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

Real Returns in Investing

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 Real Returns in Investing     A Anil Singh (name changed), 44, works with a private company and believes in investing his entire savings in fixed deposits. His financials from the year 2000 till date is given in the table. Anil's savings in FDs gave him an average return of around 8%. The total amount saved over the 174 months (From January 2000 to June 2014) is Rs 49.80 lakh. The value of his investment today is around Rs 66.71 lakh. Naveen Singh (name changed), 44, works in a similar profile like Anil. However his expenses were on the higher side. His financials are as in the table. Naveen invested only in equities. The total amount saved over the 174 months (From January 2000 to June 2014) is Rs 38.40 lakh. The v...

Budget 2014 Highlights for Saving

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   The new finance minister Arun Jaitley has just presented his first budget. What measures does the budget contain that will specifically impact savers and investors? Here they are: 1. Housing loans exemption for self-occupied properties increased to Rs2 lakh: Earlier this amount was Rs1.5 lakhs. This move barely keeps pace with the inflation in asset values.   2. Investment limit under 80 (C) increased to Rs1.5 lakh: This is a good move again and offers some relief to taxpayers.   3. IT exemption increased to Rs2.5 lakh, Rs3 lakh for senior citizens. This comes as a minor relief for taxpayers.   4. Annual PPF ceiling to be enhanced to Rs1.5 lakh, from Rs1 lakh: This is in tune with the change in 80C.   5. Long term capital gains tax for debt funds has been rai...

ICICI Prudential MIP 25 - Invest Online

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   ICICI Prudential MIP 25     (CRISIL Rank 2)   This scheme was launched March 2004. Please see the chart below for the one, two, three and five years annualized returns from this scheme. The minimum investment in the scheme is Rs 5,000. The asset allocation of the portfolio is 24% equity, 72% debt and 4% cash equivalent and others. Please see the chart below for the monthly dividends declared by the scheme, on a per unit basis, over the last 5 years.   For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mai...

Franklin India Smaller Companies Fund - Invest Online

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   Franklin India Smaller Companies Fund   While the universe of small-cap stocks in India is vast, there are very few equity funds which take on the task of sifting through this space for good long-term bets. Franklin India Smaller Companies Fund has managed this with aplomb. What we like about this fund is its significant out-performance of its category and benchmark over the last four years, and its ability to moderate portfolio risk despite investing in the riskiest segment of the equity market. This fund's stock selection strategy, like that of Franklin India Prima Fund is focused on finding companies that generate positive cash flows across business cycles. High return on investment and manageable leverage are also filtering criteria. Says R. Janakiraman, fund ma...

How to open a Capital Gains Account?

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   How to open a Capital Gains Account? You can open a capital gains account in an authorized bank. The Government has notified 28 banks which can open the Capital Gains Account on behalf of the Government. You have to apply for opening the account by filling out the required application form (Form A) and submit proof of address, PAN card and photograph. You cannot withdraw funds from a capital gains account using a cheque book or ATM, like you do in your normal savings bank account. There are procedures to be followed to withdraw funds from the capital gains account. Investment in Specified Bonds Section 54EC of Income Act provide that if the seller invests whole or part of capital gains arising from the sale of asset in specified Capital Gains, within a period of six months of the ...
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