Guide to Investing for Beginners in India

In the present era of uncertain economic environment and volatile market, individuals who are seeking to start investing need to have adequate financial knowledge.

Most people start investing haphazardly and don’t pay attention to key factors such as investment objective, risk appetite, assessing market variables, investment duration, etc that can facilitate them to reach upon a right investment decision.

Investment Tips for Beginners

Having investment tips give the right direction which help the investors towards achieving the desired goal.

    1. Set Investment Objectives
    2. Learn Before Investing in Stocks
    3. Control Your Emotions
    4. Disciplined Investing
    5. Check Risk Involved
    6. Analyze Stock Market
    7. Avoid Leverage
    8. Begin Investing
    9. Investment Diversification
    10. Investment and Insurance are different
    11. Hire A Financial Advisor

Read further to know more about the Investment Tips for Beginners in India.

Tip 1: Set Investment Objectives

Before you start investing, you first need to identify and set your investment objectives such as children’s education, buying a car or home, and savings for retirement. Setting long-term goals  help you take benefit of power of compounding. It helps maximize the value of investments and thereby achieve goals.

If you are investing in stock market, you need to keep it for a long-term so you can have high ROI. To meet short-term goals, you may invest in traditional investments such as bank FD that delivers guaranteed returns.

If you really want to grow your investments, it’s advisable to begin investing as soon as you start earning. You need to give enough time to your investments so that you can accumulate a corpus amount.

Tip 2: Learn Before Investing in Stocks

Investing in stocks offer you great returns over time, if you know the tricks to picking the right stocks. To get profitable returns from stock market, you need to learn and practice investing. While you are learning to invest in stocks, you must invest a lesser proportion of your savings, so you have less monetary risk.

I recommend you not to invest more than 10% of your total investment amount in stocks. Don’t get over-confident when making profits and don’t get scared when incur in stocks trading.

Also, learn investing lessons from ace investors and then adopt investment strategies that will help make profits.

When looking to invest in stocks, you must start with mutual funds investing via Systematic Investment Plan.

Tip 3: Control Your Emotions

People usually lose money, as they start buying just because others are buying and market is on upward trend. You need to control your emotions and have patience.

It’s advisable to wait till the market goes down and then buy stocks at a fairly low price. Buy more stocks when the market is bearish, hold and sold when market is in bullish state.

Tip 4: Disciplined Investing

You may have certain goals in life such as high education for children, buying a home/ car, foreign trip with family, etc. Once you specify the goals, also define the time period to meet those goals.

To ensure you fulfil the goals, you need to save a fixed monthly amount and invest it with investment avenues that can help achieve goals in timely manner. Make a habit of ‘regular savings and investing’.

For instance, if you want to accumulate Rs. 10 lakh for your child education, you need to investing with safe investment avenues including ELSS mutual funds, public provident fund, sukanya samriddhi scheme, fixed deposit, etc.

Also Read: Safe Investments in India that Offer High Returns

Tip 5: Check Risk Involved

Prior to investing your money with an investment option, you should assess the risk associated. To evaluate the risk, you need to make comparison among various schemes or plans you want to invest with.

It enables you to identify the risk involved in an investment product and then invest money as per your risk appetite. Assessing the risk factor help you avoid the instruments that have high risk potential.

Tip 6: Analyze Stock Market

The majority of novice investors directly jump into stocks market investing with no proper guidance and lack of research. However, before investing you should study the market basics and do a thorough research.

By getting a thorough understanding, you can easily assess the risks involved in stocks market investment. It help choose the right investments that suit your investment goals and risk appetite.

Tip 7: Avoid Leverage

A majority of novice investors don’t have the sufficient funds for investment. And that’s why, they need to borrow funds from banks and brokerage firms to invest in stock market.

However, getting such loans for investing is not an intelligent option. This monetary leverage will reduce your net returns. The major portion of the returns you obtain from investment will go paying the leveraged amount.

Tip 8: Begin Investing

Financial advisors always suggest to start investing as soon as you start earning. It gives more time to your investments to grow and with the help of power of compounding, you can build wealth and fulfil your financial goals.

Creating wealth involves 3 important aspects – regular savings, invest the savings and enough time to multiply the investments.

For instance, at 25 years of age if you begin investing with Rs 3,000 per month with 10% annual rate of return, you will accumulate a corpus of Rs. 3.07 crores at 60 years of age. Similarly, if you start investing with same amount at 30 years of age, you will have just Rs. 1.8 crores at 60 years.

With this example, you can see the difference to start investing early. With only a 5-year delay to begin with investing, you will have a much lesser corpus.

Tip 9: Investment Diversification

Diversification of your investments is extremely vital, as it helps reduce the overall risk involved. You can choose from varying investment classes including equity, mutual funds, fixed income, and money market instruments. Investing in avenues such as public provident fund and fixed deposit help you obtain guaranteed returns.

Under your investment portfolio, if you incur losses from some of your stocks and with other stocks, if you are getting huge profits, then your profitable investments help recover from the losses.

Related Reading: Top Investment Options that Assure High Returns

Tip 10: Investment and Insurance are Completely Different

People often think insurance and investing as same. However, both these things are different. With investment, you expect returns that help fulfil your goals. Insurance provides you coverage against uncertainties of life.

Both – investment and insurance are essential.

Also, you need to carry the right proportion of insurance be it – life insurance, health insurance, motor and home insurance. To cover your life, you need term insurance and health insurance, so it ensures financial security for yourself and loved ones.

You may start investing in stocks and other investment avenues to gain high returns.

Tip 11: Hire A Financial Advisor

If you don’t have enough time to do research or expertise to make investing in a right way, it’s time to hire a professional financial advisor. A financial advisor gives professional guidance to choose a right financial plan and pick right investments that help bring your financial life on track.

Over to You

Beginners usually make wrong investment decisions that may end in losing their principal investment amount. By following the tips, you can have a good understanding of investing and make a well-informed decision that may lead to significant profits.

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