As a newbie, investing can be pretty daunting. The idea of putting your money at risk while navigating the ins and outs of the stock market is often enough to intimidate people. It is also a common idea that investing is earmarked for a selected few – people who are willing to take risks.
Well, that’s not entirely true! No matter what your financial goals are, it is never too late to start your investment journey and plan your future. So, if you're on the fence about investing, know that it’s easy to begin and a great way to achieve financial independence.
Not sure where to start? Here’s a quick guide for you.
Starting to invest early offers significant financial advantages. One key benefit is compound interest, where your investment earnings generate additional earnings over time. This compounding effect can substantially increase your wealth as the years progress.
For example, if you start investing Rs 3,000 per month for 10 years with an average annual return of 10%, you could accumulate nearly Rs 40 lakh by the age of 50. However, starting the same investment at 35 would yield only about Rs 12.5 lakh by the same age. This shows the exponential power of starting early.
Investing early also allows you to take on more growth-oriented investments, which may offer higher returns. With a longer time horizon, you can better weather market fluctuations and recover from downturns.
SIPs are an excellent option for beginners. They allow you to invest small sums regularly, making it easier to start investing without needing a large sum upfront. This approach not only reduces the stress of market timing but also leverages the benefits of compounding.
When you're just entering the world of investment, start with studying the stock market – how it works, the various securities, and so on. Thanks to the internet, plenty of useful resources can help accelerate your learning curve. When you understand the market a little better, you'll be able to assess risks and make the right investment decision.
You don’t need to have lakhs or thousands of bucks to start investing. As a good rule of thumb, you can aim at advancing 10-15% of your income towards your investment goal every year. Of course, it all depends on the amount you need and the time you have to achieve these goals.
Opening an investment account in India is an essential step to secure your financial future. It allows you to explore various opportunities, from mutual funds to stocks, depending on your goals. Trusted platforms like Tata Capital Moneyfy simplify this process with online account setups that require basic documents like your PAN card and Aadhaar.
Investment accounts offer a wide range of options and help create a disciplined approach to saving and investing. Starting early gives your money more time to grow through compounding, while regular contributions, such as through Systematic Investment Plans (SIPs), help reduce market risks over time.
Whether your goals include financial security or future planning, an investment account lays the foundation for smart money management.
Investing is more than simply choosing a few schemes and keeping your fingers crossed.
The best investment strategy lets you meet your financial goals with ease and grow your wealth while minimising the risk exposure. Not to mention, the strategy you choose may influence the type of assets you purchase and how you buy them.
Ask yourself - What are your financial goals? How fast do you want to reach them? What is your risk tolerance? Then choose the investment strategy that best matches your objectives-
Growth investing - This strategy is centred around investing in companies with higher growth rates, and a long-term growth investment can lead to better returns.
Income investing - Aiming at regular return from your investments? You might want to look at an income investing strategy which involves buying securities that pay a regular dividend.
Value investing - Investing in high-value companies when the stocks are at a lower price than what they are worth to maximise your returns at low risk
Once you’ve identified your investment strategy, it’s time to put your stock market knowledge to good use. It is critical to understand how each instrument works and the risk it carries. Here are some of the popular investment options for beginners-
Stocks are arguably one of the best-known investment options out there. While they can be a riskier form of investment than bonds, they sure outclass them when it comes to higher returns. Whether you choose to buy single stocks or a fund with multiple stocks, a diverse portfolio of stocks is known to perform well in the long term.
Mutual funds allow the investors to buy a good mix of investments in one purchase, eliminating the requirement to pick individual stocks and bonds. The inherent variation makes them a less risky form of investment than individual stocks. Whether you focus on long-term or short-term investments, mutual funds are a terrific way to start your investment journey.
Like mutual funds, ETFs also hold many individual investments together. Traded like a stock, an ETF’s share price is mostly lower than a mutual fund investment, making them an excellent choice for new or low-budget investors.
Finally, it’s all about picking the right avenues. Once you’ve identified which instruments you want to invest in, you can get in touch with an online broker or use an investment app to invest at the right time.
Investing plays a crucial role in building wealth and achieving financial security. It helps your money grow by generating returns over time, shielding it from inflation and increasing its value. Unlike savings, investments open doors to higher returns through options like mutual funds, stocks, and bonds.
Starting early maximises the benefits of compounding, where your returns reinvest to generate even more growth. Investing also diversifies your income, providing a safety net during unexpected financial challenges. It also helps you to meet long-term goals, like owning a home, funding education, or retiring comfortably.
In India, you can begin investing in mutual funds with as little as Rs. 100 or Rs. 500 per month through a SIP. This affordable entry point makes mutual funds ideal for beginners. With SIPs, you invest a fixed amount regularly, enabling gradual wealth accumulation without requiring a significant initial investment.
Mutual funds collect money from various investors and allocate it across stocks, bonds, or other assets, providing diversification and professional management. This reduces risks compared to direct stock investments. Over time, regular contributions benefit from compounding, where returns generate more returns. Starting with a small amount is enough, as patience and consistency are key to achieving long-term financial goals with mutual funds.
The secret to achieving significant returns from your investments lies in starting early and maintaining a long-term perspective. Investments need time to grow, and withdrawing too soon can disrupt the compounding process, where returns multiply over time. Remaining invested allows you to ride out market fluctuations and benefit from consistent growth over the years.
Now that you're aware of the first steps to take towards your investment journey, you need a reliable platform for all your investment needs. Download the Moneyfy app to compare and analyse various schemes to make sound financial decisions.
For beginners, mutual funds are a solid choice. They collect money from multiple investors to buy a diversified mix of bonds, stocks, or other securities, reducing risk. Professional managers handle these funds, making them suitable for those new to investing.
The seven common types of investments are Stocks, Bonds, Exchange-Traded Funds (ETFs), Mutual Funds, PPF (Public Provident Fund), the National Pension System (NPS), Real Estate, and Equities.
Begin by setting crystal clear financial goals and creating a budget to identify investable funds. Educate yourself on investment basics and choose a brokerage account that suits your needs. Start with low-cost options like index funds or ETFs to build a diversified portfolio.
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11 December 2024
7 mins read
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