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

Post Office Deposits Interest Rates

Best SIP Funds to Invest Online   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

HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO

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     HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO will be open for subscription from 16th May 2014 to 30th May 2014. The key features of the scheme are as mentioned below:   Type of Scheme A Close Ended Capital Protection Oriented Income Scheme Benchmark Crisil MIP Blended Index Fund Manager Mr. Anil Bamboli , Mr. Vinay R Kulkarni & Mr. Rakesh Vyas New Fund Offer (NFO) Period 16 th May 2014 to 30 th May 2014. Minimum Application Amount Rs. 5000 and in multiples of Rs.10 thereafter Plans/ Options Offered Growth and Dividend Payout Facility Liquidity To be listed For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

How Tax Deducted at Source (TDS) works?

    THE tax season is here. And if you are an employee you can't blame your employer for deducting large chunks of money from your salary towards tax deducted at source ( TDS ), which he is legally obliged to do. Your bank will also deduct some percentage from your FD interest of Rs 10,000 or more towards TDS! So what is this TDS all about? How is it computed? Are there any changes this year? Read on... What is TDS? TDS reduces your taxable income and could even provide tax relief! The TDS collections account for 40 percent of the total taxes collected in the country. As the name suggests TDS is the amount of tax that is deducted at source in certain types of income . The TDS thus collected is deposited in the Government treasury within a specified time. How is it computed? Some of the types of income where TDS is applicable include salary, interest, rental fee, interest on securities, insurance commission, dividends from shares and UTI/Mutual Funds, commission and brokerage

How to PPF Account extension after maturity

A PPF account can be retained after maturity without making any further deposits. The balance will continue to earn interest till it is closed. Public provident fund or PPF remains one of the most popular savings options for the long term despite a gradual decline in interest rates over the years. PPF accounts have a maturity period of 15 years and they can be extended. If there is no fund requirement, financial planners say, PPF account holders should extend the account beyond 15 years. In terms of income tax implications, PPF accounts enjoy the benefit of EEE (exempt-exempt-exempt) status . Under Section 80C, contribution up to Rs 1.5 lakh in a financial year qualifies for income tax deduction. The interest earned and maturity proceeds are also tax free. What are your options when a PPF account matures? 1) A PPF account can be closed after the expiry of 15 financial years from the end of the year in which the account was opened. 2) The subscriber can retain his

Indian Railways Seat Availability and Train Fare Enquiry

Enter the PNR for your train booking to find its status. Your 10 Digit PNR : Are you looking for Indian Railways Seat Availability information for trains between any two Indian Railway stations? Well, here is a detailed guide to find out seat availability and train fare information for journey between any two stations by any train on any chosen journey date. The holiday season is around and Indian all around are busy making Indian Railways Reservation .But before making the reservation, they would like to check berth availability information and here is a detailed step by step guide to check seat availability and train fare. How to check Indian Railways seat availability · 1. Go to the Indian Railways Passenger Reservation Enquiry page to check seat availability by clicking here [link] · 2. Enter the first few characters of the Originating Station against Source Station Name. For eg., if the origination station is chennai, enter "Che" against Sou
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