The Indian equity market has continuously rallied from last year. Despite few ‘slips and trips’ it did come out as one of the best performings among the major economies. The benchmark indices NIFTY & SENSEX are making new records every day and giving fruitful results (or returns), widely outperforming the global peers. In such times, most people make money by selling their shares which they bought at a low price. On the other hand, you were maintaining your 5-7-year-old heavy equity-based portfolio consisting of a blue cap and mid-cap stocks. The stocks you own have substantially increased in the last year. Your portfolio value has multiplied and made huge gains.
At this moment, you can surely book your profits and come out of the stock. Even your friend is guiding you to do the same thing. But, you’re not sure whether you should book profits after selling shares or hold on to it. Even if you plan to make other big investments after making profits then it will be quite risky and you’ll have to start all over again. But, you already have invested in some blue-chip stocks and you are quite confident that you will make good profits out of these companies stocks in the long-term.
That brings us to a question: If you are holding onto some good equity portfolio, is there a way to monetize your shares without selling them? So, you can keep your shares, earn dividends, and make good money without selling them.
In this article, we’re going to answer this question: how to make money without selling shares in the stock market?
Monetizing Shares without selling them
There are different ways to monetize your shares without selling them which are as follow:
Using the Holdings Value as Margin for Trading
This is by far the most simplistic method of making profits without selling your shares. On the basis of the value of your DEMAT holdings, your broker can allow you to take a margin trading position in the equity or Futures & Options segment. In this way, you can take a loan against your equity holdings and get the opportunity of making short-term profits. But, we would recommend you to be extra careful, since the broker will sell your shareholdings to recover the losses in trading.
Loan Against Shares (LAS)
If you are not interested to take the margin trading position then you can opt for Loan against Shares (LAS). In LAS facility, you can take funds of up to 50-60% of your shares total value. For instance, if you’re holding the shares of worth Rs. 10 lakh then you can take LAS of up to Rs. 5 lakh. The shares will remain within your DEMAT account, you will get your dividends as you used to but once your trade is executed, you pay back to your broker with interest and release the pledge, irrespective of profit or loss. But, to offer the LAS facility, your broker must have a tie-up with the bank or NBFCs who that avail you the loan.
There are two types of risks in LAS:
- If you fail to repay the loan then the broker has the liberty to sell your shares and recover the dues.
- If the share price crashes sharply, then the broker would ask you to add the additional margin and has the liberty to sell your shares, if you failed to do so.
Apart from this, you can also go for selling higher options to keep reducing your cost of holding the stock but it is a slightly more aggressive strategy where you sell out of the money call options on the stock which you are holding. But, it is still a good way to monetize stocks without selling them. There are different ways to monetize your stocks without selling them, all it’s up to you on what’s suit you best!