How much can I earn from stock market – a clear answer to this question can help you have realistic expectations.
If you expect to double your money in a short period of time – you will end up losing a lot of money.
Being realistic is very important.
So make sure you read every word of this article – till the very end. It’ll help you avoid mistakes.
Earning from Stock Market
Let’s get straight to the numbers.
After spending more than 10 years in the stock market, here is what I think:
- Long Term Investors: 15-25% per year.
- Skilled Traders: 20-40% per year.
Trading is more profitable than investing?
The answer is yes.
However, it is much easier to become a skilled investor than it is to become a skilled trader.
Less than 1% of all traders make money in the share market.
Trading is tough and consistently earning from trading over a long period of time – is even more tougher.
That is why, you might have heard of famous investors like Warren Buffett, Rakesh Jhunjhunwala, Vijay Kedia and a few more. But there are very few successful traders in the world.
In an interview with Ramesh Damani, Jhunjhunwala who started his career as a trader – had famously said – only about 100 traders in 1 million make money in the stock market.
If you have time, this video is worth watching:
For a trader, it takes only one big mistake to lose money made over several successful trades.
In fact, there are examples of several traders losing everything in just a few risky trades.
For investors, the game is a little different. A portfolio of quality companies, diversified across several sectors can perform very well in the long run.
The effort required is much lesser because you could buy a few great companies and hold them for decades. Brokerage, taxes and other expenses – which can add up quickly and reduce returns – are minimal in investing.
I want to earn from Stock Trading
9 out of 10 messages I get, is from beginners who want to earn from trading.
- I want to earn 1000 rupees per day from trading.
- I want to earn 1 lakh per month from trading.
These are questions I get everyday.
There is a simple reason why trading is much more popular than investing.
One is boring, the other is exciting.
Think about it.
You invest ₹ 10,000 in Reliance Industries today and do nothing for 5 years.
How boring is that?
Keep quiet, be patient and do nothing is against human nature. We constantly want to do something.
That is the reason meditating for 10 minutes is difficult, sitting at home during lockdown is difficult and the same applies for long term investing.
Meanwhile, trading is exciting. You keep buying or selling. You earn or you lose, but the results are quick.
It’s possible to have fun (trade) and also make money, but it’ll take years of losing money to get the necessary skills to become an expert trader. There is no shortcut.
When you acquire the necessary skills, you also need to have enough capital left to continue your journey as a trader. 99% or more, lose money and quit trading within a year.
Earning from Stock Market Investing
Since trading is beyond the capability of most people, let’s discuss how much money can you actually make from long term stock market investing.
In a growing country like India, earning 15% returns from the stock market should not be difficult for an investor with a few years of experience.
15% might sound less, but the power of compounding can work wonders after a few years.
In 20 years, 1 lakh can become 16.5 lakhs at 15%.
If you are good at investing and the country does well in the long run, you could earn 20% returns.
In 20 years, 1 lakh will become 39 lakhs at 20%.
If you are a skilled investor and the country does exceptionally well in the long run. You could earn 25% returns.
In 20 years, 1 lakh will become 87 lakhs at 25%.
Imagine 1 lakh becoming nearly 1 crore in 20-25 years if you are a patient and skilled investor.
This is possible in the stock market. There are examples of several investors who have managed to do this. Many other investors, who are not known publicly, but I know personally – have also created huge wealth in the long run.
Just by investing in good companies for a long period of time and doing nothing!
Do you know how much a fixed deposit of 1 lakh will become in 20 years?
The answer is 3.2 lakhs. At the current FD rate of 6%, 1 lakh will become 3.2 lakhs in 20 years.
What will be the value of 3.2 lakhs in 20 years? Think about this question when you have your dinner tonight.
In short, what I am trying to tell you is actually very simple.
It’s worth investing time to learn the stock market.
This is a place where a small plant today can become a huge tree in a few years.
If you want the tree to bear fruits in the future, you need to water the plant everyday.
Water in the stock market is both learning and investing money. Slowly, steadily and patiently.
In the future, a day will come when you can enjoy the fruit, without worrying about watering the tree.
In the stock market, the fruit is money which you can enjoy in your later years – if you start today!