How to start investing?
Now that the question about the necessity of investment is answered it is time to explore the idea of how do one start investing.
One of the most basic question in the mind of people is how to start investing. As a first step one need to see the amount of money that he/she has, in order to begin investing. This money is his capital. One can have this capital by inheritance from parents or ancestors. Another way of having this capital is acquiring it by way of saving. Your saving may be small but still you can start investing. You can even borrow money from friends and relatives and invest, but this website, do not encourage the same.
Savings
It is easy to say save and invest. But it is difficult to start saving if you do not follow certain steps. The first step in saving is start budgeting. Budgeting is necessary to keep track of your income and expenses. Write down what you and others in your family earn and spend each month. That is, on one side “Earnings” will come and on the other side ‘Expenses”. Now include a new category ‘For savings and investing’ on the Expenses side. If both the sides balance. no problem you are on the right track. if not you have to have a relook at the budget. If you are spending all your income, then you will never have money to save or invest. If there is no scope for increasing your income start by cutting back on expenses. Many people get into the habit of saving and investing by keeping aside the amount of savings first and then trying to balance the Income-Expenses statement. This appears to be the right way to start saving. We know it is not an easy task but one has to bite the bullet. Another easy way to do this is to have all your family income credited into your bank account automatically and pay for expenses from that account. There are many ideas and rules for promoting savings, but those will be dealt in detail elsewhere.
Knowledge of assets
So, you have managed to save some money from your earnings. This is your capital. Now the question is what financial product/tool to invest in? The answer to this question begins with the analysis of financial assets available for investment as the first step. We have seen many types of investment vehicles and it is quite normal for an investor to get confused. Someone new to investing may not exactly know where to invest their money. So one has to gain knowledge or understanding of the investment tools available. Making the wrong investment choice can lead to financial losses, which is something that no one wants. So either one should seek expert advice or try to become an expert himself. The aim of this website is to impart investment expertise to people.
Understand financial goal
The second basic but important step is to understand the financial goal to be achieved by the proceeds of your investment. This will help in identifying the investment tool. There could be many reasons why an individual wants to invest money. It could be for meeting his financial needs post retirement or to meet the education expenses of his/her children in future. Some people may desire to undertake a world tour or some others may be wanting to acquire their dream luxury car. In any case, identifying the aim/goal of investment is one of the most crucial steps since this will give you a fair idea about the investment tool to go for. The aim/goal of the investment will also make out the investment process easier as it helps us to chalk out other relevant details like the quantum of investment amount, the timeline of investment, and the type of financial product to zero down on.
Individual Risk Profile.
Another thing to think about when choosing an investment option is about the risk profile of the individual. .We should know our risk taking capacity which differs from person to person. Some people will be having very low risk aptitude. They want to ensure that their capital is safe so that they will not have to spend sleepless nights. They are happy at low rate of returns. On the other hand there are some people who are always prone to take high risk and will always undertake high risk investments to earn high return.
Asset Risk profile
It is also important to know that each investment carry different degree of risk. One should be ready to take some risk as all investments carry an inherent risk with them. Investing is all about taking calculated risks and managing the same, not avoiding the risks altogether. If you try to avoid risk altogether your investment will not grow.it is as good as not investing. So you should be ready to take some amount of risk as per capacity and may take some measures to manage the same.
Educate self
But having money, goal and risk-taking attitude is not sufficient to start investments. You should have Expertise to select proper investment avenues. Expertise cannot be gained in one day. You have to invest in educating self by reading books or browsing websites or you can approach an expert investment advisor in the field.
The purpose of this website is to give you as much knowledge as to impart confidence in you so that you can start investing.
