Stock markets are never seen with a moderate outlook. While they seem like gold mines to some, others believe that investing in equities is the road to financial ruin. However, the truth lies somewhere in the middle. There are countless examples of people who have made fortunes in the stock market but the thing to remember here is that no good thing comes easy.
So is the case with stock markets. While there is no upper limit to how much you can make from stocks in a month, you have to be realistic and think about all the efforts and work it will take to be a millionaire in a year. Hint: it’s a lot.
The key to investing in stock markets is doing your homework and being patient. While there are a lot of people out there telling you that you can make tons of money in a very short period, it’s important to take these claims with a pinch of salt. The idea is to not be scared of the markets but to be highly aware of your own risk appetite, knowledge and skills before you decide to jump in the deep end of the pool.
Riding the wave
Before thinking about how much you can make from the stock market in a month, you must figure out how much money you have in spare that you can afford to lose if things don’t go too well. This is the first and the most important step that determines your risk appetite and guides your strategy of investing.
For instance, if you think you have a comfortable sum that you can begin investing with, you must first halve it and use only 50% in your first leg of investments. Even when you invest, you can’t blindly buy stocks based on what the TV channels or newspapers are telling you. You must keep in mind that while there’s no limit to how much you can make from the stock market in a month, you can lose a lot too.
It’s important to do your own research and get skilled in the game of predicting the quality of a stock before you pledge your money to it. Here are three things that you should look out for:
- Company fundamentals: This is the absolute must when you think about a stock. You must research the company well. Read its annual reports, get to know the management’s vision, read about it in the newspapers and find out if this company’s business is comprehensible and viable. Once you are sure of the company’s financial and operational health, you move to the next step.
- Pricing: A company may be a star performer in the sector but it may not be making new investors any money if its stock is priced too high. You can learn about the P/E ratio and check historical pricing charts to ensure that you don’t buy too high and later sell low.
- Investing timeline: If you are looking at making short term gains, highly stable blue-chip companies may not provide you with those returns. However, volatile companies may erase your capital so you must decide a concrete timeline of the investment horizon and act accordingly.
Let’s talk numbers
So, now that you know about things to keep in mind and the preparation you have to do before entering the markets, let’s talk about the returns! While quality investing and discipline can take you a long way towards your financial dreams, it’s important to be realistic and account for all future scenarios when you are thinking about how much can you make in stocks in a month.
The amount of money you make from stocks in a month depends on basically three factors:
- The amount of capital you put in
- Number of trades you make
- The amount of risk you take
Realistically, it’s impossible to invest Rs 100 and hope for it to turn into Rs 1 lakh in even 10 years no matter how good your investing strategy is. Hence, it is important for you to keep topping up your investments with additional capital to beat inflation and also, compound your returns from the well-performing stocks.
At the same time, for higher-gains, you need to take a bit more risk. While top-level companies deliver high returns over time, you must diversify your portfolio with moderately risky stocks too to get the best of both worlds.
The third and most important factor in determining your monthly income from stocks is the number of trades you make. For instance, it is very common for investors to get greedy when their stocks do well so that they don’t sell it at the right price. You must have pre-defined goals about your income and exit when those are achieved. Waiting for a jackpot could rob you of your entire capital.
While stock markets are a good opportunity to make money, an investor must be prepared to do the groundwork themselves and set aside a chunk of capital that they are willing to invest without financial difficulty before they start investing.