2020 has certainly been a year full of learnings, especially on the financial front. Financial security has never been as important as it is right now, and having another source of income is at the top of everyone’s minds. Investing in good plans with favourable results can help secure you in times of crisis and prepare you for the future.
Following are 10 tips that can aid a new investor’s decision-making capability:
1. Start early: The sooner you start your investments the higher the reward will be in the future. If you start investing in your 20s, you could save up a sizable chunk by the time you hit 60. Don’t worry if you are a little late to start investing. Just remember to invest more.
2. Make a budget: Before deciding on any investments, it is necessary to first decide how much you want to invest. This would ideally depend on your income and how much you can save. You should also be prepared in advance for any kind of expense that may come with the investment.
3. Risk acceptance: If you are on path to becoming an investor, you will have to become a risk-taker. As stock markets rules go, the higher the risk, the higher the return! You may opt for a high-yielding security with a very high-risk factor attached. If you are okay with a lower return, you can explore the options where less risk is involved.
4. Keeping expense ratio low: Take care of all the expenses attached with investments. Try to keep these expenses as minimal as possible. An expense of up to 0.1% of the total amount of investment is good. This can be reduced even further if you plan it properly keeping your financial advisor in tow.
5. Long-term planning: Investment in the stock market is for those willing to invest their money for the long run, i.e., a minimum of five years. This way, you will let your money grow. If you are looking for returns within a few days or weeks, then the stock market is not the right place for you.
6. Don’t start when the market is low: Starting to invest when the market is low is not a very good start. Believing that certain securities’ market prices will eventually increase is not a very good approach for making an initial investment. It is always better to check what were the reasons that the market crashed and then make the investment decision accordingly.
7. Researching when investing in single security: Indulge in deep market research if you plan to invest all your money in a single security. The chances of a high return in a single stock are undoubtedly good, but so is the risk attached with it.
8. Mutual funds can be a good idea: Mutual funds are a good scheme to invest your money in various securities. It reduces the overall risk and ensures a constant rate of return that you earn on the investment.
9. Invest regularly: Rather than investing all your savings in one go, it is suggested that you keep investing regularly, irrespective of what the market conditions are. This will help in taking full advantage of market conditions.
10. Consult an advisor: If you are new to the stock market, it is better to take advice from a stock market professional like a broker.
Investing is crucial to one’s financial growth. It is, however, advisable to do so after conducting proper market research and consulting professionals.