Investing is perhaps the smartest thing that you can do with your money, regardless of whether you are wealthy or not. Even if you have just a few thousand rupees lying around, making a wise investment can offer significant returns.
However, investing can seem intimidating, especially if you are a beginner who’s just started earning. But what you might not know is that the fundamentals of investing are actually quite simple.
In this article, we have provided some smart yet simple tips for investing as a beginner. By diligently following these tips, you will be able to create a solid foundation for smart investing. Also, these tips can be applied in your personal financial planning.
Start as early as possible
Take your mind back to your childhood days. Do you remember how you used to save your pocket money inside diaries, books, or in your tiny piggy bank to afford some of the things you wanted as a child?
As you can see, we all learned the concept of saving little for bigger rewards pretty early in life. Why not start this process early in your adult life? After you’ve started earning, you need to establish a budget and determine how much you can set aside each month for investing.
Keep in mind that the earlier you start, the longer you will have to invest and the more money you will make. This is known as the power of compounding – another smart investment tip.
Consult and seek advice
After figuring out your budget, research your options. While a close acquaintance may offer valuable tips, it is more advisable to seek the expert opinion of an investment advisor at your local bank. He or she is better suited to offer professional and outcome-oriented guidance.
Perhaps you are more interested in property development finance. Finding an advisor with expertise in the area you want to invest in is crucial. They will be able to assess your situation and guide you on the best kind of investment, for example, whether you should invest in a retirement savings plan or set up a tax-free savings account.
Once you have a better understanding of the various types of accounts to invest in as well as their benefits and drawbacks, you will be able to make a more informed decision.
As a beginner investor, it is completely normal and understandable to be a bit skeptical. It goes without saying that you definitely want to minimize the potential risks of your first investment. With this in mind, you can consider investing in a fixed deposit account.
Fixed deposits serve as loans to governments and companies and offer small but reliable returns. There is also an alternative way to invest your money. Focusing on less volatile stocks can help you specialize in stocks that have long-term prospects.
For instance, consumer staples stocks are considered safer than the overall market due to the fact that even in tough economic times, people will still have to buy essential products including food and clothes. The point here is to follow the lower-risk strategy. In just a few months, you will notice that these tips are helping you save smartly.
Consider an all-in-one solution for your investment problems: SIP
When it comes to investing smartly as a beginner, one of the best ways to approach this is through Systemic Investment Planning (SIP). This lets you invest in mutual funds while eliminating the risks of market failure thanks to the Rupee Cost Averaging technique in which you purchase more units when the markets are low thus reducing the total cost of investment.
Systemic investment planning offers a smart yet hassle-free way of investing your money since you only invest a certain amount at regular intervals be it weekly, monthly, or quarterly.
Advantages of investing in SIP
First of all, you can choose to start with the minimum $500 investment amount. Secondly, the power of compounding can help to increase your money tenfold. What’s more, investing in SIP offers better long-term benefits.
While Fixed Deposit and Recurring Deposit accounts are all safe options, Systematic Investment Planning offers 2X higher returns without any of the risks of market failure. SIP is also more convenient than all the other types of investments since you don’t have to worry about forgetting to make an investment every single week or month.
In Systematic Investment Planning, a fixed amount is automatically transferred from your savings account each month to the mutual fund scheme you are looking to invest in.
Time to Pick Up and Split
While choosing the perfect time to invest is almost impossible, there is a way you can boost your chances of maximizing your returns. This is by directing small amounts into the fund on a regular basis instead of investing a lump sum. You can choose to buy fewer shares in case you find the market rising or just wait and buy more at a lower price if you catch it falling.
This will help to minimize the overall cost and risk. The general rule of thumb when it comes to smart investing is that you should never put everything into one basket. For example, if you put all your money into one company, you will end up with nothing should the company tank.
The smart move is to diversify your portfolio. This means splitting up your lump sum and investing in different companies, asset classes and markets. Keep in mind that smart investors stick to monthly investment plans.
Information is key in the world of investing. You need to stay involved always. While investment options such as debt funds and bank deposits aren’t so much information sensitive and are considered safe investments, investment vehicles like real estate, stocks, and equity-linked mutual funds are much riskier. As a result, they have a much higher rate of return. Read this article: Janus Henderson.
However, before choosing a high return investment return, it is crucial that you first understand how to minimize the risks of loss. And to minimize your risks, you need to stay informed. Information is your best tool when investing in shares. Did you know that you can completely eliminate the risks of losses just by staying informed.