In India, the share market is a great avenue for earning regular income. But, earning a regular or fixed income from it is not a straightforward process and involves a lot of labor. However, there are certain areas in the stock market where one can earn a regular income without worrying about the risks. Though these avenues can give the investor a regular income, it is not an assurance that it can work all the days and not provide high returns. This blog will talk about such avenues and ways.
Income Stocks : These types of stocks are ideal for investors looking for a regular source of income from the share market. Income Stocks pay the investors in the form of dividends on a regular basis. This dividend grows steadily over time to account for dividend inflation. These stocks are typically issued by companies with a consistent cash flow and a well-established financial infrastructure. These firms have large market capitalizations and are typically at a mature stage in their growth curve.
Market capitalization is a method for calculating a company’s worth. The methodology employs two variables: a company’s outstanding shares and the price of each share. This method distinguishes three types of companies: large-cap companies, mid-cap companies, and small-cap companies. Large-cap companies are the most likely issuers of income stocks. Here are a few characteristics of Income stocks that make them an attractiveinvestment for such investors.
Defensive Stocks Income stocks are frequently regarded as defensive stocks by investors. These stocks are from industries that continue to operate regardless of market conditions. Food and beverage is an example of an industry that produces defensive income stocks; others include electricity, gas, and so on.
Because the aforementioned goods and services are required at various stages of market fluctuations, such stocks are less reactive to market volatility. You can invest in such stocks to reduce the risk factor in your portfolio and receive guaranteed stock market income, even if the market is bearish.
High–Dividend Stocks Some industries pay out dividends that are higher than the average. This scale of dividend payment is common in industries such as electricity, gas, water, and energy. The Real Estate sector, which issues income stocks in the form of Real Estate Investment Trusts, also has a high share market income (REITs).
Incorporating income stocks into your investment portfolio will allow you to strike a balance between risk and reward. Also, in the case of market contractions, it will buoy your stock market income and keep your investment capital immune to volatility to avoid losses.
Disadvantages of Income Stocks: While income Stocks pay regular dividends and empower the investors with a fixed income, they also come along with a couple of drawbacks.
Expensive: Income stocks are more expensive than other stocks due to their profitable nature and issuer companies with large market capitalization. As a result, if investment capital is scarce, such stocks may appear unviable.
Low capital appreciation: Income stocks do not provide significant capital growth. As a result, investors who prefer trading stocks for income during market expansion will not profit significantly from such transactions.
Alternatives to Income Stocks: Though the stakes are high, Income Stocks is not the only type of security that offers a fixed source of income to investors. When compared to income stocks, growth stocks provide higher scale capital appreciation. It is ideal for investors with a high risk tolerance and a dynamic investment goal. Mutual funds, because of their investment pooling, enable investors to have a diverse investment portfolio and professional fund management. These funds can be invested in any type of market security.
Conclusion: Be it Income Stocks or growth stocks or mutual funds, you have to choose the right investment that fits your needs and aligns with your financial goals. An essential part of dealing with the Indian stock exchanges is the need for a good partner who will provide you with the required tools and expertise. We at Tradeplus can provide you with online trading platforms with the best analytical tools that lets you trade anywhere from the globe. Our flat fee brokerage plan can also do a great deal of help for you.