kind of swing you are expecting in a day itself is called intraday trading. Buying and selling in the same day or maybe it can be selling and buying also as it is intraday. Here the risk is that no matter what happens you need to square off your position in a day itself but the advantage is that you get a percentage of margin from your broker. Using this margin you can multiply your profits.
F&O stands for Futures and Options and it is just a next step to the equity segment but yes it is also a part of stock markets only. Futures is nothing but as the name suggests future of the stock that you are trading in but options have a different world altogether. You can do options buying or selling but you should be right in what you are doing, you will make money.