Investing is not everyone’s cup of tea. Some can manage on their own and some do not know the basics of investing. To invest, one has to first set their mind to it, so they can start saving. It’s very difficult for some to start saving, because they may not be earning that much also. But now, you don’t need to be rich to invest. The minimum amount starts from Rs. 500/- only. So you can start small and increase the amount little by little.
People realize very late the importance of saving and investing. Children should be taught to save from small. So, as they grow they realize the importance of it. Some parents give their children everything they ask for, sometimes things that are not even required. This makes the children dependent on their parents for everything and they don’t see the need to save.
Investing works step wise, as you can see below:
1st step: Earning
2nd step: Saving
3rd step: Invest
4th step: maturity fund (can be reinvested)
For beginners to start investing, it is a task, especially those who have no idea about investments. To get into the habit of investing, one has to start saving. The things that we want, well the list is never ending. So, trying to fulfill all our wishes, we forget that savings is also necessary. Once a person starts saving, it becomes a habit and their investments increase too.
One big advantage of paying taxes is that, people have to invest to save their taxes. This is a very good opportunity, because it will indirectly put in the habit of saving. It is always better to start early, since you can take risks at an earlier age. It is not so in the case of older people, they can’t take a risk with their money, as they are coming closer to retirement and they need all the funds, they can get.
Related Article : 8 Common Investment Mistakes You Must Avoid
Boosters that help beginners to start investing:
- Savings: It is hard to save when there are so many things that you want to buy. There’s a way you can balance both out. Make a list of things and write them priority wise. Then you can divide it in the coming months, according to when you want it. At the same time, the money that your saving from buying the other things, can be invested. You do not need to invest in complicated investments. You can start with investments in debt or equity mutual funds.
Future Goals: Investing helps one in the future. All of us have goals in life, most of them require money. It doesn’t mean that just because you don’t have goals, you don’t need to save. As your earning increases, your purchasing capacity also increases, which in turn increases your goals as well. So it’s always better to start saving early, so that it becomes easier to fund your future goals.
- Tax Benefit: If your earning a good salary at a young age, then you are bound to come in the tax bracket. This gives a boost to the people to invest in different tax saving avenues, which automatically in builds a saving habit. So if you invest the maximum amount and use the tax saving tools to the maximum, you can bring the tax to nil.
- Emergency Fund: No one ever realizes the importance of keeping an emergency fund. You never know what can pop up. For example, If a person looses his job, he will have to survive on some funds till he gets back on his feet. Another example is falling sick or getting diagnosed with a dangerous disease. So emergency fund is very necessary as it acts like a backup to fund unfortunate situations.
- No Begging And Borrowing: we all have experienced the feeling of not having money and then begging and borrowing. No one likes to beg or borrow. It’s another feeling altogether when you are earning and spending for your own needs. Start saving now and it will help you pay for your own expenses, so why be in debt of someone else, when you can fend for yourself.
- Financially Independent: Having your own savings and investments, reduces the financial burden for your family and it leaves you financially independent. This way you do not have to worry about funding your goals. No one likes to keep asking their parents for money again and again. It gives one a proud feeling to be financially independent.
It’s not at all difficult to start saving, it all depends on our mindset. If we put our mind to it, we can save. Investing has many benefits which youngsters don’t know about. At that age, life is all about enjoyment, which is true and one should enjoy life, but it is also important to plan for the future. So invest and stay financially healthy!
Strategies of wealth management are some basic fundamentals that everyone should be aware of. The power of intelligent investment in the creation and multiplication of wealth is indisputable. However, many of us are not aware of some basic flaws that every investor might fall prey to. We often treat terms associated with investment strategies as financial jargons meant only for the erudite. But, working knowledge of investment is not hard to gather. Armed with this basic knowledge, we shall be equipped to make sure that we are not losing our hard-earned money.
In this article, we shall explore 8 common mistakes that investors have been making over the years and which should be avoided in order to facilitate long term wealth accumulation.
1. Ignoring Insurance
We cannot emphasize how important it is to have a well-suited insurance policy in place. Insurance policies make sure that the well-being of you and your loved ones are safe-guarded in case of any unforeseen circumstances. It provides you the knowledge that your family will be taken care of, your children will be provided for and all your financial commitments will be honoured even in your absence.
However, I have met many youngsters in their 20s who believe that they are invincible and thus above the purview of insurance policies. They forget that it is when you are young that the policies are cheapest and as you grow older, the policies keep getting more expensive. Hence, chances are that by the time you realise the indispensability of insurance policies, you will not be eligible for many of them.
Moreover, as the money in terms of periodic premiums keeps accumulating, you are privy to a bank of forced savings that have very low-risk factors associated with them. Moreover, insurance premiums are also eligible for tax benefits. Thus, when the insurance term matures, you have access to funds that will supplement your retirement plans.
2. Confusing Between Investing and Trading
Although these terms are often used interchangeably by young investors, there is a world of difference between investing and trading. If one is not completely aware of the ropes of the market, chances are they expose themselves to financial losses by trading with the wrong stocks. However, a diversified portfolio with equities that have a proven track record will help grow your savings in the long run at a moderate risk quotient.
3. Basing Investments On Ups and Downs Of Stock Market
If there is anything you should know about the stock market, then you should know that it is volatile. Stocks performing big on the first hour of the day might end up losing big as well as the day progresses. Thus, gambling your money away on the ups and downs of the Sensex arrow is never advisable. It is much more prudent to invest in healthy stocks with a proven 5-10 years track that will appreciate your wealth slowly but steadily.
4. Too Short Of Time Horizon
The golden rule of investment states that the longer your money stays invested, the greater are your returns. Such is the beauty of compounding interest. Thus, if you constantly keep taking out money from your investments, you will never be able to accumulate enough interest. It is due to this reason that most investment vehicles like fixed deposits, provident funds and ELSS mutual funds have a certain minimum lock-in period.
5. Not Starting Early Enough
The old proverb goes-“The early bird catches the worm”. Indeed, it is never too early to start investing. In fact, the earlier you start investing, the higher you end up gaining in terms of returns due to the magic of compound interest. Let us illustrate this phenomenon with an example.
Mr. A starts investing at the age of 20. He invests Rs X in a scheme that doubles his principal amount in 10 years. Thus at the age of 30, his investment grows to 2X, at the age of 40, it grows to 4X. At the age of 50, he has 8X and he has 16X when he is ready for retirement.
Now, let us consider B starts investing when he is 30. He invests Rs X in the same scheme as A. But when he turns 60, he ends up with only 8X amount. He has lost eight times his initial investment by starting 10 years later. You get the picture, right?
6. Not Having A Systematic Investment Plan
By investing small amounts regularly in a SIP, you gain the following advantages:
- Since you do not have to come up with a lump sum amount to invest, you don’t feel a financial burden or the inability to honour prior commitments
- You become a more disciplined investor
Trust us when we say that if you do not have a Systematic Investment Plan, you are losing out on your money.
7. Complicating Things
Many investors have the habit of dabbling in different equities every year. This makes it all the more difficult to stay top on your portfolio and make informed decisions. Instead, a well-chosen basket of consistent stocks in your portfolio serves the purpose of wealth multiplication quite well. And it keeps things simple.
8. Working With the Wrong Advisor
Of all the investment blunders that you might perform, this is perhaps the gravest. A wrong investment advisor will result in more than just financial losses. Thus it is very important to study the past performance of a financial advisor before choosing one. Moreover, keeping an eye on your portfolio is advised and with good reason.
Investment strategies might be a dime a dozen. The onus of choosing one that works for you lies with no one else. However, with a little amount of research and determination, carving out the path to glory is not that difficult as long as you are avoiding the pitfalls that we have outlined above. Start early, keep investing small amounts in regular intervals and watch your wealth grow. You may download the Fintoo app to start your investment now.