I always say – “If you save your money now, your money will save you in the future”
The beginners are either not aware of investing or they don’t care about that. But if you are serious about wealth creation, you should know about investing & how money grows over time.
I will give you some investment tips for beginners that will help you start your journey of financial independence.
1. Start Investing
The earlier you start investing, the more time you will get to achieve your financial goals. Even if you start small, the power of compounding will help you create wealth over time.
Wealth creation requires 3 things – regular saving, reinvesting the savings, and time.
For instance, if you are a 25-year-old and you start investing Rs. 5,000 per month via SIP with an expectation of a 10% annual return, you will have a corpus of Rs 1.13 crore at the age of 55 years.
And if you start investing the same amount at the age of 30, you will have Rs. 66 lakh when you reach 55.
You could easily see the benefit of starting early.
A 5-year delay in starting the investment resulted in a loss of 47 lakh rupees.
Apart from that, starting early will give you the confidence to learn & invest in high risk/return-oriented assets like stocks, for better growth.
2. Learn to Invest in Stocks
Stocks can give you a fantastic return over time if you learn how to pick the winning stocks.
I suggest you invest less than 10% of your savings in the stock market to learn & practice for a couple of years. Don’t get overwhelmed when you make profits and don’t get afraid when you make losses.
Having less money on risk would give you more time to learn the stock market.
Learn long-term value investing that follows the strategies of ace investors like Warren Buffet and Charlie Munger.
Initially, you can start investing in Mutual Funds with a Systematic Investment Plan (SIP).
3. Be Greedy, Be Fearful at the Right Time
There’s a popular saying in the stock market – “Be fearful when the market is greedy & be greedy when the market is fearful”.
People lose money in the market because they start buying when everyone is buying & the market is going up.
Smart investors keep their emotions on hold & let the bubble burst.
So have patience till the stock price goes down when others are selling, you have the opportunity to buy stocks at a fair price.
Buy more stocks whenever the market is down, & hold when it is going high.
4. Hire A Financial Advisor
If you don’t have time to manage your money yourself, it is always better to hire a professional to work for you.
People can spend money on upgrading their phones but hesitate to invest in a financial advisor who can help them grow their money. If you pay Rs. 10,000 per year to a good certified financial advisor, you may save more than Rs. 20,000 in taxes and investments even if your portfolio size is Rs. 3 Lakhs.
Your financial advisor keeps your financial life on track. You can make the right investment decisions with professional guidance.
A financial advisor can help you analyze-
- How much you need to save
- How much to keep in an emergency fund
- What ROI you will need to achieve your certain goals over a given time frame like higher education, marriage, or buying a house.
- How to diversify your funds for a balanced approach
- Tax planning
5. Follow a Disciplined Approach
You may have different goals like marriage, higher education, buying a house, or a foreign trip. Be clear about every goal and define the period to reach that target.
Once you set your aim, be strict to spare a fixed monthly amount to achieve the desired result.
For example, if your goal is to spend Rs. 2 lakh on foreign vacation next year. You can save Rs. 17,000 per month in a Recurring Deposit (RD) for the next 12 months. You will end up saving more than Rs. 2 lakh with the interest earned.
Automating investments is the best way of forming the habit of ‘regular investing’.
RDs are safe assets to start without worrying about the chances of loss.
You can use these investment tips to start your journey of wealth creation. The best approach for a financially free future is to learn the investment basics & start investing at earliest. Otherwise, hire an expert if you don’t have enough time to manage your finances.