What you need to remember Before Investing ? The one question we get is where to invest money? & what to do with excess money? How to get more returns than a normal fixed deposit? And we are tempted to share hot stock tips about small cap stocks or some Ponzi scheme like saradha chit fund. We do not do proper research before investing seriously before investing our Hard earned money. Most of the time we get tempted because of high returns like 12%, 15%, sometimes 18% also. We must understand risk also incense with increased returns. Government bonds give only 6-7% returns but they are safe.
How to do investment
Investment should be done as per individual financial conditions, Income, family background. You should not invest money in the same scheme where your friend or relative invested their money. You must do your own research. So if you are considering investing your money and confused about where to start,Firstly ask yourself some important questions before investing money in any investment instrument. When we see an investment opportunity, most people only think about how much returns they will make in 6 months,2 years,5 years. Everyone must think about the question How Much risk I am taking in this investment. Am I Willing to Lose money for some extra returns?
If you have 1 lakh rupees to invest. How would you feel if you lost 5 thousand of capital? Mostly you Will have the regret of losing money in the investment. you will stop investing because of your bad experience. Many people invest in high risk investment schemes without knowing the risk of losing money.
Many investors sold off their all holdings during the market crash of 2008 and 2020. They were not aware of risk in equity and other markets and they ended up selling their assets in huge losses. Some unfortunate people have lost all their life savings during the market crash.Many people have sold their assets at low prices.But some Intelligent Investors had invested in diversified portfolios. you can reduce your risk in various assets like gold, mutual funds, equities, real estate, pension schemes, government bonds.
Everyone should analyse their own financial condition before investing in various financial instruments.Young people can invest in direct equities, small cap mutual funds, residential real estate. people whose age is between 30 to 50, they should think about investing in large cap mutual funds, pension schemes, fixed deposits, Government Bonds & small Investments in the equity market.People having age more than 50 must consider to invest large proportion of their investment in fixed income assets like Government Bonds, Bank fixed deposits.
ELSS is Equity linked saving scheme. Government started ELSS for everyone. You can claim income tax benefit for purchasing ELSS units. You can save upto 1.5 lakh in income tax every year using ELSS scheme under Section 80C of the Income Tax Act, 1961. This scheme is available in various fund houses like aditya birla fund house,Kotak fund house,HDFC mutual fund. Average yearly return for ELSS is 8-10%. You can do monthly SIP or Lump sum amount investment for ELSS.
Purpose of investment
Everyone should think about the goal or purpose of their investment. Your retirement, child’s college or marriage, World trip, Big house, Farm house, luxury car. Each of these goals need a completely different time-scale. When your goal needs 10-20 years in the future, you should take moderate risk and invest in a moderate risk long-term investment option like the stock market ,mid cap mutual funds ,Real estate . That is the correct way to manage risk with a longer term investment and get the maximum returns.
But When you have just one year or two year to complete your investment goal, you cannot take risks in the market. Recession may destroy your goal planning.You should invest in less risky investment assets like fixed deposits, Government Bonds . you can invest in liquid funds for short term goals. Liquid funds have less risk and they give moderate Returns.
Selling the investments
When you think about selling your investment, think rationally.and rationally. Only watching technical charts and Share market News channels may lead you to selling the investment. Only rational thinking and the right investment approach helps you avoid panic investment selling in volatile and down-going markets.
Many brokers and investment companies charge hefty fees or commission and make investments super-complicated. You must find out exactly how much an investment cost. Sometimes there is a simple one time fee or joining fee like a stock-trading service app that charges fixed brokerage for every trade. Mutual funds and ETF index funds charge you a percentage of the money for managing your investment called as expense ratio. Expense ration is charged every year on your investments. It is generally between 1-3% as per policy of the mutual fund house. An investment advisor will typically add affiliate commission or consultancy fee layer for the service.There are some Direct selling mutual funds like paytm money are available. Direct selling platforms do not charge commission of mutual fund investments. Be Aware of bad performaing salesman is need to remember Before Investing.
Use of moneycontrol application for investing
There are various share market related application available on play store. You can use moneycontrol application to do research about equity share, mutual fund scheme and some technical charts, historic returns. Moneycontrol is available on playstore for free. Moneycontrol is best tool for new comers of share market. This application has user friendly interface. this platform provide news about share market,currency market, commodity market and international markets. Moneycontrol application has paid subscription also. Paid subscription will give you premium research reports, broker recommendations,company related alerts, lectures of ace investors.
You need to remember Before Investing.I hope you would have got answer to your question “What you need to remember Before Investing ? “.Now start investing as soon as possible and secure your financial career.
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Author of this article is “Pranav Divekar”.