At the beginning of your investment journey, it is possible to be overwhelmed with a lot of advice from various books, videos and content creators. You may find various articles or videos on the best stocks for options trading, best short term investment options and various other catchy titles that give you investment tips. Yet, this isn’t the way to approach investing if you want to be successful in the long run on your own. Here are 5 simple tips to ensure you are on the right path of your stock market investment journey:
This is one of the first steps for any initial investor to take. Setting your financial goals gives you clarity on what amounts of money you will require at various stages of your life and helps you to back-calculate the amount you would need to invest in order to achieve those goals. These goals can include higher education, marriage, buying a house, children’s education, retirement, starting a business, etc., depending on your age and circumstances.
Once your financial goals are set, you will have a fair idea about the time horizon you have for your investments to grow. For example, say you want to get married 5 years from now and want to set aside Rs. 10 Lakhs for the same. You can use a SIP calculator, input the time period, target amount and rate of return (depending on risk appetite) and arrive at the amount you need to invest each month to reach your goal. Assuming a rate of return of 12%, you would need to invest Rs. 12,123 every month to achieve your target.
Depending on the time horizon and your circumstances in life, you can arrive at your risk appetite. For example, let us say you want to save money for your children’s education 2 years from now. This should ideally be placed in safe investment options such as Debt funds or FDs, because your child’s education expenses are around the corner and you must not risk them in a volatile equity market.
Once you have arrived at your risk appetite for the different financial goals, you can decide your asset allocation. This means you can invest in various asset classes such as Equity, Debt, Liquid Funds, etc., in a proportion depending on your various goals in life. It is helpful to do your own research on these asset classes and how much of a return you can expect from them. In this process, it is prudent to take the help of a professional financial advisor.
As markets tend to evolve over time, it is important to stay up to date on your investments and reshuffle your portfolio every once in a while. As mentioned earlier, it is beneficial to take the aid of a financial advisor in this process as their research can help your portfolio grow better.
When you set out on your investment journey, keep the above 5 steps in mind and check if your investments are in alignment with the same. Ensure that you take the help of a financial advisor as their inputs can help your portfolio grow multifold as compared to doing your own research.
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