Posted by: CIEL on Fri, Apr 20th, 2018
Investing for Beginners Educational Guide
If you’ve decided to start investing your money, you’ve already taken a step in the right direction financially. However, knowing that you should invest your money is very different from knowing how and where to invest it.
The Basic Tenets of Investing
Many people are afraid to invest their money in the equity markets, fearing they will lose it all overnight. They couldn’t be more wrong, as long as the investments are made wisely! Putting your money into bank saving accounts, while necessary, will not give you the much higher yields that you can expect from the markets. Let your savings do the hard work for you! But remember, you should expect to invest your money over a long term in order to gain the best yields.
How Much Money Should You Invest?
There is no ‘one size fits all’ answer to this and it is largely dependent on your income, lifestyle and other financial commitments. Many experts suggest you should invest at least 10% of your income. However, if this is not possible, investing 5% of your income is a good start. The important thing is to start investing as soon as possible.
Additionally, not everyone has a lump sum of money to invest, so, unless you have had a windfall, start investing your money systematically. Set a target amount of money to invest each month and do it! It does not have to be a grandiose amount. You’ll be pleasantly surprised at how far investing as little as 500 rupees a month will take you.
Where Should You Invest Your Money?
All forms of investment have their pros and cons and for reasons of brevity, we will discuss investing your money in different forms of equity in this article, but, before deciding where to put your money, it is important to answer the two following questions:
- What are your financial goals? You need to clearly define what you expect to achieve from your investments. For example, are you saving to buy a house or to go on that long-dreamed-about world trip? Or are you saving to send your children to college or is it for your retirement? Your financial goals will help you determine an investment timeline that aligns with your needs.
- What is Your Tolerance for Risk? Let’s face it; every single form of investment has an amount of risk attached to it, albeit in varying degrees. Riskier investments can often lead to higher returns on your investment. You need to understand the degree of risk you are comfortable taking, before making any investments.
If you are unsure of how to invest your money, consult a financial advisor you can trust for guidance. You can also learn to manage your finances by taking an online course on Financial Management. Happy investing!