If you want to begin investing in the Indian financial market, then it is essential for you to gain instrumental knowledge and at least have a fair understanding of the different investment options. As a beginner, you must venture into investments carefully because the whole purpose of making an investment is wealth generation, and this calls for consistency and sincerity. Making an investment needs preparation.
Here are a couple of useful beginner friendly investor tips that can help you make good investment decisions.
Decide How Much Is to Be Invested
The first and most important aspect of making an investment is to decide how much you want to invest. Don’t get excited and decide on a large chunk of money to be invested. As a beginner, you may want to go with the slow and steady approach towards an investment. Start with a low proportion of your fixed salary and only increase it if you feel it’s too low and you can afford a little more after meeting your expenses and contributing reasonably to your saving fund. The bottom line is that you must be realistic when you decide on how much is to be invested.
Before you make any investment, you must set objectives for your investment. You must be clear whether you are making an investment for securing your own post-retirement life, whether you are investing to save for your child’s education expenses, buy a property, or you are saving for meeting unforeseen medical expenses. Setting long term objectives or short-term objectives for your investment totally depends upon crucial factors such as affordability, type of financial requirement, the amount of capital you can invest, risk-taking capacity and period for which you can part with your hard-earned money. Consciously and calculatedly setting an objective for your investment is a wise step.
Level of Risk
Different investment options come with a different level of risk associated with them. If you are a beginner in the investment market, then it is advisable that you chose an investment option after carefully analyzing the level of risk associated with it. One good way of identifying the level of risk associated with different investment products is to conduct a careful comparison between the different investment options. This will help you figure out which instrument holds what level of risk so that you can select an investment instrument accordingly. This exercise will help you avoid investing in instruments that have high possibilities of making you incur losses.
Like it’s said you should never keep all your eggs in the same basket, you should never invest all your funds in the same investment instrument. Investment diversification is a wise decision even at a beginner level. Diversifying investment helps negate the potential risk of incurring losses. You could invest a part of your funds in different investments such as gold, real estate, stocks, equity, and bank deposits. Investment diversification must be done on the basis of your individual risk-bearing capacity and long term and short-term financial goals. Some of the low-risk options include purchasing of gold, Life Insurance Policy, and Fixed Deposits. Some of the high-risk options include Stocks, Equity Mutual Funds and Real Estate. Ideally, your portfolio should comprise of both high risk and low-risk investment to generate a good financial safety net.
Consider the Liquidity Factor
When you are considering investing, as a beginner, you must understand and carefully analyze the liquidity factor of the investment in question. Know that the level of return on your investment will also depend on the liquidity of the invested funds. If the returns are low, then the risk involved is low, and the liquidity is high. If the returns are high then probably the risk involved is high, and the liquidity is low. Depending on the objective of your investment, the financial goal associated with it, your risk taking capacity and liquidity preference you can select an appropriate investment option.
Keep Educating Yourself
You may be a beginner, but you don’t always want to remain one. You must upgrade your knowledge about various investment instruments from time to time, keep learning about the market trends, keep making a comparative analysis of benefits offered by different companies offering the same investment instruments and read about past trends and keep yourself updated about the rate of returns offered by different companies from time to time. This will help you to not make the same investment mistakes in the near future and reduce the number of wrong investment decisions you may have taken otherwise. Having profound knowledge of where your money is going and where it’s taking you financially is very important.
Look For A Low Fee Solution
Different companies charge different amounts to use their services, also their fees may differ on the basis of how much you have in your account. You may also be charged for buying and selling assets. You may also have to pay separate fees for mutual funds. A large chunk of your savings can go into paying for such fees. Hence it is imperative to locate the fee schedule that costs you the least and doesn’t really burn a hole in your pocket in the name of investment.
Study Your Portfolio
You must study your investment portfolio from time to time. What is good for your portfolio today may not be good for your portfolio tomorrow. It is crucial that you know where you stand financially at all times. It is essential that you know what you have today and where you need to make the necessary changes. You must also know that what changes must be made when the economic climate shifts in your country or globally.
The world of investment can be quite intimidating for beginners, however with your head in the right place and the above investment tips up your sleeve you are good to begin your investment journey efficiently and effectively. Whenever you hesitate, falter, or fail, remember that anyone can make prudent investment decisions with a little education.