Investments are an essential part of financial planning. It’s advisable to begin investing as early as you can, so there’s enough time for your money to grow several times over. By following smart investment tips and planning your investments right, you can ensure that you have sufficient funds to meet all of your life’s goals and milestones, such as buying a house, purchasing a car, funding your children’s education, or even retiring with significant financial assets.
If you’re new to this turf, it can be confusing to figure out how to go about investing your money correctly. Fortunately, there are many investment tricks that can help people who are just starting out. Learning the basics is the best place to start. So, here is some good investment advice for beginners.
- Be realistic about your investment budget
Before you actually begin to invest, you need to be aware of the level of funds available for your investments. You don’t want to be left with too little money to meet your essential expenses such as rent and utilities. To avoid this possibility, make a budget and figure out how much of your income is available to park in investments. Ideally, you need to follow the 50-20-30 rule, where you utilize 50% of your income for meeting your necessary expenses, invest 20% of your income, and use the balance 30% on expendable expenses such as fun and entertainment.
- Assess your risk appetite
Another essential exercise to engage in before you invest your money is to understand your risk profile. Are you open to taking higher risks if it means you have the possibility of earning greater rewards? Or are you a conservative investor who’s more comfortable investing in low-risk instruments even if it means the rewards are lower? Figure out where your risk appetite stands and look at investment instruments that fit in with your risk profile. By doing this, you’ll ensure that you don’t take risks you’re not prepared for. Your risk appetite should also align with your financial goals for the short term and the long term.
- Understand the instruments you’re investing in
Investing in an instrument without understanding what it’s all about is a rookie mistake. Avoid falling prey to this error by taking some time out to research the investment options that fit in with your budget and your risk profile. Read up one these instruments, understand the tax benefits they offer, and learn about the financial rewards they promise. If you have trouble putting it all together, consider making an appointment with a financial advisor. These professionals can help you comprehend the investment market, so you can make an informed decision about what instruments to invest in.
- Diversify your portfolio
Diversifying your portfolio is one of the most tried and tested investment tricks in the beginners’ handbook to investments. It helps you spread your risk across multiple investment options, so you’re not trapped in any specific risk category. In other words, if you diversify smartly, you can balance your risk across different investments, thus improving your overall return. Spread your investments across high-risk and low-risk options. Additionally, you can also include both short-term as well as long-term investments in your portfolio to enjoy a better distribution of cash inflow upon maturity.
- Link your investments to your life goals
Once you’ve understood the benefits of different investment options, it’s essential that you link your choice of investments to your life goals. This is one of the best investment tips to ensure that you meet your financial objectives smoothly. For instance, if your life goals include a plan to purchase a home within the next five years, you might need to opt for SIPs in equity mutual funds or balanced mutual funds. Alternatively, if you intend to save for retirement, a low-risk long-term investment option like debt funds would be a good choice. Aside from these goals, it’s also essential to invest in a term insurance plan so your family is financially secure. You can learn more about Term Insurance by browsing the website for the various Term Plans offered by PNB MetLife.
With all of this investment advice for beginners, you can take your first steps into the financially rewarding world of investments. Remember that while the best time to start investing was yesterday, the next best time is now. So, draw up a plan, compare various investment options, and begin investing, even if it’s only a few thousands at a time. After all, small reserves can add up to large rewards in the long run.
In the policy the investment risk in the investment portfolio is borne by the policyholder’ on top of the document.
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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