How I Made 3 Lakhs of Side Income in 3 Years
In India, income from one’s primary profession is often insufficient to meet financial goals. Therefore, seeking additional sources of income is essential.
I’ve explored various avenues, including freelancing. However, the competition in freelancing is intense due to the large population, many of whom, despite being mediocre, contribute to the high competition.
Many in India have historically viewed stock markets as risky, a sentiment not unfounded given scandals like those involving Harshad Mehta and Ketan Parekh.
Additionally, individuals who engage in futures and options (F&O) trading often lose money, further tarnishing the stock market's reputation.
9 out of 10 equity F&O traders lose money, with 84% of them being men and 75% under 40. This underscores the high risk of stock market trading, especially in the F&O segment.
Despite these challenges, my journey into stock investing has been a rewarding experience, showcasing the potential for disciplined investors to generate significant side income.
Childhood Curiosity
From a young age, I was intrigued by the world of stock investing. However, the initial complexities of opening a demat account and navigating through the process were intimidating.
The Turning Point: COVID-19
The COVID-19 pandemic was a traumatic experience for everyone, whether they lost someone or not. It felt as though the world was coming to an end. However, with most people confined to their homes, interest in the stock market surged for several reasons:
- The sudden downfall of the Indian Stock Market.
- The rise of easy-to-use stock investment mobile apps.
- The influence of financial influencers, or “Finfluencers.”
Starting My Journey
In 2020, I didn’t have any money to invest, but by 2021, I began exploring stock investing with the limited savings I had at that time. I can’t recall exactly how I started, but I began reading articles and watching videos to educate myself.
I opened an account with Groww, although I later learned that Zerodha offers the best rates. Nevertheless, I found the Groww app satisfactory for my needs.
Learning and Growing
Learning from mistakes has been central to my journey in stock market investing. I’ve faced pitfalls like mistiming trades, indecision over buy/sell prices and investing in poorly understood downturns, including penny stocks. It’s vital not to risk significant amounts prematurely; starting small and gradually increasing investments has proven prudent.
Here are some of my key learnings from the stock market:
1. Start Small:
Begin with small investments to minimize risk while learning. It takes time to gain confidence in the stock market. Starting with a small corpus means that even if you lose, the impact is minimal, and you can experiment with various strategies.
2. Diversify:
Spread your investments across various sectors to reduce risk. Initially, most of my investments were in high alpha and beta stocks, but I have recently allocated a significant portion to stable growth stocks. I also plan to invest approximately 10–15% in fixed deposits and bonds soon.
3. Research Thoroughly:
Conduct fundamental and technical analyses to make informed decisions. While I focus more on understanding fundamentals, I also pay attention to trends, market sentiment, and information from reliable channels.
4. Understand Market Sentiment:
Trusting a company and planning to stay invested long-term allows you to enter a stock at any point, irrespective of market sentiment. However, entering during market fear and exiting during greed can significantly decrease risk and increase profits.
- Extreme Fear: This suggests a good time to open fresh positions, as markets are likely oversold and might turn upwards.
- Fear: Indicates investor caution. Actions should be based on the overall market sentiment and trajectory.
- Greed: This shows that investors are becoming overly optimistic. Decisions should consider the market’s ongoing trend.
- Extreme Greed: Suggests avoiding new positions, as markets are overbought and may be due for a downturn.
“Be fearful when others are greedy, and be greedy when others are fearful.” — Warren Buffett
5. Stay Informed:
Keep up with financial news, economic indicators, and market trends. Applications like Groww send daily updates, and taking 10 minutes daily to read stock market news can be very beneficial.
6. Be Patient:
Focus on long-term gains rather than short-term profits. Patience is crucial in the stock market. If you’ve invested in a stock with conviction and it doesn’t move for a while, it shouldn’t matter — just invest and forget. It will likely rise eventually. Take ITC, for example.
7. Avoid Herd Mentality:
Make independent decisions based on research rather than following the crowd. As discussed in point 4, to make money, you’ll often need to go against the prevailing sentiment.
8. Learn from Mistakes:
Analyze and learn from past investment errors to improve future strategies.
My Investment Journey
Through continuous learning and disciplined application, I’ve generated 3 lakhs in side income over three years by focusing on quality stocks and maintaining a long-term perspective.
My journey included extensive research into stock investing, which helped me identify quality stocks affected by temporary factors like weather, inflation or just market sentiment. This strategic approach has enabled me to seize potential value opportunities in the market.
“Success is not final, failure is not fatal: It is the courage to continue that counts.” — Winston Churchill
Top 5 Stocks with the Highest Profits
Among my investments, the top 5 stocks that delivered the highest profits were Wonderla Holidays, Aavas Financiers, Lux Industries, Zydus Wellness, and Raymond.
Wonderla Holidays holds a special place for me. I initiated my position in the second half of 2021 when its price hovered around 225. My decision was backed by thorough research, revealing promising plans for significant capital expenditures (CAPEX).
By 2022–23, needing funds for other commitments, I decided to sell my holdings. With an initial investment of approximately 33k, I realized returns close to 71k, more than doubling my investment. However, looking back, I regret not allocating more capital to this opportunity, restricting my initial investment to about 30k due to financial constraints.
In hindsight, had I invested 2 lakhs instead, considering its subsequent rise to over 1000 per share by 2024, the potential profit could have exceeded 6 lakhs over approximately three years.
“Successful investing is about managing risk, not avoiding it.” — Benjamin Graham
Top 5 Stocks with the Highest Losses
Among the investments that didn’t go as planned, the top 5 stocks with the highest losses in my portfolio were Paytm, Delta Corp, Rajesh Exports, Power Fin Corp, and Coal India.
The allure of buying these stocks at a significant discount from their peak prices initially seemed like a promising opportunity. However, hindsight revealed that timing the market’s lows is fraught with risk.
Paytm
The allure of buying Paytm at a significant discount from its peak price initially seemed like a promising opportunity. However, hindsight revealed that timing the market’s lows is fraught with risk. When I invested in Paytm, its stock price had already experienced a substantial decline. Despite its large customer base, the company was grappling with profitability issues. Realizing my entry was ill-timed and driven more by speculation than sound analysis, I opted to cut my losses. This decision freed up capital for more promising investments.
Coal India
As a PSU stock known for its dividends, Coal India appeared attractive when I purchased it at a depressed valuation. Unfortunately, the stock’s performance remained stagnant or continued to decline over an extended period. This experience underscored the importance of evaluating a company’s growth prospects alongside its dividend history.
While these setbacks were part of my learning journey in stock market investing, they strengthened my approach to portfolio management.
“Cut your losses quickly, without hesitation. It doesn’t matter if you were wrong, as long as you can fix it.” — Linda Bradford Raschke
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
Dividends
Dividends provide extra returns on top of the profits gained from buying and selling stocks.
The complete dividend history wasn’t readily available on platforms like Groww. However, from April 2023 onwards, I’ve earned approximately 3k in dividends. Estimating from the beginning, I believe dividends have contributed around 10k to my additional earnings.
While my initial stock market investing strategy included focusing on dividends, I have since shifted my focus towards prioritizing upfront value propositions in stocks.
Promising Prospect: Star Health
One of the stocks in my current portfolio that I see with bright growth prospects, akin to Wonderla Holidays, is Star Health. I’ve invested approximately 180k in this company.
Star Health holds a unique position as India’s first standalone health insurance provider and the largest private health insurer in the country. It commands a significant market share of 15.8% in the Indian health insurance market as of FY21, primarily dominating the retail health segment.
Despite the stock currently being down even in a bull market, my belief in Star Health’s potential remains steadfast. I am prepared to invest more if its price falls further.
(Note: This is not investment advice.)
So this has been my journey to earning 3 lakhs from the stock market. Looking ahead, I remain optimistic about future opportunities and aim to share more insights with fellow investors.
Till then, keep investing, and feel free to share your investment story in the comments. Happy investing!
