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Looking to grow your money? Here are some top tips on investment

Author: Team Finapolis/Wednesday, January 24, 2018/Categories: Invest

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Looking to grow your money? Here are some top tips on investment

In financial planning, it is said the most difficult journey for any investor is the one that he doesn’t begin. Just like every journey has its own adventures, discoveries and learning, the financial journey too has its twists and turns. Yet it is the most adventurous journey that every individual should take and learn from. Investment is one of the most important itineraries in the financial journey. To make sure that the investor takes the right decision and at the right time, there are some textbook steps that he can take to ensure the journey is safe and fulfilling. Following are some of the top tips on investment:

Review your needs and goals: The most important criterion in devising a plan is to first know what are the needs and goals. Goals can be both short-term or long-term. Long term goals require more than five years to accomplish. Depending on the goal, the time frame is set. Time frame determines the risk exposure. While a shorter time period will help in meeting short-term goals, longer investments will provide the flexibility to collect, grow and preserve your wealth.

Set the amount to be invested: The amount required to achieve your goals can be calculated after assessing the cash flows and net worth. It is better to set an amount on a monthly or quarterly basis.

Understand the risk appetite: Risk profiling is based on age, cash availability, commitment, family conditions. While a person at the age of 30 years can take more risk, a 60-year-old retiree would be more risk averse.

Select the right investment instrument: There are a number of investment options like fixed deposits, government schemes, mutual funds, bonds, shares etc to choose from. It is better to shy away from high-risk assets without complete understanding of the product. Choose the right instrument that matches your risk tolerance.

Don’t put all eggs in the same basket: To earn better returns, it is necessary to diversify. If you are investing Rs 1 lakh, choose instruments like fixed deposits, mutual funds, equity and national savings scheme. Investing in two market-related products and two fixed instruments would balance the risk involved.

Don’t follow the crowd: This advice comes directly from American business magnate Warren Buffett. He says the best way to avoid irrational decisions is to stay away from popular stocks. Choose wisely is what he believes in.

Stay invested for a longer period: While short term trading has its own positives, the long term will yield greater gains. For example, the longer you stay invested in mutual funds, the better returns you are likely to get. 

Let bygones be bygones: If you have faced disappointment in the past, let it not weigh on your investment decisions now or in the future. Losses make way for gains.

Make savings automatic: Making savings a habit. Try and save as much as possible every month. Cut down on regular expenses. If necessary chart your earnings and expenditure to get a clear picture of where you can cut your spends. After a certain period of time, this habit will become an automatic process.

Take measured risks: to gain success it is important to take risks. As the popular saying goes, “No risk, no returns”. Hence, take some risks in your investments. However, be aware of the consequences and do not stop investing if you meet with a setback.

Keep it simple: As of June 2013, there were 46 mutual funds in India. Apart from this there are a number of stocks, bonds, debentures and government schemes from which you can add to your investment portfolio. The choice will not be easy, but the trick to a good investment is to keep it simple. Read and learn about all the products and chose the one that suits your needs most. Stick to the investment for a longer period of time. Keeping it simple may be a difficult task but is the way to a secured future.

Review your investment portfolio: A timely review of the portfolio is important to where you are positioned in terms of asset and wealth creation. While reviewing your portfolio, there are two steps that one should take:

  • Review the overall portfolio as an aggregate

  • Compare the various components in the portfolio against each other

This will give you an overall estimation of how all your investments have performed and also which component is performing better. You can base your future investment on this review.

Invest, Don’t Speculate: The last and the most pertinent advice to all is to start investing. Do not spend too much time in speculating and studying the markets and products. The earlier you start, the faster you can make your money. Also, it will give you a longer time to stay invested and therefore give more returns. So get ready to start investing.  


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1 comments on article "Looking to grow your money? Here are some top tips on investment"

Narpat Rai Gupta

4/20/2019 8:02 PM

Cash Equity

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