'Should I trade stocks to generate a second income?'

THE PLAN

Thirty-four-year-old Rachit works in an IT company and takes home about ₹80,000 a month. His wife is a homemaker and the couple is blessed with a five-year-old daughter. They live in their own house, for which Rachit pays an EMI of ₹23,000. Their other monthly expenses usually vary between ₹45,000 and ₹50,000.

Rachit is a little worried as he is unable to save much for his daughter's higher education and his retirement. Recently, he has come across a social-media post on how one can generate an additional regular income by trading in derivatives. Influenced by the post, he has decided to invest about a lakh from his savings and wants to know if this is the right thing to do.

WHAT ARE DERIVATIVES (FUTURES AND OPTIONS)?

● Derivatives are leveraged financial instruments whose value is derived from an underlying instrument, such as an index, a stock, a currency or a commodity. Futures and options are two major types of derivatives.

● Leveraged financial instruments can magnify both your gains and losses. Many people are attracted to them for their profit potential but end up suffering big losses.

HOW DERIVATIVES CAN GIVE YOU MEGA LOSSES