It was only last week when my brother’s friend who just landed a lucrative offer through the campus placement met me. He was quite ecstatic. Finally after years of burning the midnight lamp’s oil he was going to get his first paycheck. No more pocket money issues, no udhaars/Karz (loans from friends). Just as we celebrated his success I asked him rather a serious question. How do you plan to invest for your future? The answer he gave was rather quite common which still plagues millions of new investors like –
· Investing?? Nah……. It’s time to go on a shopping for now brother,
· I don’t think I have sufficient amount to invest!
· Will see I have loads of time for the same
· Isn’t the stock market very volatile and I may end up losing my money!!
· So many products to choose from which one should I opt for?
If one starts early the chances of making a substantial long-term wealth is quite high. In my earlier blog on Achint’s style of passive investing I dwelled on this point (Please refer to the earlier blog posted on compounding returns the following link https://simplifiedmoneytalks.wordpress.com/2019/10/11/how-to-multiply-your-money/). At the start of one’s career just when you start getting your paychecks, the ‘SAVINGS’ bit tends to take a back seat. To cater to this carefree attitude, I would suggest the easiest way of saving is to create a systematic investment plan at the beginning of every month. By applying such a method – your savings will be taken care of even before any spending takes off. By its very design, a SIP will also impart the discipline of investing and average out your investment costs.
If you think you have very little surplus, please do not worry. With a SIP, you can start investing with as little as INR 100 through Micro SIPs. Having said that, make sure that you have first set aside your 4 to 6-month expenses for emergency purposes and consider the good-old savings account for the same or keep FDs.
While equity should be your chosen path, do remember this – invest only and only your long-term money (a period of five years or more) in equity space. However, for a newbie investor, it is important to first get accustomed to the market volatility before taking an all-equity route.
Would suggest one to start with an aggressive hybrid funds (earlier known as balanced fund) as with their 65:35 equity to debt allocation rate, the in-built debt portion will provide a cushioning effect. So, when the market falls down, the fund won’t tumble much and neither scares you out of the market.
Sticking to one’s investment plan is very important. So, let your investment run for at least three to five years to experience a full market cycle. No matter how the market runs remember one thing avoid market rumors. Having said that, if you are a tax-paying investor, choose an ELSS fund and invest only up to the 80C limit of 1.5 lakh. To start investing in a fund, you need to be KYC (know your customer) compliant. For this, you will have to go through some one-time formalities. While you can still invest through a distributor to buy your funds, make sure that you do not fall prey to products like unit-linked insurance plans (ULIPs), or some other products for which you do not have any idea. Start now as today is the day to start afresh. Till then Happy Investing.
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