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6How To Earn Regular Income Through Stock MarketsFeb-28-2020

How To Earn Regular Income Through Stock Markets

Blog by – Mr. Ashish Ajmera
Stock markets offer a great avenue for investors to channelize their savings for financial gains. Stock market investments and online stock market trading are almost similar except the time horizon with the former used for long term appreciation of funds while the later tilted towards benefitting from short term movement in stock markets. A stock advisory company offers timely recommendations on stock prices though it is upto the individual investor to wisely decide the course of action suitable for his or her financial plan. An investor normally thinks of markets as a wealth appreciation tool for long term though a carefully planned approach makes it possible for earning regular income through stock market investments. Let us find out how?

Dividend Income is one of the most effective ways of earning regular income via stock markets. Dividend is the distribution of company profits to shareholders. Note that not all stocks pay dividends and even the companies that pay regular dividends may witness a drop in the quantum of profit shared to shareholders due to challenging business conditions. However, normally, blue chip market leaders do pay dividends at a steady clip and accumulating such stocks at regular intervals would ensure that you have a portfolio that generates regular income.

Capital appreciation is another common approach to ensuring regular income through stock market investments. For this, it is important to keep a watch on stock prices and earnings updates. Studying business trends and economic data is also warranted so that you can buy and sell the shares at a profit. This is an active investing strategy which needs you to book your profits in select shares at a timely internal and allocating the capital to other companies likely to provide gains in near term. 

Short term trading in stock market also offers an exciting albeit slightly risky avenue for earning regular income. Conceptually, short term trading is fairly simple as it entails using the basic buy low –sell high strategy for a very short term including for intraday period. In fact, using derivatives, one can also use the sell high-buy low strategy. Albeit little risky, practicing on a regular basis and maintaining a disciplined approach can work in you favor, ensuring a regular flow of income. Very volatile periods of stock prices movements can adversely affect short term trading outcomes though and it is warranted that one treads with utmost caution while using this approach in stock markets.

Conclusion:

It is important to keep your investing purpose in mind when approaching stock markets. Making money in equity markets on a regular basis is possible but needs a set of well-crafted individual strategies in tune with your risk taking ability and financial plan. Also, given the inherent volatile nature of the stock market investments, there is a possibility that the markets may witness period of turmoil in short term. For instance, the current slide in markets due to the Coronavirus scare is one such episode. Such volatility can affect your returns.

Similarly, in case of dividend paying stocks, please keep in mind that past performance doesn`t guarantee future results. While companies with a well-established set of products normally offer good dependability as regards the payment of dividends, it is wise to churn the list of stocks in accordance with the annual earnings performance, management guidance and sectoral developments. Because the primary purpose is earning regular income via dividends from a set of companies, it is not advisable to hold onto the companies which are facing some adverse situation in operations or are facing regularly hurdles in the hope of better future offerings. Such stocks are to be replaced with other companies with a good track record of paying dividends and indicating a promising outlook in terms of new products, capacity expansions and rising sales etc.

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