Many beginners struggle to start thier journey in investing. Since there are avenue of opportunities to invest, they will get confused by access to execesssive information. Let’s clear the clutter today by understanding how to invest in a better way !!
First and foremost thing, one must do before investing is, they need to ask a question themselves, why am I investing for?
Every investor has a different view and different target, that’s the reason finance is always unique and ever changing trend. If you are 50 year old investing just to save your money from inflation, then pick gold, debt and some portion in equity, so, flexicap type of funds will be a better pick for you.
If you are 35 year old investor who has just started, depending on your risk apettite, make your asset allocation in different asset classes. One can consider crypto as well since we never know when it gives rally with sudden jump.
If you are pretty young, atleast invest some portion of money in smallcap and crypto type of assets, rest of the 75% portfolio can be parked in different asset classes. So that, risky bets for longer term will give you an enormous wealth creation opportunity if you start early. Thematic investments also suits well if you have faith in one particular theme like IT or Pharma and want to hold them for longer duration.
What should be your first investment as soon as get a paycheck?
Your first investment should be term insurance. Yes, you heard it right. Term insurance will save your family if something happens to you unexpectedly. This is must if you are sole earner in your family and there are no other cash flows which are there to help for monthly needs. Last but not least, don’t combine insurance and investment by taking money back policies, that would be worst investment for which you will regret later. Money back policies must be avoided strictly according to my view, only purchase pure term insurance policy.
Second step, research about Health insurance and consider choosing some good health insurance policy which covers you & your family if anything happens. I remember my Grandfather saying, Health is wealth. I realised how much important it is to have health insurance after COVID hit the world badly. Remember, all your savings and investments will become worthless if your health is effected. So, get insured.
After doing these things, you will get a confidence and sense of relief because whatever happens there are term insurance and health insurance which will protect you. If you own a car or bike and can’t afford of losing it or repairing the damages if any accident happens, consider purchasing car or bike insurance. In the initial one or two years, car companies provide that insurance when you are purchasing but make sure to renew it.
Congratulations, you made three best choices in your life in the first investment step. Don’t ask me now, Can I invest all my money in my next step? A big NO !!
Wait why? Because it’s equally important to have some emergency fund in the form of cash for any urgent requirements. You may lose your job but you can’t stop feeding your family right? Keep your emergency fund aside depending on your needs.
Eventually, one can start investing by deciding the asset allocation and amount of risk he or she can take !!
Quick recap of investment steps to be taken
- Term Insurance
- Health Insurance
- Bike/Car Insurance
- Emergency fund
- Asset Allocation & Investment
