It is never too soon to start investing. Investing is the smartest way to secure your financial future and to begin letting your money make more money for you. Nobody starts out an expert. Even the best investors in the world were once sitting where you are. The tricky part is figuring out what to invest in — and how much. ( Learn More - Investment options- thinking beyond the obvious )

But before you put any money in the market, I suggest that you cover a couple of financial bases. First, set aside enough cash in an emergency fund to cover three to six months of essential living expenses. Next, make sure you have health insurance as well as car insurance and renters or homeowners insurance, depending on whether you rent or own a home. (Learn More5 New-age features of health insurance plans to know )


Here are a few simple steps to help you learn investing:


Set goals:-


Investing is about growing your money, but to do that effectively, you have to know what you want to accomplish. So do some thinking. Lay out your short-, medium- and long-term goals. Write them down, give them a time frame, and put a Rupee figure beside each. For instance, a short-term goal might be a vacation. A medium-term goal could be a down payment on a house. A 46-year-old businessman and a 64-year-old widow will have very different needs. ( Learn More - Investing in Equities- Identifying the Best Plan for Your Financial Goals )


Understand Your Risk Tolerance:-


Risk is the scary part of investing, and there’s no way to avoid it completely. Before deciding on which investments are right for you, you need to know how much risk you are willing to assume. It’s also important to understand that risk and return go hand-in-hand: Often the greater the potential return, the greater the risk. (Learn More Short term investment options for high returns )

Two things will determine how much risk or uncertainty you can handle: your personal feelings and your time frame. Stocks are on the high end of the risk-o-meter, fixed-income investments such as bonds are in the middle; cash investments are on the low end. Also look at how long you plan to keep your money invested. In general, if you’ll need your money in:

Three years or less - Avoid stocks. They’re just too volatile. Consider cash investments.
Three to Five years - It may be appropriate to invest as much as 50-60 percent in stocks, with the balance in bonds or cash equivalents.
Five to Ten years or longer - You can add more stocks to the mix.

Learn about the costs involved:-


It is equally important to learn the costs of investing, as certain costs can cut into your investment returns. As a whole, passive investing strategies tend to have lower fees than active investing strategies such as trading stocks. Stock brokers charge commissions. On the other hand, if you are purchasing mutual funds, keep in mind that funds charge various management fees, which is the cost of operating the fund, and some funds charge load fees. Do a bit of research on performance and fees. There are plenty of reliable websites that give details of particular funds and let you comparison shop. You might start with your brokerage company’s website.


Emotional Control:-


Don't let fear or greed limit your returns or inflate your losses. Expect short-term fluctuations in your overall portfolio value. Greed can lead an investor to hold on to a position too long in the hope of an even higher price – even if it falls. Fear can cause an investor to sell an investment too early.


Review:-


The final step in your investing journey is reviewing your portfolio. Check your portfolio at least thrice a year to evaluate performance and to make sure your investments still match your goals and feelings about risk. And try to keep a long-term view. And once you have some money in the market, you may be inspired to learn more.


Bottom Line:


It all depends on your saving goals and how many years you plan to let your money grow, “You need to decide how much of your money you’re going to allocate to each goal, and invest that money based on the time frame for the goal,” All you have to do is start somewhere. Once you do, it will get easier as time goes on, and your future self will love you for it.

1 Comments

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