Hoarding money in a bank account will not help you reach your financial goals. Investments provide everyone with a great opportunity to earn huge amounts of money. By investing, you can increase your net worth, and with advancement in technology, you can even invest as low as Rs 1000 per month with a smartphone.
In fact, it is very important to build the right investment plan according to your future needs. Before starting your first investment, take some time to master the basics about each platform and the risks associated with them.
So, for you to make money successfully, here are the top seven tips you should incorporate into your investment plan.
Set Your Financial Goals:
Huge short-term gains can attract new investors, but choosing a long-term path is very important for every investor. This doesn’t mean that short-term investments won’t pay off, on the contrary, understand your need and appetite for risk to get off to a productive start.
Short-term goals can vary from one year to three years, and long-term goals can vary from three to ten years or more, depending on your priorities.
Know Your Risk Tolerance:
Risk tolerance is a subconscious trait that is influenced by an investor’s income and education. Your risk tolerance is how you respond to the risks associated with an investment opportunity. By knowing your risk tolerance, you can avoid investments that tend to worry you and make extreme mistakes.
During times of financial ambiguity, investors who can maintain a cool head and develop analytical judgment are always better off. One’s understanding of risk also affects risk tolerance. For example, flying in an airplane or driving a car was considered risky in the 1900s, but today flying or driving a car is an everyday occurrence.
Identify Different Asset Classes:
It is important to have a detailed analysis of the various asset classes and plan your investment accordingly. While cash investments are the most popular, demat account required by the organization for certain types of Mutual Fund trades.
According to the India Wealth Report, about 55% of the individual wealth of Indians is financial assets, while physical assets make up only 45%.
There are five broad categories of assets namely:
- Fixed income
- Cash or cash equivalent
- Housing area
Identify financial instruments that will give you a high return on your investment based on your risk appetite and investment horizon.
Make Regular Contributions
Try to set aside a certain percentage of your salary monthly or quarterly into your investment account. For example, contribute 15% – 20% of your salary before you pay your expenses and automatically transfer this amount from your salary directly to your investment account.
Adding regularly to your account ensures excellent investment discipline for you, and helps fund your post-career life.
Diversify Your Investment:
Everything in life carries a certain level of risk, and this is especially true when it comes to investing. While a savings account is a safe way to secure wealth for the future, it doesn’t generate high returns, so it’s best to invest your money across a variety of investment models and sectors.
Diversification increases your profits and allows you to take more significant opportunities for higher rewards than just investing money in safer options like bank deposits, gold, etc. You can manage and develop a balance between risk and return while achieving growth and reducing the overall risk in your portfolio.
Investments to Avoid
One great tip for investing is avoid high risk options unless you really understand their different risk features and feel comfortable following them. Limiting your risk when starting an investment course will ensure that you are profitable in the long term.
Only consider high-risk products once you have sufficient capital and a high-risk appetite. To gain experience and confidence in your decision-making abilities, you can fund limited capital in investment options such as stocks or bonds.
Follow Current Trends And Review Your Investments Regularly
Following the financial markets will give you a proper understanding of the latest standards and happenings. You may see an up or down trend based on the industry you invest in. For example, if you invest in direct equity or mutual funds, you need to be aware of market trends that are likely to influence your investment.
In addition, a quarterly or annual financial review will ensure that you keep proper records of your investment performance and modify your savings to achieve your goals. However, don’t be tempted to act whenever the price changes unexpectedly. Industrial markets rise and fall all the time, and if you are a long-term investor, you can efficiently offset these fluctuations.
To conclude, it is very important to understand your financial goals and investment approach to learn the basics of investing. To build a concrete foundation, start investing as early as possible and give your investment time to build value.