Investing provides financial security for the future. Just earning money is not enough. Growth of funds is also necessary. It is up to you how you are taking charge of your financial security. When it comes to growth of your funds, the following are the interdependent factors to determine growth:
- The capital you are investing
- The net annual earnings on your capital
- The investment period
Here are the tips, or say a checklist, that an investor should consider while investing:
1. Investment Horizon
Investment horizon is how long you want to keep investment, for short term or long term, to achieve your goal. Time frames vary for different goals. You need to determine when you will require your funds back. Investment horizon will affect the type of risks you can take on. It is advisable to keep high-risk investments like equities for the long term to achieve long term goals and low-risk investments like debt funds for the short term.
2. Appropriate mix of investments
To reduce the risk of losing returns, you should consider and invest in more than one investment category. Your overall returns will be smooth even if one investment return falls. Don’t make it complicated but comprehensive.
3. Keep Emergency Funds
Your savings are like your back support. Put enough money as an emergency fund and maintain it. It is advisable to keep an emergency fund equal to the income of your 6 months. It will help you to evaluate your comfort zone in taking on risk.
4. Know What Works in the Market
Be a prudent investor with a solid grasp. Do not make your investing experience a dark style of investing. You should know why and how to choose an investment category. Focus on security and transparency in the financial market. Find out which financial instruments are working well. It’s equities or bonds or currencies or derivatives.
5. Avoid investments with high fees
Most of the time, a high fee on investment makes it difficult to beat the market. For instance, mutual funds. Mutual fund managers charge a percentage based fee. Most mutual fund investors find it difficult to beat the market with high fees.
You should find a proficient brokerage firm to open a Demat account that enables you to save on brokerage fees. Bajaj Financial Securities Limited Demat Account is a good option as it allows you to pay a flat brokerage rate per trade, thereby helping you save on brokerage cost. The documents required for Demat account include Proof of Identity (Driving License, Voter ID card), Proof of Address (such as passport, Aadhaar card, etc.), Proof of Income (copy of ITR acknowledgment), Proof of Bank Account (i.e. canceled cheque), PAN Card and passport size photographs.
6. Stay Debt Free
Debt works just the opposite of your investments and decreases your wealth, so better to make yourself debt-free as soon as possible. Once you have controlled your debts, start investing as much as you can.
7. Handle basics first for the stock market
If you want to invest in the stock market, handle basics first. Know financial metrics and definitions, methods of stock selection, utilization of market timings, order types, different types of investment accounts, etc. Investing in the stock market is a great opportunity to make large assets but for those who have spent their energy to gain experience with their knowledge. Investing enables you to enjoy a good retirement life. To succeed in investing, use a system and a strategy. Do not put your savings at risk. Take calculated risks and play it safe