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.
Study the stock market
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.
Decide how much to invest
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.
Determine your investment strategy
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.
Know your investment options
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
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.
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 Moneyfyapp to compare and analyse various schemes to make sound financial decisions.