Everyone wants to lead a happy and financially stable life, but doesn’t know from where and how to start with. Availability of plenty investment instruments also adds to the confusion for beginners. However, with a little research about the these products and assessing financial needs can certainly resolve this confusion. Listed below are seven such steps, that will increase your financial awareness and help you take an informed decision:
Before you start investing, you must access your financial goals and how much money you’d need to meet those goals. Financial needs and goals vary from individual to individual. “ You should consider the income, the growth of capital, and the safety of your capital while determining your goal. Being a new investor you can use your 30-50% amount for investment if do not have any responsibility,” guides Hemant Rustagi of Wiseinvest advisors. Factors such as age, liabilities, and income among other should be considered while setting financial goals.
It is important to review your financial resources before you start investing. The approach has to be realistic and practical. Be sure you have enough money to take care of your regular monthly bills, loan repayments, and so on. To invest, you don’t need to have a lot of money but discipline. Decide on how much you need to meet your expenses and how much you can commit towards a certain product.
Become familiar with basic terminologies/jargons so that you are able to understand a financial product. Learn about how stocks, bonds, mutual funds, fixed deposits, tax savings, and government savings programs work. “You should never invest without knowing and understanding your investment as later you may regret,’’ explained Mr. Rustagi. It’s good to know the fundamentals of diversification, portfolio creation, and what to do if market conditions pull your profits downwards.
There is always a fluctuation in the market, and investments may rise and fall. Make sure you have a diversified portfolio if you don’t want to lose too much money when the market falls. “As a new investor, you should invest balanced proportions in equity, debt, and gold on the basis of goal. For long-term goals invest greater portions equity while for short-term goals debt should be on the higher side. With at least 10-15% exposure of gold in both cases,” explains Pankaj Mathpal of Optimamoney.
If you start investing early, your money will grow faster. Matpal further explains that, “The sooner you start, the less money you will need every year to achieve your goals. You should start investing for the long-term and short-term together.” You shouldn’t be hesitant to start investing even when you’re still in college.
You should make sure a certain amount of money is automatically invested every month. This will help you avoid procrastinating and invest consistently. Also, compounding works best when you invest a small sum in regular fixed intervals for a longer duration.
Investment professionals will try to persuade you to buy investments that will give them a high commission. Research about the product thoroughly before making a decision. People often call themselves professional, but they end up selling products that pay them large commissions but do not benefit much to the customers.
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