You have officially crossed the first step in the journey of financial planning by making up your mind to start your first investment.
Investing is the most efficient way to start building a stable financial future. It enables your money to work for you simultaneously.
With so many options available, investing for the first time can be quite overwhelming.
Where to invest? How to invest? When to invest?… are some things that haunt the minds of potential investors.
There are millions of people who almost decide to start investing and then back off due to fear. Before you jump the gun and join that club, pause for a moment.
Investment isn’t rocket science; It is pretty simple – make your money work for you.
Investing for Beginners India 2020
That’s why I have laid out a few simple tips that will come in handy throughout your investment journey, especially if you are a beginner in investing
#1. Chart Your Goals & Needs
Ask yourself why you want to invest?
Define your goals and needs first. Your goals may be anything from investing for your first vehicle (short term), a vacation to investing for your child’s college(long term).
Once the plan is clear, you will be able able to set a time frame.
The time frame affects the risk exposure to investments. While short term investments meet your immediate needs, long term investments have more time to grow and add to your wealth.
#2. Know Your Risk
No investments are risk-free; every asset comes with its risk attached. Some carry low risk, and some are riskier – but the risk is directly proportional to returns.
It is necessary to find the right balance between maximizing returns and risk. You can assess your risk tolerance on many factors such as age, cash availability, commitments, etc.
#3. Set a Sum for Investment
Investing does not require a considerable sum of money;
You can start with what you can afford. The amount of money you have for investment is less significant than being financially ready to invest a sum of money periodically.
#4. Automate Your Savings
Saving money is something most people struggle to do.
One of the best ways to start saving is by automating it.
Habituate yourself to set aside some amount of money periodically for investing in the future. Add space for savings in your monthly budget and make sure that money is never touched.
Money saved shouldn’t be spent, and hence that money will grow.
#5. Do Your Research
It is crucial to spend a reasonable amount of time researching the investment in which you want to invest your money.
The purpose of researching before making investments is to acquire knowledge to make the right investment decisions. The quality of your assets depends on the quality of your research.
#6. Choose the Right Instrument
There is no one size fits all instrument for everyone. Numerous investment options are available in the market today. Before choosing your first investment, you must ask yourself if it fits your goals and needs.
Make sure to select an instrument based on when you require the funds, your risk tolerance, how much money you can invest, will it make a difference if you lose that money, etc.
This will enable you to put your money in an instrument that suits your profile.
#7. Diversify Your Assets
Diversification means spreading your investment in various non-related asset classes.
If all your money is put in one asset class, the risk is very high.
If you are investing in one high-risk product, simultaneously holding a low-risk asset helps mitigate the loss. Though diversification may not guarantee against losses, it keeps your portfolio from completely falling apart.
#8. Plan for Long Term Investments
Though investing in the short term is not a bad idea, it is better to keep your money invested for a more extended period.
Time allows your money to grow at an unimaginable rate due to the effect of compounding. Investments vested for the long term are usually undisturbed by temporary economic disasters such as pandemics, wars, natural calamities, etc.
#9. Review Your Portfolio Periodically.
A timely review of your portfolio gives you an insight into your position in terms of wealth creation. There are two steps to reviewing your investments.
- Take a broader look at your overall portfolio and assess the aggregate returns.
- Consider the returns of each asset and draw a comparison.
This will give you an overall idea of the success of your investment. And also enable you to identify your best and worst-performing assets.
If there is one golden rule to invest, it is – never invests the money you can’t afford to lose. It is natural to want to make the best of your money or even better put in more than you can afford.
But this nature will blow up in case of losses. Ensure that any disappointments in your investments do not affect your current lifestyle. Even more so, never invest borrowed funds.
Once you have considered all this, you will be ready to take your second step into the financial planning journey – Start investing.
[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
Table of content
Subscribe to Our Newsletter with exclusive content.