Any one who is putting Capital to work in Stock Market is an Investor. And, Every Investor’s prime objective is to maximize Profit with minimum Risk.
And Stock Market offers us only three choices,
First – Investing: Buying in Cash Segment for Long Term primarily through ETF, Mutual Funds’ Unit, Stocks (MidCaps, Small Caps, etc).
Either through Lump Sum or via Systematic Investment Plans.
Whereas Entry is relatively Easy, but Exit becomes very difficult. Because, either the Fear of miss profit or Greed of more profits make an investor to sit idle on Investments forever. Eventually, we all are DEAD in long term. Nothing lives forever.
Second – Initial Public Offering: There is hardly any notable example of Long Term Wealth created by investing in IPOs. But, there are unlimited numbers of Stories for listing gains (losses).
Ask the people who invested in the IPO’s of DLF, COALINDIA, COCHINSHIP, etc.
And, many of follow-on Issues, afterwards.
Third – Trading: Buying &/or doing Short Selling in Derivatives’ Segment for Short Term, primarily to capture event specific market volatility.
Agreed that, Short Term Trading is High Risk Business therefore unsuitable for Many; especially if one cannot bear even a single penny Capital Loss.
But in Stock Market, Capital Losses are a harsh reality, even in Cash Investments, too.
Ask the LONG TERM investors’ of PSU Banks, YESBANK, DHFL, ADAG Group Stocks, IDEA, SAIL, BHEL, HDIL, SUZLON, actually the list is very long.
However, Many people don’t realized those Investment losses because of three reasons,
a). There is no Mark To Margin Concept in Cash Segments because you are buying against 100% payment.
Which means, No benefit of Leverage. And, every Business person knows the importance of Credit to maximize the returns on Capital Employed.
Even, Salaried Class uses Credit facilities in form of Personal Loans & Credit Cards.
b). There is no High, Concentrate Position: You can diversify even with very less absolute Capital. For example, You can buy 30 Stocks in ₹50,000/- Capital.
Impossible to do so in Futures. Even to do 3 Stock Futures one needs minimum ₹500,000/- Capital based on today’s Span Margin requirement.
Options anyway is Strictly avoid at Rocket Trades.
c). There is no urgency: Long Term becomes Forever Holding. Unless you decided to Exit irrespective of absolute losses or profit.
And, because of this lack of Urgency in Cash’s Segment People miss the concept of Stop – Loss, Profit Objective, Time to time review of Open Positions…
Which a must in Futures’ Segment. Options anyway is Strictly avoid at Rocket Trades.
Tax Implications: Unless Government do changes there stance (or do some sort of tweaking) on Long Term Capital Gain Tax in upcoming Budget 2020 there is hardly any notable difference between Short Term and Long Term Trading approach from a investors’ point of view.
We at Rocket Trades understand the pain points of an Investor therefore not giving any false hope. Losses are fact in Stock Market whereas Profits are fiction.
But, as the saying goes on & on… NO RISK NO REWARD.
And IF, you are willing to take Risk in Systematic, Scientific, Disciplined way then YES together we can make fictions a “FACT” of life.
However, Sufficient Capital Requirements is the first (and hopefully the only) challenge you need to overcome in your quest of Trading Success.
For Rest of other challenges, we got Pillars’ Strategy.