Investment Tips for Beginners

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Must-Follow Investment Tips for Beginners

Not everyone can be an expert when it comes to investment planning. However, with some basic tips, even a first-time investor can make the most of his investments . Our experts strongly believe that right investment planning paves the way to achieve great returns.

A first-time investor possessing less knowledge about different investment avenues can easily fall for a product that is promoted aggressively in the market. However, such a product might not meet his investment goals or might be unsuitable at a later stage. One wrong investment decision can distress you and can lead to loss of funds.

Before making any investment decision, you should consider the following points:

Research: Research is the primary task before investing money. Research the product or area of investment you are interested in. Like for example, if you are investing in stock market, research the company’s past performance, financial ratios, future growth, etc. With research, you understand the different investment avenues and the risk associated with them. Research tells you which product of investment is relatively safer and which is exposed to extreme volatility. Accordingly, you can make a portfolio that has multiple investments to protect you from losing money in one investment.
Risk Appetite: Risk is directly related to investment decisions, so carefully analyse the area where you desire to put your money in. Compare different investment avenues and understand the level of risk associated with them. Evaluate the amount of risk you are ready to take and accordingly arrive at any decision. If your risk tolerance is low, avoid investment in the instruments carrying a high probability of incurring losses. Also, risk calculation depicts the right time when an investment can be made. Like, if the real estate market is down, the risk of losing money is less and therefore it becomes the right time to invest in property because when the real estate market will recover, you will get a better return for the same property.
Objective: Understand your objective of investment, like whether it is being done to support you after retirement, or is it to buy a home in future, or is it to meet your children’s expense. If your objectives are clear, you know, how much to invest and for how long to invest. If you want a secured investment, then Life Insurance is perfect for you. If you want fixed rate of return on your investment, then you can go for Fixed Deposit . Also, know the term of investment i.e. long, medium or short. Another factor that should form part of your objective is the tax consequences of your investments. Like, investing in saving bonds results in tax saving whereas; earnings from the stock market are liable to tax. Always consider factors like investment period, your tax bracket, the investment product, etc. to understand how tax laws will impact you.
Control the Emotions: Control on emotions is the primary requisite of any investment. The market passes through various cycles and it may happen that you get trapped in a downward cycle. This is the time when you should control your emotions rather than taking one bad decision of selling the investments by incurring a loss. Always be confident and optimistic about the invested avenue. Figure out the cause of downfall, the future prospects and the recovery time. Don’t let insecurity or tension creep in. Most of the bad decisions are driven by emotions. A market always recovers; it’s just a matter of time. Be a brave heart and keep the patience, the market will reward you in a big way.
Avoid Leverage and Speculation: Leverage is borrowing funds and investing in stock markets. The idea of leveraging looks good if the share prices rise, but when the price of shares falls, you lose the leveraged money. In addition, you also have to pay interest on the borrowed funds. A beginner should never consider an investment avenue or a product that is based on speculation. Like in the stock market, any share bought on a tip, is a speculation and not investment. Investment is something with which you are comfortable and can hold for some time.

Once an investment is done, you need to track it periodically. This minimises the possibility of loss. An investment that gets ignored is like a driverless car, waiting for the casualty to happen. Any investment avenue requires your involvement. You need to track, analyse it continuously and understand the future prospects at different intervals of time. For example, an investment in the stock market requires regular tracking of price to know if it is performing on expected lines. Ignoring the investment can lead to losses.

From the above points, we understand that it is very important for the beginners to invest their money carefully. A smart investor should not get trapped in the greed of earning extraordinary returns in a short time. A new investor should always put efforts to learn more about the investment opportunities. There are many experts in the market who can help you with that. One of them is your bank. Let the experts guide you to make the right choice.