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 in India 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.
6. Set your Objectives
One of the significant investment tips for beginners in India is before starting any investment, you need to determine the objectives- what’s your long-term objectives or short term-objectives.
Is your Investment the primary way to save for retirement?
Do you want to build a huge amount for a child’s education?
Are you saving for purchasing a new home?
Or Investment is simply a tool for making money fastly?
Regardless, what’s your objective, to achieve it, there are different investment plans for each of them. That’s the reason why setting objectives is important.
We advise you to set long-term objectives if you are thinking forward to invest in the stock market. If you want to save for a vacation, that case RD can be the best investment option for you.
Whether you are among the most recent wave of market investors or a veteran at planning goals, set the objectives first, and then choose the plan that helps to achieve specific goals.
7. Don’t Mix Insurance with Investment
Many people think investing in insurance is the same as investing in the stock market. But, they are completely wrong. Insurance is not an investment. When you invest your money somewhere, you expect something back.
Not with a term insurance policy. If you die, then only your nominee gets the amount. You will not get anything till you are alive. But, if you invest in the stock market, you can get a better return on the Investment after a specific time. Since the market is volatile, you need to take the risk to invest in the stock market.
If you are starting out to invest, keep your insurance separate from the Investment. Get life insurance for coverage and mutual funds for the Investment. I hope you got my point.
8. Level of Risk
Another one of the best investment tips for beginners in India is to check the level of risk. Before putting money in the Investment, you need to identify your risk level. The higher risk you take, the better return you will get.
One of the best ways to identify the risks is to conduct a comparison between the different schemes. Doing so will enable you to identify whether you are an intermediate risk-taker or a higher risk-taker. Understanding the level of risk involved with investments will help you avoid risky investment instruments associated with a higher risk.
Every Investment is associated with some sort of risk. Therefore, before investing, analyze the risk and your capabilities as well, like how much loss you can bear if your Investment goes in a negative direction. Once you are clear with the risk appetite, choose the investment plan that can help you to reap the benefits while keeping you in the low-risk category.
9. Diversification of the Investment
Want to mitigate the risk when investing in the market instruments? If yes, then diversify your portfolio. Diversification is one of the best investing tips for beginners in India to improve the potential of Investment and decrease the risk. By investing money in different companies, you can get a better return on the Investment.
It doesn’t enable you to divide your risk and make sure that your money is protected and secured. If you want to balance the risk and reward, then follow the principle of diversification. Almost every seasoned investor uses this technique because it lets them spread the capital across different assets and earn huge returns without facing a big loss.
10. Spends without Regret
In the list of investing tips for beginners in India, spending without regret is the best because what good is life if you don’t live well in the present? So, trust your process, believe in your investment efforts, and spend on the asset to build a secured future.
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 the earliest. Otherwise, hire an expert if you don’t have enough time to manage your finances.
Investment Tips for Beginners in India – FAQ’s
Q1. Is the stock market a risky investment?
Risk is associated with every investment in the stock market you can mitigate by diversifying your portfolio and know your risk level.
Q2. Which are the investment tips for beginners in India?
If you want to invest in the stock market, then diversification of a portfolio is the best tip.
Q3 What is the risk to return ratio in Investment?
The risk to return marks the prospective reward an investor can earn for every rupee they risk on the Investment.