Step 2: How to Arrange capital
In our Future and Options series, this is 2nd article, in this article, we are going to discuss about how much capital is required and how to arrange such capital.
So, friends, now, let’s move forward and let me introduce about Future and Options short. It is a practical step by step approach in which you will get the opportunity to learn Future and Options journey and if you want to learn how to invest using Future and Options which generate silently better return than this course is definitely for you guys. so I’m talking about 2 to 3 % per months and 24 to 36% per year that’s the return we are targeting. So let move and discuss each point So, 1st thing we will discuss that how much capital you should need to start your Future and Options journey. This is most important part and let me introduce it to you that why we required that much capital.
Generally, I recommend nifty as there are lots of benefits in using nifty which we will discuss in some other article of the benefits of using nifty Now suppose if you are dealing in nifty and you want to deal in 1 strategy then you should have at least 5 lakhs in your Demat account and out of 5 lakh rupees, if you want to deal only in options than 4 lakhs should be in base portfolio and 1 lakhs as hard cash in your demat account.
Similarly, if you want to use 2 strategy, which we personally recommend to our clients, you should have at least 10 lakh in your demat account and out of 10 lakhs, 8 lakhs should be in base portfolio (If you are going to use only options) and 2 lakhs as hard cash Another point people asked to us that whether we recommend Bank nifty or stocks, well bank nifty, we personally don’t recommend it as bank nifty is very volatile and my approach of investment is where I can earn some money without getting stress so most important part is we as an investor do not want to sit whole day in front of computer and watching our positions so that is not my strategy. My strategy is basically investing and forget and focus on my carrier and goal and try to get silently better return with our carrier and with our profession and my goal is not to become a full time trader or full time investor so that’s why we don’t recommend bank nifty.
In respect of stock, there are lots of problem with stocks if you go with Future and Options since there are lots of stock in which Future and Options are not available then there are lot of liquidity problem.
Now second question come to our mind, that how to arrange this capital, some of you may say that what kind of question is this because if you have capital then you have capital and if you don’t have capital then you don’t have capital but that is not a truth. Let me tell you, most of us, basically the small retailers’ investors, they have easily 5 to 10 lakhs rupees and even more. Our portfolio is not in good shelf and 70% to 80% of people don’t know what exactly is your portfolio and as portfolio, we are discussing only investment portfolio.
As a retail investor, you have to know about your portfolio then how much money have with you and where you have employed such money i.e. how much money you have invested in mutual fund, how much in FD, how much in stocks.
There is no need to have very lengthy calculation, you can simply put your money in different mutual funds and stocks. Once you made your portfolio then you have to reshuffle portfolio on timely basis.
It has been noticed that some people put their money in lots of mutual funds or stocks. You have to reduce number of mutual funds you owned because a smaller number of mutual funds you have, it will be easier to pledge and get the margin. Let me tell you, for options selling, you don’t required capital, you can do it with zero capital. Zero Capital means literally zero capital. You only need margin.
So, your base portfolio is going to be used in Future and Options invested in good stocks specially nifty relate stocks and good liquid mutual funds and all you pledge and get the margin on the basis of which you can do Future and Options trading. So margin is not equal to capital.
As we discussed above, most of people are carrying lot of number of stocks like 500 in one stock and 1000 in another and likewise in other stocks. So, they will have 50 stocks in 5 to 10 lakhs rupees of capital which is not required. We will recommend to cut down all those stocks and just focus on 5 to 10 quality stocks that is the maximum you should have in your portfolio and in one stock at least you should have 50000 rupees because if you invest less than Rs.50000 in one stock then even such stock is double up then also it will not change your life so you always not to have more then 5 to 10 stocks and each stock should not have less then 50000. So, with this, you can short and make simple your portfolio.
In mutual funds, almost all mutual funds are very well diversified, one mutual fund has more then 50 companies, So, why to have 50 mutual funds. So, you should have only 1 to 2 mutual funds. So that will be easy to manage and that will be easy to pledge also.
Next thing which retail investor love to invest is in Fixed deposit, even the rates of FD has been decreased from 8% to 5% but still they love FD. I’m not saying that FD is bad only thing I’m saying that you can get better return in liquid mutual fund and at the same time you can make your base portfolio in 50% from equity and 50% from cash and cash requirement can be fulfilled with liquid mutual funds.
There are many brokers who use FD also but so far I have not come through because doing pledging through FD is very difficult task so lot of broker avoid pledging of FD so generally they pledge lot of liquid funds.
You can ask from friend or family but again if you follow me properly, without taking unnecessary risk then only borrow money from them. Please don’t ask money from your parents from their retirement money but if they are earning then support you then you can arrange 2 to 3 lakhs from them also. You can offer them 50% of profit of whatever you earn which is better than FD and it will be win win situation for all of them. You can also pledge your house and arrange some money. We are not asking for you to get 50 lakhs or 60 lakhs but yes , 5 to 6 lakhs amount will be sufficient to take a loan against property and arrange capital because without capital there is no options and no future.