Nifty99000 100%

Sensex99000 100%

Article rating: 4.3
Article rating: 4.1
Article rating: 4.3
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: 4.0
Article rating: 4.0
Article rating: No rating
Article rating: 3.0
RSS

News

Top investment tips for beginners

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

Top investment tips for beginners

Aveek (23) was delighted to get his first cheque from the multinational company he had joined a month back after completing his studies from a management school. Within a week he bought gifts for his parents, siblings, grannies, relatives and even the dog. The next week he treated his friends for his new job. The week after he bought a few clothes to wear to the office and by the end of the month he borrowed some money from his friend to survive.

In the months that ensued Aveek almost repeated the same cycle adding gifts to other people, credit repayments to friends and payment of credit card bills to the already burdened wallet. Despite working for a year now, Aveek has no savings, no investments, pays huge amounts in taxes and lives on borrowings.

This is not the situation you would want to be. Most young office-goers who are starting their career believe that it is better to enjoy the little and big things in life before they start their finance journey. This is a wrong assumption. Financial planning and management starts from the moment you earn money. Given below are some of the top investment tips for beginners:

Best Investment Tips

  • Cash management
  • Protection Management
  • Wealth Accumulation
  • Tax Planning
  • Retirement Planning

Cash management: To begin with investment tips, the basics of cash management are to be able to pay your bills on time without any delay or fine. A part of your salary has to be kept liquid to meet regular needs like bills, groceries and daily cash requirements. The best way is to put them in the savings or salary account with ATM option so that they can be accessed at any time. Apart from this, investment tips provided by experts show that a certain sum of money which is equal to three months of your salary should be kept separately for unexpected and unforeseen circumstances. Ideally, one should draw a cash management strategy following the chart providing a beginners guide to investing:

Cash management strategy

Description

Purpose

Typical investment options

Everyday cash

  • Pay bills
  • Groceries
  • Daily cash requirements

Savings or salary account

Emergency cash

  • Medical emergencies
  • Higher purchases
  • Events, functions
  • Unforeseen circumstances
  • 3- 6 months’ salary in savings account
  • Short term, highly liquid investments

Savings cash

  • Asset allocation for investment
  • Retirement benefits
  • Education costs
  • Long term investment tools

 

Protection management: Once step 1 has been cleared, the next investment tips to a beginner would be to ensure that he/she and their family are safe from any financial debacle that they may face in the future. Insurance provides that protection to you and your family. In India, insurance is broadly divided into two categories:

  • General insurance
  • Life and health insurance

General insurance or non-life insurance covers property and cars and provides protection against burglaries, fires, etc. Life insurance provides protection against accidents and sudden demises, while health insurance takes care of medical emergencies. At present, most salaried people are medically covered by their offices. However, these medical insurances are limited to the time you are at service. It is advisable to keep a medical insurance separately that will cater to you and your families emergencies even when you are not associated with any office.

It is said, life insurance should not be mixed with investment. However, it is a must-have listed in all beginners guide to investing. 

Wealth accumulation – Stocks, mutual funds, fixed deposits, bonds are some of the investment tips that are oftern listed in beginners guide to investing. Since each instrument offers different rates of returns, it is advisable not to put all eggs in the same basket. This way you can also mitigate markets risks. The earlier you start investing, the more you can earn and save. Also, make sure you are aware of your needs and requirements before planning your investments.

The following table illustrates how a simple investment of Rs 2,000 per month yields in 5, 10 and 20 years:

Expected rate of return 

 

Annual rate of return

Years

10% on Rs 2000/ month

15% on Rs 2000/ month

20% on Rs 2000/ month

2 years

53,335

56,271

59,404

5 years

1,56,165

1,79,363

2,06,908

10 years

4,13,104

5,57,315

7,64,727

20 years

15,31,394

30,31,910

63,22,959

 

Tax planning: For all salaried people below the age of 60 years, the most important aspect of income is taxation. If you are starting new, then you should immediately start planning your taxes. The Government of India provides a tax exemption for income upto Rs 2,50,000. Income between 2.5 lakh and 5 lakh is taxed at the rate of 5% of the total income above 2.5 lakh. For income between 5 lakh to 10 lakh, the tax rate is 20%, while those above 10 lakh annual income of Rs 10 lakh need to pay taxes at the rate of 30%. However, one can claim deductions under various sections of the Income Tax Act such as mediclaim, LIC, PPF under 80C, house rent under 80GG where HRA is not paid, home loan under 80EE.

Retirement planning: With the cost of living rising, it is better to start planning for retirement early. This is one of the most neglected components of financial planning with most people worrying about education, marriage, homes and cars and not saving for their golden years.

Following these top investment tips for beginners would not just ensure a smooth-sailing present, but a secured future too.

Print Rate this article:
4.7

Number of views (3025)/Comments (0)

rajyashree guha

Team Finapolis

Other posts by Team Finapolis
Contact author

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest
 
 

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free