Only if you could pay your bills, spend money on things you love, all on one paycheck. Sounds like a dream, no? We hate to break it to you, it’s not possible unless your paycheck is as heavy as an elephant. If you’re in that club, you’re good to go. If not, you’re in for some serious financial crunches.
We don’t mean to scare you, but it’s quite true. However, we do have a solution, a secret to spill. That secret, my friend, is investment.
Here, we’ll tell you all the know-how and investment tips. All you have to do is stay.
Key Takeaways
- With the power of compound interest in investment schemes, you can double your money.
- You can start as low as INR 500 or 1000 to kickstart your financial journey.
- If you think you don’t have the financial insights, mutual funds are a wise choice as the fund manager makes the investment decisions according to their expertise.
- The right kind of investment plan for you depends on your financial goals, financial capability and risk tolerance.
Why Do I Need to Invest at all?
Coming to the important question, why? Here are all the reasons why:
1. Compound Interest is a Powerful Spell
Compound interest is what makes investment a juicy fruit. In simple words, it is interest on top of interest. Here’s clearing it with an example.
Imagine you invest INR 10,000 in an investment scheme that earns you an interest of 10%. In the first year, as our basic math skills say, you earn INR 1,000 as interest. Now next year, even if you don’t make an investment, you’ll still earn interest, not on INR 1,000 but INR 1100.
That’s how your money will grow (Who knows if you become a millionaire years later? if you do, you have compound interest to thank.)
2. Allows you to Beat Inflation
Do you dislike inflation? Great, we all do, feel free to join the club. Inflation can impact your financial future by minimizing the value of your money over time. But a pro-investment tip here is having an investment portfolio that offers you a return higher than the inflation rate.
3. You’d Want your Retirement to be a Financial Paradise
You have an income to support you and your family right now, doesn’t that feel blissful? We bet it does. But have you imagined what would happen when you stop earning after your retirement?
The fear is genuine. But don’t fret if you have a retirement fund to your rescue. If not, just know regular investment habits can help you build a sizeable one.
4. Tax Benefits
No one likes to pay taxes, but that’s what we have to do. But what if we tell you that you can actually save on taxes if you invest? Yes, you heard that right. One of the most exciting investment tips for most investors is that under Section 80C of the Income Tax Act, you can claim a tax deduction.
Did you Know?
2020 witnessed all-time high fundraising, all through the public equity markets at Rs 1,77,468 crore, despite the adversities of the COVID Pandemic.
What Kind of Investment is Right for Me?
Much to your disappointment, there’s no definite investment tip or answer to it. Truth be told, it depends on various factors:
1. Your Goals
Have your children’s education to fund? Or a house to buy? Whatever your life goals are, investments should be made accordingly. If you happen to have expensive life goals, and strong financial capability, opting for investment options that offer high returns is the smart investment tip for you.
2. Time Horizon
Your investment tenure is influenced by your financial goals. Let’s say you are closing the age of 40, but do not have a sizeable corpus. Guess what, the investment tip is that you have to look for investment options that offer higher returns, helping you meet your financial goals at the earliest.
3. Risk Tolerance
The last thing you would want is to invest beyond your means into risky investment options, only to watch your investment go downhill. Therefore, the smart investment tip here is that always keep your risk tolerance into consideration. Remember, all investments come with a certain degree of risk so, you have to think carefully before taking a step.
Did you Know?
Beyoncé was once invited to perform at an Uber corporate event in 2015. However, Beyoncé refused to get paid with money. Instead, she desired to get $6 million worth of Uber stock units. [2]
When Should I Begin Investing?
The answer is simple – today. In fact, the money investment tip for beginners here is that the earlier you start, the better. Learn from Warren Buffet; the legend started investing at the age of 11.
Most individuals wait as they think they don’t have the financial strength to start investing. So, one investment tip is that you don’t have to invest 60-70% of your salary or pocket money. The investment tip here is that invest what you can afford. You can increase your investments as you become financially stronger with time.
How Much Money Do I Need to Start Investing?
Once again, there’s no definite answer to this. The amount depends on your financial capability and your investment goals.
Let’s just say you’re young and you cannot afford to invest heavily. So, you decide to invest INR 1000 every month in SIP (Systematic Investment Plan – we’ll get to it in a while) at the age of 20. In a span of 10 years, you’ll be generating a corpus of INR 2,32,339. Here’s a break-up to give you a better idea:
| Corpus | INR 2,32, 339 |
| Invested Amount | INR 1,20,000 |
| Returns | INR 1,12,339 |
| Time Period | 10 years |
| Expected Rate of Return | 12% |
It was just an example; the amount is subjective. As an investment tip for beginners, you always have the option to invest lower or higher, according to your financial goals, and investment capability.
Most Popular Investment Options
The question you must be asking all along would be, where should you invest? Here are the many answers:
1. Unit Linked Investment Plan
Unit Linked Investment Plan (ULIP) is an investment plan with the dual characteristics of insurance and investment. It works through regular premium payments. The premium is used to pay for insurance premium and invest in market-linked instruments.
2. Systematic Investment Plan
An individual needs to make fixed monthly investments for a period in SIP. This investment is used to invest in mutual funds, as chosen by the investor. Mutual funds, as the name suggests, pool money from multiple investors and use it to buy securities such as stocks, bonds, and short-term debt. Mutual funds are the go-to choice for most investors for many reasons. One of the reasons is that it is not you, but the fund managers, who are pros at investing, have to do the hard work of selecting and managing the asset. (A relief, right? Especially, when you are a beginner and don’t have the expertise in investing).
Did you know?
Even though returns in SIP are market-linked, they can be averaged out. In other words, when the market is crashing, investors can buy more units, and when the market is booming, they can buy fewer. Consequently, the returns are unaffected to some extent.
3. ELSS Mutual Funds
Equity-linked savings scheme is a kind of saving and investment scheme that offers returns through investment in the stock market. Being market-linked, the returns in ELSS are not guaranteed, however, they are higher than many investment options. Moreover, you can also claim tax deductions of up to Rs 1,50,000 a year for investments in ELSS mutual funds under Section 80C of the Income Tax Act, 1961.
4. Share Market
Investment in security might be a juicy fruit for most investors, but it should be thought through. As the returns are market-linked, you cannot invest blindly. Hence, one of the most important investment tips is to do your own research. Study the market, study the financial performance of the company, and so on to begin with.
In 2021, during the first and second waves of COVID-19, the demand for medicines increased. Consequently, the share prices of pharmaceuticals skyrocketed. Pharmaceutical companies such as Sun Pharma, Dr Reddy’s and Cipla saw tremendous growth.
Did you Know?
Poonawalla Fincorp, led by Adar Poonawala, owner of Serum Institute, which bagged the vaccine rights in India its shares rise from ₹47.15 on February 1, 2021, to ₹282.75 per share in 2022 delivering a tremendous return of 499% to its shareholders in this period. [3]
Word to Remember
NAV – Net Asset Value
NAV refers to the net market value of a particular mutual fund unit, which is computed as the total value of the entity’s assets minus liabilities.
Conclusion
If your goal is to attain financial security and improve your financial position, you now know investment is one of the fastest ways to do it. Doesn’t matter if you’re in the prime of your life or not, you should start investing. With these investment tips, you don’t have to worry. If you have read these investment tips, understood them and applied them while investing, you are good to go.
FAQs
No, there is no minimum age for investing in the share market. Both adults and minors can invest. However, the minor account for share trading has to be operated by a parent/guardian. You may be required to submit some documents while setting up a trading account.
Yes, they are if your goal is an investment security. Most government investment schemes offer fixed returns, irrespective of the market conditions. However, they do not offer relatively higher returns as compared to market-linked schemes. A pro-investment tip here would be to look for government investment schemes that offer a return rate higher than that of inflation.
It depends on the investment schemes. While the security market and mutual funds are highly liquid, the returns offered by them depend on the NAV of shares on the withdrawal date. As for government investment schemes, they do have some withdrawal restrictions, commonly called a lock-in period, during which you cannot withdraw the funds. So, the money investment tip here, is that choose wisely if liquidity is a concern.
A pro-investment tip would be to invest in investment schemes that are moderately safe. This would include government introduced schemes, bonds and debentures.
The one investment tip that you need if you desire a strong investment portfolio is to have a mix of investment assets such as shares, deOne way to ensure a strong investment portfolio would be to diversify your investments across multiple asset classes like Equity, Debt, Gold, Real Estate, etc. This diversification can help you ensure optimal returns for your portfolio while minimizing overall investment risk.
