The only way to see money grow is by investing it. One should start investing early so that time works in their favour. The earlier an individual starts the longer they can compound money. According to financial experts, first time investors should spend generous time on educating themselves about investment before taking the plunge.
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How to start investing?
Depending upon the risk profile and objectives, investors can choose different forms of investment. In the words of Harsh Jain, co-founder and COO of investment platform Groww, investing goals should be clear before diving in.
“First time investors should be aware of their long-term and short-term goals. How much corpus they are looking to raise for these goals and how much risk they are willing to take to reach them,” he said.
They should also factor in inflation while calculating the corpus needed.
"Once they are sure of what category of funds they are going with, they can compare the performance of schemes against other similar schemes and also against the benchmark," Jain added.
There are chances that an individual may start investing but they may not be able to continue with it. On this, Terence Lucien, head of mutual funds at PhonePe says that it is important to invest regularly.
"Regular investing via SIP will help one build wealth in the long-term," said Lucien.
Where to start investing?
There are several investment options available in the market for beginners. However, financial advisers say that the best way to start an investment is through a systematic investment plan (SIP) in a mutual fund (MF). Mutual funds are professionally managed, transparent, liquid and provide low cost investment options.
It is also important to focus on diversification. "Make sure the investments are balanced across equity and debt based on the investment objectives. Once invested, don’t focus much on temporary market fluctuations that may affect the portfolio. Give sufficient time for investments to show their wealth creation potential," explained Jain.
Tax saving funds should be focused more.
"It's also essential to keep an emergency fund ready, which must have at least 4-5 month expenses. One can keep this fund in savings banks or can invest it in liquid mutual funds or somewhere from where it can be quickly accessed," said Lucien.
How much should one invest?
"Ideally, one should invest 30 percent of the in-hand salary. However, it’s not possible for every body. In that case, one can start early with 5-10 percent allocation and gradually move to 20-30 percent within 5-6 months," suggested Lucien.
First Published: Mar 3, 2020 1:56 PM IST
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