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A Beginner's Guide to Investment Plans

August 03, 2021

 

When it comes to planning for the future, people must rely on a combination of savings and investments. Many people are wary of investments since they could lead to losses as well. It can be overwhelming for beginners to understand where and how to start investing. Figuring out the best way to split their money across the various types of financial investment options can be overwhelming. Here’s a short guide that every beginner can use to get started on their investment journey.

Understanding the Different Types of Investment Plans

1. Fixed Deposits

These are possibly the most well-known investment option. With a fixed deposit, you invest a sum for a fixed number of years. At the end of this period, you earn interest on your initial investment. These plans offer average returns but are one of the safest investment avenues.

2. Mutual Funds

With a mutual fund, your money gets invested in various market instruments. Depending on the fund you choose, you can invest in equity, debt or hybrid funds. The market influences your returns. They offer high returns but come with inherent risks.

3. Stocks

You can opt to invest directly in equity markets through the purchase of stocks. While these investments potentially offer the best returns, you risk facing losses when the market is volatile.

4. Real Estate

Many people include real estate in their investment strategy. It’s a smart move since property values will appreciate over the years. However, not many people can afford to purchase a home right after they’ve started working, so this a long-term investment.

5. Unit-Linked Insurance Plans (ULIPs)

ULIPs are unique since they allow you to invest your money in debt, equity and hybrid funds while also providing the policyholder with life insurance. Here, you have control over where your money gets invested. So, you can navigate markets ups and downs with ease.

How Do I Start Investing?

Once you understand the types of financial investment options available, you must think about what will work best for you. Consider the options and your risk appetite. Come up with a plan to save enough money to begin investing. You can start small, with just a few thousand every month and slowly increase your investment amount over time.

When Should I Start Investing?

There’s never a wrong time to start investing. You can start right from the time your first salary gets credited into your account. Most people wait to save up a certain amount. But the ideal time to start investing is now.

Coming Up with an Investment Strategy

1. List Your Objectives

Most people invest their money for specific reasons. Start by thinking about all your future financial goals. Perhaps you’d like to purchase a car or save up to buy a house. List out all your dreams. Then group them based on their timeline. For example, buying a new laptop or electronic device might be a short-term goal, something you can achieve within a few months or a year. Saving up money for a vacation abroad or buying a vehicle might be a medium-term plan. Perhaps you need to invest for a few years before you achieve these. Goals like a home purchase require years of dedicated investing. Once you have your goals, you can work out how much you need to invest to achieve them.

2. Understand Risk

Every investment comes with inherent risks. So, your investment strategy should include both high- and low-risk investments. Pick a hybrid or balanced fund investment opportunity that allows you to spread your risk. With a hybrid investment, you can put money into both equity and debt funds. When the market is performing well, your equity investments will reward you with high returns. Should the market dip, your debt funds will continue to provide you with steady returns. Younger people can afford to take more risks and can opt for equity-heavy investments.

3. Protect Yourself and Your Assets

An accident or illness could lead to incredibly high medical bills. Paying for medical expenses by yourself could set you back quite a bit. So, make sure you purchase a comprehensive health plan. The plan will help you take care of medical bills while safeguarding your savings and investments since you won’t need to dip into them unnecessarily. If you have family members who depend on you and your income, you must purchase a life or term insurance policy as well. Although nothing will make up for your loss, these plans provide your family with financial stability when they need it most. The payouts from these policies will also help your family members continue with your investment strategy or pay off any outstanding debt.

4. Stay Committed

Investments take time to provide the returns you need. Remember to stay invested. Do not make rash decisions when the market suddenly dips. The longer you stick to your investment strategy, the more likely you are to achieve your goals.

Investing doesn’t have to be confusing or overwhelming. Once you understand your options, you can create a strategy that works for you.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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