As the equity markets get more complex, stock investing is increasingly becoming a full time job. You can no longer afford to treat your equity investing activity as something you can do in your spare time. You need to give your full time commitment to equity investing. After all there are so many tasks to manage. You need to manage your capital. You need to ensure that your regular flows continue. You need to provide for the uncertainties. You also need to ensure that you have the time and the wherewithal to study stocks in depth. You also need to invest in your own skills and constantly keep searching for new ideas in the stock market. If you believe that you can achieve all these things with a part-time approach, you may be grossly mistaken. Investing is a full time job. You need to prepare yourself accordingly.
What exactly does it take to be a full time stock trader or investor in India? Is stock trading as a career in India actually viable? What are the financial implications of undertaking stock trading as a full time commitment? How do you need to prepare yourself to become full time trader or investor in the stock markets? Let us answer each of these questions in elaborate detail..
Managing your finances reasonably well..
That is the primary challenge of becoming a full time investor in the markets. We have always held the view that investing and trading is a full-time job. That means; you are not going to be left with too much time to pursue any vocation. So you have to ensure that your existing trading activities are able to generate the requisite returns for you. Alternatively, you need to set up a few consultancy assignments through your networks so that your regular expenses can be taken care of. Remember, trading and investing are not only full time jobs but they are also highly risky activities where the probability of losses is higher than the chance of profits. You need to position yourself accordingly.
How much capital to bring in for trading and investing..
What is more important is how much of your corpus should you commit to your regular trading and investment activity. Let us follow some thumb rules. Assume that you have a corpus of around Rs.50 lakhs and are seriously considering giving up your full-time job and turning to trading as a profession. Ensure that at least 60% of the funds are in highly secure and stable return assets on which you can fall back upon. When you commit the balance funds to your trading and investment activity, clearly define how much loss you are willing to bear on a trade or in a month. That will be determined by the productivity of your remaining corpus.
Keeping a tab on capital erosion; both real and notional..
When we talk about capital losses, there are two aspects to it. There are real capital losses that you have booked and then there are notional capital losses that you have not booked. As a trader or investor you need to treat both the losses as one and the same. If your portfolio is down by 15%, then you need to treat that as a loss you have already booked and mentally reduce your corpus accordingly. That will help you set limits to your potential losses more effectively.
Investing time and resources into your core investing activity..
You do not become a successful investor overnight. There is a long hard grind that is involved. There is a vast difference between committing your client’s money and committing your own money. You will realize the difference when you take the plunge to become a full time investor in the stock markets. The best hedge is to invest in yourself and invest in your profession. Read extensively and try to keep a scrap book to record your trading ideas as them come along. Keep back testing your ideas on a regular basis. Keep a tab on seminars and conferences where you can walk in to network and have meaningful meetings. Try to go through training programs to understand fundamentals and technicals better. The list can go on; but the moral of the story is that you need to really invest in yourself. There is no alternative!
Can the stock market pay you in other ways?
As a trader or an investor in the stock market you learn a lot by committing your own money. Is there a way to monetize these lessons? There are a variety of ways to do it. Look to give lecturers as a guest faculty in institutions of higher learning. See if you can create your own blog or contribute to a registered blog on markets and investing. You can also organize a small seminar to train budding traders and investors by sharing your experiences. These are all not only monetizing opportunities but they are also good networking opportunities. You not only use your spare time productively but also monetize your knowledge better.
The idea of being a full time investor or trader is to use your market ideas to generate wealth in the long run. However, there are 2 key things you need to remember. Firstly, you need to constantly invest in yourself and keep fine tuning your skill sets. Secondly, you need to take care of your cash flows. You are en route to being a successful investor in your own right!