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  • Category: Stock Market

    How to earn a stable income by share market?


    Interested to know the benefits of earning income by means of share market? Check this ISC page to know more from our experts.

    I was involved in share market trading but stopped mainly due to losses in intraday trading. Now I am investing mainly for long term. I was wondering if I can earn a stable income by purchasing some high dividend paying stocks. In this case how much investment will be needed if I want a regular income of 2 lakhs approximately on the annual basis?. One more doubt is regarding mutual fund or equity to buy for long term investment and regular income. Advise from experts is needed.
  • Answers

    5 Answers found.
  • Share market is not everyone's cup of tea. It requires patience and long term vision. Many people have lost heavily in share market due to myopic outlook.

    The best strategy is go for long term and have a mix of equity and mutual fund. Equity is a high risk area and mutual funds are moderate to high risk. In mutual fund try to go for balanced funds which have a balanced investments in equity and debt. So combining both will be a good strategy. On an average I will suggest 75% of investment in equity and 25% in mutual funds.

    There are some shares which belong to good companies and are distributing good amount of dividend. They are the high dividend yield companies and it is a good idea to invest in them if one is in need of a regular income. Sometimes the shares of these companies spurt up in market and at that time a decision to sell them partially or full can also be taken.

    If you are interested to have an income of about Rs 2 lakhs per year then the investment should be to the tune of 30 to 40 lakhs. I am only considering the dividend on shares and dividend on mutual funds. There is no partial selling of shares.

    The return may look discouraging but in share market what we have to look is for capital growth. One thing which is of utmost importance is the portfolio. As far as possible we should restrict to the blue chip or A group companies which are doing good for last so many decades. Patience is the most crucial factor in this type of investment and history is witness that those who waited had the real benefits of share market investments.

    If you remember, the share market index was hovering around 20000 before the present Govt came to power and then it rose to present level which is about 35000. This growth has happened in about 5 years and is not bad. Political considerations also affect the market and due to various uncertainties no one can predict the future. Only solution is to stay long and wait for an opportune moment to sell partially if funds are required for house or children marriage etc.

    Knowledge is power.

  • Getting money through stock market requires a lot of patience and understanding of the market. Many people start investing in that and final they may end up with a loss due to lack of understanding of the subject. Before starting investing in this market you better understand the market better or take the help of a person who is well versed with the subject. You can be a passive investor or an active investor.
    In passive investing very few purchases and sales of assets over time. One will purchase shares in a company keep it for a long time and go on getting the dividend. Basically, I am a passive investor. Active investing is moving money in and out of different company shares very frequently.
    In passive investing, the time we spent will be less. The disadvantage to passive investing is that your odds of obtaining above-market returns are very low. This will be useful for the people who are doing some job and earning money as their time will be better spent earning money at a job or business. Some people who don't have much knowledge about the market even though they have money will depend on somebody and try this passive buying.
    The main methods of investing in the passive market are.
    1. A predefined % of your income will be allocated and shares can be purchased based on your knowledge.
    2.Index funds.
    3.Mutual funds
    4. Hedge funds

    The active investment will be spending a lot of time on the market research and investing in the shares which will give quick returns. The buying and selling of shares will be very frequent. One should have sufficient knowledge and should be able to decide on the companies based on their history and the latest trends in the market. Without proper knowledge, we start investing the chances of losing money are high.

    Always stock market is good for fast benefits or fast losses and it is definitely a risky one. But a wise investment can give you a handful of profit.

    drrao
    always confident

  • Share market investment is for those people who can wait for long times to realise the benefits of this particular mode of investment. The most difficult thing in share market is the timing and prediction of the market movements and even the experts fail in this task.

    Anyway one strategy which I can suggest from my observations is that a prudent investor should not take unnecessary risk and only should invest in the reputed known companies which are generally termed as blue chips. I can give some examples of such companies like Colgate, Hindustan Lever, Doctor Reddy Lab, ABB, L & T, Reliance Industry, Dabur, Cipla, Ponds, Lakme, ITC, Infosys, HDFC etc and many many others.

    If you go through the history of these companies, you will find that there is phenomenal rise in the share prices of these companies and they have given a good amount of dividend as well as bonus or right shares time to time. They are the real wealth creators. But one has to keep them for 15-20 years to reap the real benefits.

    One thing which is also very important in this field is that one has to invest in a basket of companies rather than one company because business environment is a strange place and we do not know when a company due to unfortunate reasons become a thing of past.

    I remember one incident 20-25 years back when a company came in the field of wind energy and seeing the scope of that many people bought the share of that company but soon the presumed economics in wind energy area proved wrong and the company closed its operations and the investors suffered huge loses.

    So share market investments are a high risk investments and one has to invest only in a bunch of good or excellent companies.

    Thoughts exchanged is knowledge gained.

  • To be successful in the share market, you need to have patience, understanding the past track - records of the different companies and the ways how they are delivering results. If we could go through this formulaes of the companies such as TCS, Infosys, Dr Reddy Lab, Cipla etc, we can observe that consistency has been maintained in terms of profit and the growth of the company showed an upward graph. This reflects the healthy surge of financial growth and hence by being invested in such portfolios, one is sure to make steady income over a long period of time. However, some fluctuations in terms of growth may be possible due to market - conditions and other variables for which the company would not have control in regulating the erratic behaviour of the market.
    Hence one must go in the depth of reputed companies prior to investment and should remain invested for a period not less than five years. Initial capital investment should be such that it has to be distributed proportionately so as to take the maximum advantage of profits.
    While talking for the mutual funds, some of mutual funds such Birla Sun Life. ICICI Prudential, HDFC debt and balanced fund would also be helpful.
    Then there are infrastructural bonds and the shares of pharma sectors which can give you substantial yields since their demand will surge with the time.
    Hence you need adequate capital for investment in diversified portfolios, a close look of the market trend and your clarity in understanding the dynamics of market - growth.

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    I am glad that you have stopped that intra-day trading. Intra-day trading is entirely based on speculation without any logic and is a sure-shot way for loss-making. Technical analysis on which intra-day trading is based is nothing but a graph based on the previous movement of stock price of a particular stock. There is no surety that the same graph will be replicated again and again.

    So far as dividend-paying stocks are concerned, it is a relatively better strategy but this can't ensure a stable income. We can't be sure that every year a particular company will announce a dividend. Announcing dividend depends upon the profit made by the Company in the last year. As the profit may vary or the company may suffer loss in a particular year, the dividend may not be regular.

    Purchasing some good growth stocks, some large-cap stocks and some dividend-giving stocks would be a better strategy for earning. However, for retail investors, it would be good to include some good mutual fund schemes in their portfolios depending upon their risk-taking capabilities and holding period.

    Beware! I question everything and everybody.


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