Skip to main content

A beginner guide to Investing

"If past history was all there was to the game, the richest people would be librarians."

– Warren Buffett

Investing, particularly investing well, is not the easiest game in the world. It requires a multitude of virtues like patience, keeping faith in your investment and the important ability to admit it when a mistake has been made. Even the doyen of investing Warren Buffett admitted he made a mistake about his Berkshire stock saying

"I've made lots of dumb decisions. That's part of the game."

There are a few basics that are vital to hold on to while investing. So much so, we believe it would be nearly impossible to be successful in the field without these four building blocks of investment.


1. Set the right goals

Before investing any money, it is absolutely vital that your goals are clearly defined. There are many different approaches to setting these goals. Ask yourself a few questions.

• Is your ultimate goal to simply preserve your capital and to grow it at above inflation (and risk) adjusted returns over a long period of time?
• Or do you prefer quick turnaround times bearing in mind that it might ultimately be high risk?
• What is your tolerance for risk?
• What do you want to achieve over the short term and what are your long term plans?

• How much time will you have to devote to your portfolio?

Defining these goals will ultimately decide the asset allocation along with buy and sell strategies for your portfolio. It is also important to remember that your goals are not hard and fast and can change if necessary. However, it is best to define them as clearly as possible so an overall strategy can be defined.

2. Don't panic

Sudden bubbles and busts have often left investors paranoid and in a panic. Behavioral biases are often at their strongest in such cases. Many investors are guided by external cues like news coming through the papers, TV channels or simply by word of mouth. Fear and greed are two major contributors to panic in the market. Optimism forms market peaks and pessimism forms market bottoms.

It might be easier said than done but you must have faith in your investment strategy and stay calm. After all, there are bargains to be had at when the market hits the bottom!

The same can be said about selling when stocks are low. Fear can drive an investor to rid himself of his equities. Staying rational during market highs and lows is the best way to minimize the risks of behavioral biases while investing.

In short, you must accept that markets are volatile creatures and it is important to stay calm and use the volatility to your advantage.

3. Allocate assets wisely

Diversify your portfolio by investing in diverse asset classes as hedges against inflationary and deflationary environments. Ensure that you invest in the highest quality spectrum of different asset classes. For example, when investing in equities you should look at strong businesses preferably with sustainable barriers to entry and when investing in debt, you should invest in debt of those companies that are preferably backed by the government and which are providing a necessary service e.g. utilities. Gold works as a high quality cash reserve. This strategy helps mitigate the various risks facing a portfolio over the long term.

Apart from under diversification, another big no is over diversification which can actually work against you and decrease your chances of getting good returns. A well balanced portfolio will have the ability to maintain the purchasing power of a portfolio through any economic environment while providing good returns over the long run.

4. Hire a proficient financial advisor

Don't assume you can do it all yourself. Successful investing comprises of numerous different factors and variables. While it might look easy to navigate the market in times of prosperity, it becomes difficult to avoid emotional and behavioral biases when things are bad.

Good investment advisors are individuals who are trained to remain rational through all of Mr. Market's mood swings thereby avoiding impulsive decisions that could prove to be detrimental to your portfolio in the long run. Hiring a wealth manager who understands your goals can bring in fresh expertise and go a long way toward increasing your returns.

Common perception deems investing to be a gamble where you can 'get lucky and strike it rich' while it actually involves taking a series of calculated risks based on careful research. Preserving and growing your capital requires discipline and sticking to a few basic rules will ensure that you meet your investment goals in the long run. And remember to always ask a professional for help when you are in doubt.



SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now