A BEGINNNERS GUIDE TO INVESTING: ALL YOU NEED TO KNOW TO GET STARTED

A BEGINNNERS GUIDE TO INVESTING: ALL YOU NEED TO KNOW TO GET STARTED

People often look for places that can help them getting good returns. Those financial instruments that can give good returns have high risk potential but beginners fail to identify that. People who are looking for good returns often get carried away by their greed and end up taking huge risks.

Before diving into investing for the first time, take a deep breath and enjoy the process. It’s important to remember that investing is a broad field and that many people make it their entire lives. One of the most common deficiencies in our education system is the lack of basic knowledge in areas such as investing and personal finance. This is a vital component of our personal finance and investing success. There’s no doubt that investing can be incredibly successful if you take the time to learn the basics. Acquiring even a basic knowledge of investing will give you an advantage over your peers in terms of financial success. So make sure to invest only on those places where you have complete knowledge of.

 Always remember, it’s never too late to start investing, it’s still not too late to start building a financial foundation even if you’re not satisfied with your current situation. Don’t hurry. Only invest when you have enough money in your emergency fund and have a capability to take risks and to withstand the idea of losing money.

Before you invest, try to ask yourself these 3 questions

  1. Do you have enough money in your emergency fund?
  2. How much risk can you tolerate
  3. How much liquidity do you have?
  4. Do you need long term returns or short term returns?

Your decisions on investing and choosing a right financial asset will be based on the answers of those 4 questions. You need not to invest all your money, considering the current pandemic times when there is limited or no job security. Before you start investing, make sure that you have enough money to cover your living expenses.

If you have figured out your budget and ready to invest, make sure you start with the basic and most necessary places that will provide you long term benefits and are low or no risk value like:

  1. Health and life insurance – It is highly important to realise the value of insurance now. A lot of people save their whole lives but not smartly and end up giving away their life long savings on paying medical bills. Financial literacy doesn’t mean to learn how to grow your investment but also taking the right decisions in investing for future contingencies. Health insurance can help to cover the short term expenses by paying for immediate medical bills and health expenses. On the other hand, Life insurance, offers long term coverage and can help financially protect you and your family in the event of debilitating illness or death.
  2. National Pension Scheme- It is a retirement savings plan that encourages people to save regularly for their retirement age throughout their working lives. NPS encourages you to save for your retirement and provides a steady income once you stop working. NPS is a good alternative for people who aren’t very adept at picking the correct investment options and can’t devote their time to it.
  3. PPF
  4. SIPs

Although, there are a lot of things that you can’t learn in one day, but there are some places that can help you start making money by investing in various financial assets.

EQUITY– Investing in equities is one of the finest possibilities in today’s expanding market, because top-tier companies continue to invest in growth and are safer options for investors. Choosing the appropriate stock is critical, and determining the right time to enter and exit is tough. In order to determine the proper market price to invest in their stocks, investors who want to build a strong portfolio should first grasp the company’s future growth potential and current financial status. Before you begin investing in stocks, you must first open a demat account and study the fundamentals. Remember that diversifying your portfolio can help you earn higher returns while reducing your risk of losing money.

MUTUAL FUNDS– Mutual funds are one of the most popular and safe investment options that can provide decent returns (bearing in mind that there is always the risk of losing money). It is a better option for people who are unable to locate the perfect investment option for them. Mutual funds are a sort of financial asset that collects money from investors in order to invest it in stocks, bonds, and other money-making assets. Think of giving your money to someone highly professional and more knowledgeable than you who invest your money in various places and gives you the majority of the profit he earned with your investment. That’s mutual funds. They are categorised into many but for a start you can invest in either Equity mutual funds or Debt mutual funds.

GOLD– Not to be confused with gold in the form of jewellery, which has its own set of issues, including safety and high cost. Then there are the ‘making charges,’ which usually amount to 6-14 percent (can go as high as 25%) of the gold price. There is, however, a choice for individuals who desire to invest in gold. Paper gold is another option for gold ownership. ETFs can be used to invest in paper gold, which is more cost-effective.

CRYPTOCURRENCY– More than 10 million Indians have already invested over $5 billion into cryptocurrency and the government has the tough task in making sure it’s done without safety concerns.  But the government does not want to be left behind in the new age tech revolution and how to get utmost benefits of blockchain revolution. According to the report of Inter-Ministerial Committee (IMC), the use of digital currencies is suggested for various places like financial firms including banks and many more. It is also said that the government is planning to launch its own digital currency in the end of 2021. This will be a good opportunity considering the economy is in bull’s phase. Although, it is recommended to trade in smaller quantities in the beginning.

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