Introduction to Investing: A Beginners Guide!

Table of Content

1. 3 Tips for Investing for Beginners

2. Conclusion

As a beginner to the financial market in India, you may be overwhelmed by the wide range of investment options available to the average investor. With avenues ranging from conservative options like fixed deposits and debt instruments to market-linked products like direct equity and mutual funds, it’s easy to choose investments that do not quite align with your requirements or investor persona. 

To ensure that you do not make this costly mistake, we’ve put together this handy guide to investing for beginners. 

3 Tips for Investing for Beginners

Before you put your hard-earned money in any investment scheme or asset, it is essential to have a solid investment plan to guide you.  

The following tips can help you formulate an effective investment strategy. 

• List down Your Financial Goals
  

  Identifying your financial goals is the first step that you need to take as a beginner investor. This includes short-term and medium-term goals like taking a family vacation or saving up for your home’s down payment to long-term goals like retirement. Once you identify your goals, you will have a clear picture of what you need to save up for, how large your corpus needs to be, and the timelines within which you need to have the funds ready. 

• Understand Your Investor Persona 
  

  Some investments carry more risks than others, but they also offer a higher potential to earn inflation-beating returns. Depending on your risk profile and your financial goals, you need to decide how much of your capital you wish to allocate to high-risk, moderate and low-risk assets. 

  For instance, if you are a conservative investor, you may want to have a stable portfolio with a higher asset allocation for debt assets and other low-risk assets, with a small portion allocated to direct equity, index funds or equity mutual funds. On the other hand, if you are comfortable taking on more risks, you can invest more heavily in equity and other potentially inflation-beating assets. 
  

• Make Use of the Right Tools 
  

  Once you have figured out what your goals are and how much risk you can comfortably afford to take on, you need to choose investment options that align with your requirements. Many online tools can help you with this kind of financial planning. 

  A retirement calculator is one such tool that helps you decide how much you need to save up for your post-retirement life based on your current expenses, the number of years left to retire, inflation and your post-retirement goals. 
  

  In addition to a retirement calculator, there are also other tools like a mutual fund SIP calculator, EMI calculator, PPF calculator and tax planning tools. There are also life insurance calculators that can help you decide the ideal amount of coverage for your family. 
  

  You can make use of these free online computing tools to decide how much to invest and which assets or schemes to invest the funds in. These investments need to align with your goals in terms of the investment horizon as well as the returns required. 

Conclusion

Make your investments easier by following the above mentioned tips and tricks. Moreover, the information is to align investment strategy with financial goals instead of settling for only one-size-fits-all financial plan. 

This material has been prepared for information purposes only, should not be relied on for investment, tax or any accounting advice. It is advisable to consult your financial advisor regarding to any investment or financial decision.

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• Is life insurance a good investment plan? 

ARN - ED/08/23/3930