Investment guide for beginners: why, where and how?
NEW DELHI: To build your wealth, you need to invest your money. Many people do not opt for investment for fear of losing their earned money with so much effort. But with the right knowledge of the investment and the understanding of the options available, this fear will vanish.
First, let's understand why you should invest.
Investments can provide you with financial freedom to stay, even when there is no regular income. These are the 5 main reasons to invest your money:
Grow your wealth : The best tool to grow your money is through investment. There are numerous investment tools such as bonds, stocks, government schemes and certificates of deposit that offer large long-term profits.
Comfortable life after retirement : While working, you must save for your retirement. Plan your savings and make investments in mutual funds, bonds, stocks, real estate or deposits to lead a comfortable life after retirement.
Get tax exemption : There are many investment options available in the market that give you the benefit of the tax exemption and help you earn tax-free income. When choosing investment plans to save taxes, you should also consider factors such as risk, returns and liquidity.
Meet financial objectives : The returns on investment can help you achieve financial goals such as building a house, buying a car, starting a business or getting your child's admission to a good college/university.
Starting a new business : In the future, if you plan to establish a business, then it is important that you start investing now. Establishing new companies and turning them into successful entities will definitely provide you with greater profits.
How to plan your investments?
Beginners who want to explore the world of investment are recommended to start with a small amount so that the risk factor is lower and once they gain confidence, gradually increase the amount of the investment.
It is also important that the investment option you choose is in conjunction with your requirements and needs.
Some things to keep in mind when planning your investment are:
- Choose investment options wisely after doing extensive research
- Never opt for fast money schemes that offer higher returns in less time since the risk in such schemes is very high
- Always analyze your investments periodically
- Consider the impact of the tax on the returns you have obtained from your investments.
- Avoid complicated investment options and make investments in the simplest and most understandable.
The 5 best investment options in India
As a beginner, you must understand the products you would be investing in to earn more money. Here, we will provide you with information related to the investment options available in the market:
Investment funds : It is a very popular investment option among investors. In the long term, say for 5 years, most mutual funds have provided good returns. Since mutual funds are managed by fund managers who are experts in their domain, the risk of losing money is comparatively lower compared to other investment options.
Public Pension Fund : It is a tax saving instrument and the interest earned through PPF is totally tax free. Backed by the Government of India, the interest rate is unbeatable compared to bank deposits. Since it is a long-term investment option, the validity of the PPF scheme is 15 years. However, premature withdrawals can be made.
Recurring deposits : You can save a small amount of your salary monthly and invest in a recurring deposit account at a bank of your choice. This helps you save money in the long term and get decent returns. It is up to you to decide the tenure of the deposit and the amount in which you wish to invest at your convenience.
National Savings Certificate : Again, it is a good and simple option to make investments. Backed by the Government of India, this scheme is valid for 5 years and offers a good interest rate on the amount deposited. Not only this, you also get tax exemption under Section 80C of the Income Tax Law. In addition, you can continue to invest in the scheme even after the expiration period.
Gold ETF : Funds traded on a gold exchange It is one of the safest and perennial investment options in which you can invest. This is safe because you can use it as protection at the time of currency fluctuation and inflation. ETFs, also known as electronic gold, provide high long-term returns.
Monitor your investments
Monitoring the performance of your investments is also important. Never forget that the main reason you started investing is to achieve financial goals. You must keep track of the returns you get from investments. Check if the returns are according to the objective in the stipulated time frame.
You can also evaluate your asset allocation to monitor your investments. You can verify that the investment options you have selected are providing adequate returns or not. And, depending on performance, do you need to make changes in the investment allocation?
There are numerous tracking websites where you can verify the return on your investments. On the website, you can verify how the scheme to which it was applied worked. The yield can be verified by loading the details of your investment and obtaining a report of it.
Following the above guide will help you better understand the investment and its options. And for a period of time, you can make significant profits by making investments.