If you’re saving money for a goal and won’t need the cash for at least five years or so then you need to start investing . Unfortunately, many people are afraid to invest or don’t do it because they don’t know how to get started.
Here’s how to begin with:
1. Decide on an investment approach-
When you invest your money in any asset, there are a few different approaches you can take. Strategies depend upon your Goals (Children’s education, Marriage, Traveling, Retirement, etc.) and your saving, which you can invest every month.
As per your goals, you can select investment options and allocate a specific part of your investment portfolio to it. Here’s a guide on the most commonly used Investment ideas:
We can classify the investment approach in 3 categories.
Aggressive Investing Approach: You will take risks and invest more in stock markets, given getting maximum return.
- Aggressive investing accepts more risk in pursuit of a higher return.
- Dynamic portfolio management may achieve its aims through one or more of many strategies, including asset selection and asset allocation.
Moderate Investing Approach: You will make a blend of Stock market investments, RD, FD, and Bonds to get optimum returns, meanwhile also protecting your investments from risks.
- Your ideal asset allocation is the mix of investments, from most aggressive to safest, that will earn the total return over time that you need.
- The mix includes stocks, bonds, and cash or money market securities.
- The percentage of your portfolio you devote to each depends on your time frame and your tolerance for risk.
- This isn’t a one-time decision. Revisit your choices from time to time to see if it is still meeting your needs and goals.
Conservative Investing Approach: You will Invest in RD’s, FD’s, Gold, and real estate. This will not give high returns but guarantee you more return than a savings bank account.
- Less risk, Less return. Ideal for aged people.
- Suggested Approach for retirement plans
You can manage the money yourself; you can turn to a full-service brokerage and have an investment advisor manage your money, or you can use a Robo-advisor.
Managed investment accounts usually carry high fees, and handing off investment decisions to an advisor isn’t the Right Approach for many people. Instead, you’ll likely choose between managing investments on your own or investing with a Robo advisor, which means an algorithm picks diversified investments for you based on your risk profile and investment goals.
2. Open an investment account
Once you’ve decided on your Approach, it’s time to open an investment account.
You may need the following Accounts:
1. Demat account: Trading and Holding Shares in dematerialized forms.
(If you don’t have an account, you may open one HERE
2. Savings Account: We all have it. Ask your bank for FD and RD options.
3. Mutual Funds: You can use an app like Paytm Money or ET money to invest in Mutual Funds. (Demat account link provided by me also allow investing in a mutual fund, Gold and Insurance)
When shopping for a brokerage, compare fees you’ll pay for buying and selling assets, minimum deposit requirements, types of investments available, and trading platform. Select a brokerage that offers low commissions or free trades with plenty of commission-free investments, and an online platform that provides education if you’re a beginner.
3. Fund your account with an initial deposit
After opening your account, you’ll make an initial deposit — usually through a transfer from your bank account. There’s generally no fee for this transfer, or you can also send in a check if you’d prefer. For other types of investment accounts, you can put in as much money as you want to. The more you invest, the more you can earn.
4. Set up automated transfers of money to your investment accounts
When you’re setting up your investment account, it’s an excellent time to set up electronic transfers into that account so you can save as close as possible to the recommended 20% of your income.
If you’re not sure how much you can afford to invest, make a budget that allocates funds to savings as a top priority. Budget to save as much as you can and set up automated transfers on payday into your investment account so you’ll never miss a contribution.
5. Buy assets to build a diversified portfolio
Once you’ve got money into your investment account, it’s time to purchase investments. You don’t want to put all your eggs in one basket, so invest in a mix of different assets. This is done to safeguard your investment as Economic assets are volatile and may either grow or contract your savings. So, diversifying it will provide you with the best desired result.
Whatever Approach you take, start investing today.
Whether you decide to get an investment advisor to manage your investments, use a roboadvisor, or buy ETFs, you’re going to be in a much better position if you start investing now rather than leaving your money to languish in a low-interest account, or spending all you earn.
The earlier you start, the more you can take advantage of compound interest and build real wealth.
Disclaimer: The Content is for informational purposes only; you should not construe any such information or other material as legal, tax, investment, financial, or other advice. The Author is not a registered Advisor or a legal entity.
There are risks associated with investing in securities. Investing in stocks, bonds, exchange-traded funds, mutual funds, and money market funds involve risk of loss. Loss of principal is possible. Some high-risk investments may use leverage, which will accentuate gains & losses. Foreign investing involves unique risks, including higher volatility and political, economic, and currency risks and differences in accounting methods. A security’s or a firm’s past investment performance is not a guarantee or predictor of future investment performance.