How to start investing?

 Why investment is important? or why we should start investing?

   if you ask a question yourself  So answer is that when we work so hard to make our family financially secure and we deserve to have enough money to fulfill life goals and dreams. Maybe it World Tour, Higher Education or a happy Retirement or a Home at your dream place. So how it will happen? all of this can happen by choosing the right investment according to your age.

Here we will discuss…..

The factor we should consider before choosing an investment plan

1. Inflation

If you don’t know that here we must consider this important thing that Inflation reduces the 'purchasing power of money because prices of flour, pulses, clothes, real-estate keep on increasing. But your cash does not increase.

For example

Let’s assume you keep Rs.10000/- in your locker today, then tomorrow that Rs.10000/- in your locker will become Rs. 9000/- because of inflation.

This time we have to focused on our basic need because we don’t have that purchasing power which fulfills our dream. So in this situation dreams comes later. Now we have an option that beats this inflation.

2. Retirement Planning

Many people started their retirement planning after their children’s marriage or retirement.  This is the worse plan for being financially free after retirement. After retirement you will need more money for medicines and operations, the cost of living will increase, and to make things worse, you won't have any monthly income.  To avoid this situation always keep in mind is your retirement fund.

3. Dreams/Goals

All of us have different dreams and goals in our life and this think make us different from others because we have different goals and dream in our life. Some want to higher education, someone wants to travel, others want to start a business. So your goals will decide the best investment option for you.

How to start investing?

Remember guys’ just earning money is not sufficient in life. Investment is also important to fulfill your dreams and goals. Instead of keeping your money in the locker you must invest your money in the right investment option and to get good returns on your investment you should plan your investment. Let’s see a formula this formula gives a clear way that how to start investing in stocks, equity, and the stock market.

It is generally advised that you must invest 100-x% in equity where 'x' is considered as your age. Suppose your age is 25. Then you can put 100-25% = 75% of your savings in Equity. Your equity options are Mutual Funds, investing directly in Stock Market, sip or through small case. But remember; choose each equity investment based on a long-term goal like higher education, retirement, buying a house later, etc…

You can choose FDs or even Liquid Funds that can act as your Emergency Fund for a hard day. With age, your risk-taking capacity decreases and this formula ensures that as you keep getting older, you start shifting from equity to debt. This is why the 20s are considered a great age to invest in equity because even though you have less money, you have the advantage of time. When coming to your 30s. As you grow older, your responsibilities increase.

Let’s assume that you will be married and plan to have children and then you need to plan for children's education for sure but also plan to enjoy your breaks with your spouse by taking holidays or occasional international travels. Unfortunately, post-marriage couples immediately take home loans, car loans, and personal loans and for a long time keep servicing these loans. But it's always better to first save and build a decent for your goals.

If you've missed investing in your 20s so 30s is still a good time to start investing. Plan to do short-term investments in Liquid Funds for vacations or to build a corpus before you take a home loan.

Now the age of 40s is a good time because of a salary of both husband and wife increases. At this time it is important to keep a check on your expenses and invest the additional salary by topping up your SIPs from time to time to meet you goals faster.

Health insurance

At least 3 to 7 months of your salary should be saved as Emergency Fund because more responsibilities you have, more stability you need.. In your 30s or 40s… you have a family to take care of. So, investing in a life insurance policy at this time is a wise decision. But at all ages, you must have a health insurance policy because in case of an emergency or an accident, a health insurance saves you from loans and when you don't have loans will you have any money to put in the rest of the investments.

 How to invest into 50 and beyond?   

When you start your career you have more capacity for taking risks and slowly as you reach retirement you will have no monthly income and less risk capacity. So you must be prepared for this transition. Equity: 20 to 40% Even if you invest in equity, pick large-cap companies that have less risk or choose the best mutual fund or sip plan.

In this case, equities help you generate long-term wealth and hence prepare you for retirement and beat inflation. Diversify your equity investment across multiple sectors and market caps. It will minimize your risk of investment. But it is important that you don’t lose money in equity due to greed, fear, or lack of knowledge.

 Always remember, equities investment is subject to market risk. So, always research the companies before you invest. Don’t worry if you haven't started any investments!

As someone says the best time to plant a tree was 20 years ago and the second-best time is NOW. It's exactly the same with investments.

Which is the best investment option?

1. Cash

Cash means the money in your hands or in your Savings Account. Investment in cash means Low risk, very few returns. A bank savings account gives very low returns it may be 2 or 3 % which is not enough to beat inflation by investing in a saving account we have to forget our dreams. But after that, it is good to have a certain percentage of your savings as cash because it is easily available to use.

2. Investments in FD and RD

 This is another option of investment. We have Bonds, Debentures but the most common debt investments in India are through FDs or Rd. FD returns are between 5%  to 7%. But they come with condensation like lock-in period, missed installment penalties. While it is good to have a certain percentage in FD for stability, it's not wise to invest all of your money in this category.

3. Real-Estate

Just because of we are attached to the concept of 'my dream house. We will invest in real estate but if you don’t want to live there so we do not recommend investing in real estate because of some reason. First is a return are location-specific; to maintain it you have to pay taxes/renovations. The second is liquidity is low because taking out your money takes years and years.

4 stocks market

People, who want to beat inflation, fulfill their dreams and grow their wealth, invest in Mutual Funds or Stock Market. So after investing, it is advised to wait for at least 3-6 years to see their potential because when you invest in the stock market or mutual fund or equity of the company is long-term investments.

Note: - all returns in the stock market is depending on your knowledge and risk-taking capacity

Where to invest money?

1. Exchange Traded Fund (ETF)

First, let’s know that what is ETF? So ETF means Exchange traded fund is traded according to exchange or index. An Exchange Traded Fund or ETF is an investment fund that trades like a stock. ETFs, like other types of funds, pull together money from investors into a basket of different investments. ETFs can generally provide investors with diversification, which can help balance risk. And because ETF shares are traded on a stock exchange; they’re bought and sold like stocks.  Basically ETF is considered a core retirement investment plan. It gives returns as the growth of the economy.

2. Mutual funds

A Mutual Fund collects money from people and makes a money pool. Then a Fund Manager uses this pool of funds to invest in Stocks, Bonds, and other assets so that your money can grow. Profits out of those investments distributed among people depending on who invested how much and for how long. If you want to invest long-term, then Mutual Funds can be a great option for you.

Before investing in mutual funds you must know that mutual funds are Subject to market risk. So you need to read the scheme-related documents carefully before investing.

3. SIP

SIP means a Systematic investment plan known as SIP this type of investment is offered by a mutual fund where you can invest your fixed amount of money regularly. Into this type, you can start your investment from 500  monthly or quarterly.

4. Small case

What is small case investment?

When you want to invest in the stock market directly but you think it is so risky to invest in one company then you can check out small case. They create a basket of stocks based on a certain theme like 'Rising Rural Demand', 'Smart Cities', 'Electric Mobility' etc...  So instead of risking it all on one company, small case allows you to diversify across multiple sectors and market caps.