A Beginners Guide to Investing

Every individual wants to fulfil the short-term and long-term financial objectives of life. In order to create a financial cushion and secure your family financially, it is very important to make a smart investment planning. While making the investment it is important to keep in mind that the investment made by you should not only match your current financial needs and also fulfil your long-term financial goals.

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In order to make the right investment, there are various factors that should be kept in mind.

In case you are new to the world of investment, consider this article as a guide on investing for beginners.

Investment Objective  

Prior investing the money in any financial instrument, it is very crucial to determine your investment goals. If your financial objective is savings for a long-term then you can consider investing in bank fixed deposits or bonds that provide medium returns. However, if you have a high-risk appetite and want to multiply money then you can consider putting your money in mutual funds or shares. So, according to one’s own investment objective, the investors should avoid keeping the eggs in one basket so that they can minimize the risk and gain profit in long-term.

 Risk Tolerance

In investment risk and returns are directly proportionate. Normally, higher the risk are higher is the probability of returns. However, the risk appetite of investment of an individual varies from person to person according to their preferences and financial conditions. Before investing the money it is very important to evaluate that how much risk you can take.  Once you evaluate your risk appetite, you can choose from the wide range of investment options as per your risk-taking ability. For example, a high-risk investment option includes equity instruments and low-risk investment option includes Bank FDs etc.

Decide the Amount of Investment

At times you can invest a large amount of money in one go. However, most of the people get much better returns if they invest in a slow and steady manner. Before making any investment, it is very important that you decide how much amount you want to invest in a particular investment plan. By maintaining a disciplined approach, you can save yourself from the financial burden of paying a lump-sum amount. It will also help you not losing a big chunk of money at one go.

Age  

Age is one of the most important aspects that should be kept in mind while making the investment. According to the market experts, it is always advised that the early you start making the investment the more corpus you can create over a long-term.  Moreover, it is beneficial to invest at a young age as you have a high risk taking ability and you can invest for a longer period of time in order to maximize the wealth. On contrary to this, if you make the investment at an old age then you will have to consider the various factors like inflation, retirement planning, health care, child education, etc. Thus, you will not have much time for your investment to reap profitable returns.

Understanding of Financial Products

Nowadays, there are wide ranges of financial products available in the market in order to cater to the requirements of the investors. However, many of these financial products are complicated in nature. Thus, before making any investment it is very crucial that you have a proper understanding of the product on which you are investing. Having proper knowledge of the product not only helps you to meet your financial needs but also offers higher profitability. For example, if you want to have insurance coverage then you can consider investing in a term life insurance plan which provides high insurance coverage at an affordable premium rate. On the other hand, if you want to create wealth and want to gain a high investment return then you can invest in mutual fund schemes, ULIPs, etc.  

Know Where do you Stand Today

While planning your finances or before deciding where to invest it is very crucial to understand that where do you stand financially. You should make the investment in keeping your short-term and long-term financial objectives in mind. As per your financial suitability you can invest weekly, monthly or as a lump sum to fulfil your financial objectives.

Over to You

By keeping these factors in mind you can determine which investment products are best suitable for your financial conditions, age, goals and risk profile. Moreover, don’t forget to have clarity about the product that you are investing in.

Written By: PolicyBazaar - Updated: 02 July 2021
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