A question that is definitely asked by a lot of people “How To Start Investing?” out there looking to invest and grow their money over time instead of keeping them idle in the bank account or doesn’t want the 4%-6% of interest in the Fixed Deposits.
Well, in this guide here, I will help you understand the basic concept of investing. This is a guide crafted mainly for the beginners out there planning to invest their money.
Always consult your financial advisor before making any plan to invest, however, if not, please understand the risk carefully then invest.
“If you happen to one of the Muslim readers, make sure you don’t take part in interest-based investments since such investments are forbidden.“
I Am A Complete Beginner, How To Start Investing?
I understand that you’re a beginner and you have no idea of investing. However, you need to understand that this is a real business.
When you invest in some business, you own its part, let it be a company, bonds, etc. Whatever you incur with either profits or loss is yours, no one plays a part in it.
Now coming to your investment journey, you could be of any one of the following type of person, click on the type you belong, to quickly jump to that section.
- Risky Investor (Ready to take the utmost risk)
- Moderate-Risk Investor (Ready to take the balanced risk)
- Very-Low Risk Investor (Afraid of Equity, crashes, etc. Not willing to take many risks)
Risky investors usually manage portfolios themselves or are really willing to take the higher risk, such as getting involved directly in the Equity Market with position build-up.
When we talk about risk, what is the risk acutally is involved?
The risk involved are mostly in Equity Stocks and Equity Mutual Funds,
- Dependence on the Economy of the country, no matter how strong the company might be, if the economy is weak, it tends to fall.
- A company can restructure anytime and can become less profitable over time
- It may stop giving high dividends as expected
- A company may fail.
These are the above risks you’re exposed to when investing all your wealth in the equity segment and this is what Risky investors do.
What do they get back in return?
A whoppingly high returns! The more the risk, the high the returns.
A very wise advice is to not always take the risk, sometimes, not everyone can afford to take risk. If you can only afford to take risk of your capital, then it is recommended to take risk.
There are many people, who takes risk without any knowledge and end up broke.
And you don’t want this to happen with your loved ones, right?
Enough talking, and let’s get to the investment.
Since you’re a risky investor, you can come directly to the Stock Market and invest in the companies you studied. To enter the stock market, you need a broker.
You can start your journey of investing into the stock market slowly and steady in the strong fundamental stocks, and few of them are:
This is not calls given to you, please try to go through each companies balance sheet and their motive to understand the company and invest. Your opinion can differ.
The prices of the stock are fetch at the time of writing this post.
- IOL Chemicals (Rs 570.9)
- Deepak Nitrite (Rs 1657)
- Avanti Feeds (Rs 499.55)
- Asian Paints (Rs 2612.65)
- Gujarat Gas (Rs 537.75)
- Aarti Drugs (Rs 696.15)
- PowerGrid (Rs 209)
I highly recommend you diversify your portfolio and have at least each stock from all different sectors altogether. Above are just the example of some fundamentally strong companies in my opinion.
You’re a safe side investor. You don’t want to take much risk and get yourself into big losses. Investors of this type usually should stick with safer options.
The safer options are
- Equity Mutual Funds
In this you skip the part where you choose your own stock and take high risk than expected. This mutual funds are pool of stocks which a certified fund manager picks and always keeps diversified and follow all good practices to keep investment safer as possible and reducing risk at the same time.
It is also regulated by SEBI (Securities Exchange Board of India) so you don’t need to get panic about any frauds.
- Debt Mutual Funds
This are lot better than the above option. They are lot less volatile compared to equity segment hence are considered more safe option of investing. Debt Funds invests in fixed-interest generating securities like corporate bonds, treasury bills, and other such money market intruments.
However, they are still not completely risk free, but a risk which can be easily handled. You are still expose to Intrest-Rate Risk, etc.
Gold is the safest option possible. You can track the price movement of gold via the Gold ETF’s which are traded just like stocks. It is like paper gold, you don’t own the real piece of jewellery but you still own the gold but on paper which can be traded when the prices goes up or down according to your returns.
- Real Estate
This is another type of investment. Well, of course it does need lot of intial capital but it sure does is a very good returns investment overtime. If you have lot of initial capital then Real Estate is a good way to get started with your investment journey.
If you don’t want to take any risk, then there is still more risk you will be taking. I explained well, in this post where I discuss why not taking risk can be deadly.
In low-risk to no risk investment methods, there are very less options to start from, however, you can open a Fixed Deposit and keep your money there to earn a interest without putting your money on any type of risk.
The best FD rates are currently given by IndusIND Bank which is capped at interest rate of 8.25 per annum.
I hope I just made your first investment journey on the much wiser side and you are now able to make a decision. Investment is a crucial part of your financial life, because once you’re old, you’re in no position to earn the living.
You will need to plan something for the retirement period or to get the financial freedom at the earliest age possible.
That’s it in for today, if you like the post, do share it with your loved ones, family and friends.