How Much Returns Can You Realistically Make From the Stock Market?


From one of our previous articles, you might've understood why you should be interested in the stock market and invest or trade. However, it's important to have a perspective on how much money (or returns) you should aim to make from the stock market. If you ask beginners, the two most common answers would be as much as possible. Or in absolute terms, maybe ₹5000 or ₹10,000 a day with very little capital. If this is your perspective, then you need to reconsider it as soon as possible!

The answer to the question in the title is: meet industry benchmarks.

What are Industry Benchmarks?

An industry benchmark is a reference point that helps you compare your performance with the leaders in the industry. For example, if the average time the top 10 race drivers take to finish a lap is 1 minute, then the industry benchmark is 1 minute. If a driver finishes the lap in 1 minute, we can consider them successful in that particular industry as they have surpassed the industry benchmark.

We now have clarity on the activities you can do in the stock market: trading and investing. But what are the industry benchmarks in trading and investing?

Industry Benchmark in Trading

If we examine how much Jim Simons (one of the most successful traders in the world) earns, we see that he generates 70% returns on his deployed capital each year. That means that if he had deployed ₹1 crore of capital on trading, he would've made around ₹70 lakhs that year. The top traders in India make nearly 40-70% returns on their capital every year. So the industry benchmark of 40-60% returns is what you should aim to generate through trading. 

However, the estimations for industry benchmarks were done with scalability in mind. It is possible to make 100%, 200%, or possibly, even more, returns with small capital, but it may not be scalable. Whatever your capital may be, you should target 40-70% profits per annum. 

Industry Benchmark in Investing

It is common knowledge that Warren Buffet, renowned as the greatest investor of all time, averages CAGR returns of 18% per year. The late Mr. Rakesh Jhunjhunwala, India's top investor, once said “If you're able to earn an 18% return on your portfolio, you are no less than a king, and if the return is 21%, you are an emperor.” Even India's leading portfolio management services generate CAGR returns of 20-30%. From this, we can conclude that 18-20% is the industry benchmark for investing, and this is what you should aim to achieve.

3 Points To Remember

1. Set a Target

Without a target or goal, it is like getting into a car without knowing where to go. To comprehend what is possible, practical, and achievable, you need to be aware of industry benchmarks.

2. Think in Percentage Terms

While discussing profits, we should express them as percentages rather than absolutes. This is because absolute terms do not provide any context for how much capital was used to generate those returns. For example, if someone says they made ₹1 lakh a week and used ₹10 crore capital, that would only be 0.1% returns, which is not great. So we should always think and talk in percentage terms.

3. Making Out of the World Returns is Possible

We discussed how generating massive returns of 200% or more may not be practical because of scalability issues. There are a few exceptional traders who make those kinds of returns, but not everyone can be at that level. It may not be possible or practical if we all aim for high returns from the start. Instead, we should focus on beating the benchmarks and then gradually increasing our targets when needed.

To conclude, you need to set realistic expectations of what you can achieve. People often make the mistake of thinking that they’re going to make a fortune overnight. The reality is that it takes time to make money in the stock market, and you need to be patient. If you’re ready to start investing in the stock market, then make sure that you have the right perspective. Otherwise, you’re setting yourself up for disappointment.

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